Corporate sustainability as an element of strategy and planning for corporations has been gaining ground significantly over the past decade. Buoyed by environmentally focused laws led by the EU, sustainability programs have also taken on economic elements such as access to capital and liquidity, as well as operational components from traditional quality programs. Most sustainability programs have three major components:
- Economic and financial: These include the ability to reduce the consumption of raw materials into the products or services delivered to customers, the ability to access capital markets, and the long-term viability of a company vision and mission
- Environmental: These include Restriction of Hazardous Substances (RoHS) along with regulations and environmental welfare, the effect the carbon footprint of an organization may have on its operations, and the effect of “cap and trade”
- Social responsibility: These include the welfare of worker rights, adherence to local labor laws, fair wages in developing countries, and workplace health and safety
For a global organization, this goes beyond its identity as a good corporate citizen. In 2006, the Global Reporting Initiaitve (GRI) was created to provide guidelines and audit recommendations for organizations participating in corporate sustainability reporting (CSR) activities. These guidelines ensure a level of consistency and governance in the practice of corporate sustainability.
Despite several years into the GRI guidelines, what defines sustainability strategically to most companies depends on the company’s point of view. Many Fortune 500 companies position their corporate sustainability programs slightly different based on their orientation and strategic drivers. Although companies generally consider the three primary areas the GRI supports, each company has a different orientation and set of actions associated with its respective program.
Driving Value through Corporate Sustainability
Given today’s compliance and reporting requirements, why do large and small organizations alike develop corporate sustainability programs? Earlier this year, management consulting firm McKinsey surveyed more than 150 CFOs, investment managers, and other professionals responsible for the development, implementation, or consumers of information from corporate sustainability programs as to the way these programs drive financial performance. On average over 75% of these stakeholders believe value will be driven from the increase in transparency and compliance from CSR programs. On average over 50% of these stakeholders believe a succsessful CSR program will attract and attain talented employees. 30% of these stakeholders believe that market value will be driven by opening new market opportunities. Other areas where value may be realized include access to capital and introduction, and atraction and retention of employee talent.
Company CSR programs yield a short list of direct and indirect key performance indicators (KPIs) that, if realized, could produce a financial and valued return. Of particular note is the interest in “improving access to capital.” For the past few years, several stock indices in the US and EU markets have created opportunities for publicly traded companies to share in a sustainability index should their CSR activities meet the GRI and additional reporting guidelines.
To date the Dow Jones Sustainability Index (DJSI) which was created in 1999 represents over $US 9 billion in total market investment vehicles. While the proverbial jury is still out on whether these organizations reap benefit from their representation on these stock indices, the DJSI STOXX40 has outperformed the nominal DJ STOXX50 by 7.5% (even accounting for the economic impacts of the global recession of 2008-9).
Higher performance creates access to capital, both from investment markets and from individual investors. It does appear that the era of Corporate Sustainability has indeed arrived.
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 Source: Valuing Corporate Social Responsibility, The McKinsey Quarterly, February 2009. www.mckinseyquarterly.com.
 SAM Sustainability Annual Review, September 3, 2009.