2013-02-05

Co.Exist

5 Lessons From The Companies Making Sustainability More Profitable Than Ever

A new study finds that companies that embrace sustainability solutions are making more money than ever before. Here’s how they’re doing it.

Good news for corporate social responsibility leaders: there’s a growing body of evidence that sustainability often goes hand in hand with profits. A new report from MIT Sloan Management Review and the Boston Consulting Group adds even more data to the pile: according to a survey of 2,600 executives and managers around the world, the number of companies that profited from sustainability initiatives climbed to 37%—up 23% from last year.

MIT’s paper, The Innovation Bottom Line, is the latest in a series of reports dating back to 2010 that examine sustainability challenges in organizations. Here’s what we learned:

Organizations need a business case for sustainability if they want their efforts to be successful. Among what the report calls Sustainability-Driven Innovators—companies that have changed their business models to incorporate sustainability and are making money from those changes—54% developed a business case,

Almost 60% of companies that merge value-chain innovation with target segments—and tweak other parts of their business models—are Sustainability-Driven Innovators. The report gives the example of Kraft Foods, now known as Mondelez International:

More often than not, however, “greening” a product is not the key to building business in target segments. Kraft discovered this with its YES Pack commercial salad dressings. Through supply chain innovations, the company significantly reduced its packaging costs. The new plastic container requires 50% less energy to produce and uses 28% less primary packaging material than its predecessors. What opens doors to commercial segments, however, is the package design. The bigger, easier-to-use containers—which are also less expensive to produce—are extremely popular with restaurants, giving Kraft competitive advantage with lower costs.

Impressively, 61% of companies that have changed their business models to incorporate sustainability as a vital piece of the management agenda say that they have also added profit from their efforts. And, unsurprisingly, companies that profit from sustainability efforts are 200% more likely to create business cases for sustainability.

The companies turning profits from sustainability generally have five practices in common:

  1. They’re prepared to change business models.
  2. They lead from the top and integrate efforts directly into their businesses.
  3. They measure and track sustainability performance.
  4. They understand how their customers view sustainability and what they would be willing to pay extra for.
  5. They collaborate with people and groups outside their organization.

In sum, the report reiterates what many CSR professionals instinctively knew: Sustainability efforts have to be integrated into businesses at all levels, and accountability for goals is key. Check out the rest of MIT’s report here.

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3 Comments

  • blake mendez

    hello ariel.  why would the top down approach work better than a bottom up, more decentralized approach in blueprinting and executing sustainability?  thank you.

    blake mendez

  • Ed kishinevsky

    my thoughts are that good organizations start at the top - they can be decentralized and still have authority and good leadership from above. you don't hear good news about companies with poor leaders, while the opposite can be truer of better-run companies.