Corporate Sustainability Trend is Slowing Down

Wednesday, 16. October 2013

CEOs have long recognized the growing strategic importance of sustainability for the future success of their businesses but still have difficulties to align sustainability impact with value creation. These are the sobering findings of the third UN Global Compact-Accenture CEO Study on Sustainability 2013. With over 1,000 participants from 27 industries across 103 countries, it is largest CEO study on sustainability to date, painting a detailed, but mixed picture of the current state of development worldwide.

“Stuck on a plateau of good intentions”

The figures clearly show that sustainability has become firmly established on the leadership agenda of almost every leading business:

  • 63% of CEOs expect sustainability challenges, such as climate change, pollution, scarcity of resources, and poverty, to transform their industry within five years;
  • 76% believe that embedding sustainability into core business will drive revenue growth and new opportunities;
  • 80% see it as a route to competitive advantage in their industry; and
  • 84% of CEOs report that sustainability is now discussed and acted upon at the board level

However, across industries and countries CEOs seem to be “frustrated” with the pace, depth, and impact of change. “They see their companies stuck on a plateau of good intentions, uncertain of the way to the summit,” the authors of the study conclude. There is little sign of critical self-reflection, though. Instead, CEOs see the current economic systems and markets as the main reason for the lack of progress being made. They point the finger at consumers, investors, regulators, and other stakeholder groups that do not provide sufficient incentives for sustainable and profitable growth.

While consumers are showing a growing awareness of sustainability issues, this often times does not translate into sustainable buying behavior. 46% of the CEOs believe that sustainability issues will always be secondary to traditional factors of price, quality, and availability. Similarly mixed signals come from investors, they say. CEOs see increased interest on the part of investors, but do not believe that they will drive change. Moreover, the majority of CEOs (83%) is convinced that governments should step up their efforts to provide an enabling environment for business to effectively scale sustainability.

Not surprisingly, the economic downturn has contributed to the apparent decline in importance of sustainability to CEOs as well. Due to economic pressures, companies are shifting their priorities to short-term goals, such as growth and employment. More than half (51%) of business leaders surveyed report that a lack of sufficient financial resources has been a barrier to implementing an integrated and company-wide approach to sustainability.

One barrier to accelerating progress, however, which is particularly worrisome and which has become more challenging than any other over the past decade is the lack of a link between sustainability and business value. Back in 2007, just 18% of CEOs reported a failure to trace such a link. This year, 37% report that the lack of a clear link to business value is a critical factor in deterring them from taking faster action on sustainability. And, not more than 38% believe they can accurately quantify the value of their sustainability initiatives.

The authors of the study point out that especially those companies that are at the beginning of their efforts are finding it difficult to make the link to value for their business. They tend to mistake corporate sustainability with philanthropy or charity. They are unable to bring economic, environmental, and social goals in line, thus creating “shared value” for all stakeholders. One of the CEOs characterized the situation as follows: “Business is absolutely not doing enough: we’re being held back by timidity, by a lack of understanding, by a lack of a more holistic approach.”

“Two-speed world in sustainability”

Nevertheless, there are companies that have already figured out how to monetize sustainability and do not wait for others to act. They are driving sustainability as an engine for innovation, competitive advantage, differentiation, and growth by developing new products, services, and business models. As an example, the authors mention Siemens AG, which has achieved strong growth throughout the economic downturn through its focus on innovative technologies that enable the transition toward clean energy and intelligent infrastructure. Siemens’ environmental portfolio has developed into its fastest growing business unit, accounting for 42% of the group’s total business in 2012. During that year alone, offerings from the portfolio enabled customers to cut CO2 emissions by 332 megatons, an amount which equals 40% of Germany’s total annual emissions.

The authors of the study speak of a „two-speed world in sustainability between those companies still reacting to external expectations on sustainability and focusing on incremental mitigation, and those that see sustainability through the lens of growth and differentiation.” The latter “are seizing opportunities at speed through building skills, measuring value and performance, and improving the dialogue with consumers, investors and governments.” The growing collaboration between stakeholders, both across industries and countries, is indeed the most encouraging finding of the study giving hope for the future.

Seven Steps to Sustainability and Success

Based on their interviews with CEOs of leading companies, the authors suggest a seven step plan how to achieve sustainability and corporate success. It is based on a realistic assessment of the challenges and opportunities as well as collaboration, partnership, and an open dialog between all stakeholders.

For more information, see the full UN Global Compact-Accenture study.