SUSTAINABILITY
A 2013 study by professors at the Harvard Business School and London Business School showed that an investment in companies that
voluntarily adopted corporate-level sustainability policies would have delivered almost
50%
greater returns between 1993 and 2009 compared to an investment in their peers following business as usual.
value of corporate brands, Millward Brown estimates that the value of the 100 strongest global brands exceeds $2.9 trillion.
2. Sustainability is not a passing fad, but instead a juggernaut Companies measure, manage and report on topics that they, their stakeholders and shareholders consider to be material. With that in mind, consider that 5,000 companies around the world, including 66% of the Fortune Global 500, publish annual sustainability or corporate responsibility reports, according to Ernst & Young and CorporateRegister.com. Why do they do this? Employees care about it. In an ever-changing and increasingly competitive global marketplace, talent is one of the most significant contributors to value creation. Executives at leading global organizations agree that the ability to attract and retain the best employees creates a major competitive advantage. In fact, this was part of the motivation for Bank of America’s chairman Ken Lewis to build its Tower at One Bryant Park in New York City as one of the greenest skyscrapers in the world. Market research by Bain & Company supports this perspective in noting that
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a company’s “nobler mission” (such as sustainability) is an important factor for 60% of employees and a powerful weapon in the war for talent. Customers think it is important An increasing number of customer surveys around the world seem to indicate the same thing: buyers of products and services prefer to engage with companies that pursue a mission higher and broader than profit motive alone. A 2012 Edelman survey of more than 8,000 people, in multiple countries, revealed these results: l 53% said that a company’s social purpose is the most important factor for them, when quality and price are the same l 47% reported that they make
Corporate sustainability leaders are 400% more likely to be considered innovation leaders
, companies world f o 00 5,0 nd the 66% bal o u aro uding e Gl ual incl ortun ann eF th , publish 500 ustainability s corporate or .com responsibility reportsRgister Y and
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purchases of cause-supporting brands at least monthly l 43% said they were willing to pay a premium for products associated with purpose (word of caution: be wary of the difference between customer intentions and actions) Investors increasingly see the value it creates As in so many situations, the “golden rule” applies here too. But in this case, we are talking about a slight variation: the one with the gold makes the rules. The investment community is justifiably sceptical about most new business models. As fiduciaries entrusted to steward capital, their duty is to mitigate risk while seeking new opportunities. Accordingly, the task with regards to sustainability is to demonstrate its ability to improve profits, manage liabilities and deliver on its promises. In so doing, investors can bring the power of capital markets to shift business towards greater sustainability on a massive scale. Consider four examples of how this is happening now: l A 2013 study by professors at the Harvard Business School and London Business School showed that an investment in companies that voluntarily adopted corporate-level sustainability policies would have delivered almost 50% greater returns between 1993 and 2010 compared to an investment in their peers doing almost nothing with sustainability policies and programmes. l Research from 2012 by Deutsche Bank found that 85% of studies on the topic show that companies that demonstrate leadership and excellence in sustainability exhibit market-based and accountingbased financial outperformance of their peers over the medium term (three to five years) and long term (five to 10 years). l On behalf of 767 institutional investors representing an excess of $92 trillion in assets, the Carbon Disclosure Project (CDP) is a non-profit organization that surveys the world’s
Dialogue | Dec 2014/Feb 2015