Management magnified sustainability and corporate growth

Management magnified
Sustainability and corporate growth
A report from the Economist Intelligence Unit
Sponsored by SAS


Management magnified
Sustainability and corporate growth

Preface

Management magnified: Sustainability and corporate growth is the third in a series of three reports written
by the Economist Intelligence Unit and sponsored by SAS.
The first report, Management magnified: Getting ahead in a recession by making better decisions, was
published in August, and the second report, Management magnified: Strategies for revenue growth in an
economic downturn, was published in September.
The quantitative findings presented in this report come from a global online survey of 183
respondents—79 of whom are board members or C-level executives—conducted by the Economist
Intelligence Unit in August and September 2009. The survey asked respondents about the importance of
sustainability to corporate strategy.
The findings and views expressed do not necessarily reflect those of the sponsor. The Economist
Intelligence Unit’s editorial team executed the survey and wrote the report. Kim Andreasson was the
editor and project manager. Dr Paul Kielstra was the author. Mike Kenny was responsible for the design of
the report.
Our thanks are due to all survey respondents for their time and insight.
November 2009

© Economist Intelligence Unit Limited 2009

1

Management magnified
Sustainability and corporate growth

Management magnified: Sustainability and
corporate growth

A

s the link between sustainability and corporate growth is typically indirect and intangible, sceptics
often dismiss initiatives in this area as window dressing. But in the survey conducted for this report,
executives counter the criticism. Seventy-eight percent of respondents say sustainability initiatives are
very or somewhat important to their current business strategy. Eighty-seven percent see them as very or
somewhat important to future growth plans and the same number expect them to be very or somewhat
important in five years’ time. Respondents, who represent a wide variety of industries and a broad range
of functions, say they spend 22% of their working time, on average, integrating sustainability initiatives
into business strategy, a sizeable investment.
Yet a significant number of organisations do not devote sufficient resources to sustainability. Thirtythree percent of those surveyed say their companies do not do enough to integrate sustainability
initiatives into strategy. An equal number of respondents (45%) say their organisation does not spend
enough of its budget on sustainability initiatives as those who say they do (45%).

Window dressing?
Before the economic downturn of 2008-09, almost every company seemed to stress its credentials as a
socially responsible organisation, where environmental and social bottom lines mattered as much as
the financial one. The business case for this thinking was, and remains, that these three areas do not

About the survey
In order to assess the importance of sustainability
to corporate strategy, the Economist Intelligence
Unit conducted a global online survey in August and

September 2009.
Of the 183 respondents to the survey, 79 describe
themselves as board members or C-level executives.
Survey takers came from around the world, led by
respondents in the Asia-Pacific region (31%), Europe
2

(26%) and North America (26%), with the rest from
the Middle East and Africa (10%) and Latin America
(8%). Roughly one-half (51%) work for companies with
global annual revenue exceeding US$1bn.
Respondents represented a wide variety of
industries, led by financial services (20%), professional
services (13%), energy and natural resources (9%), and
healthcare, pharmaceuticals and biotechnology (9%).
Respondents also came from a broad range of functions,
including strategy and business development (43%),
general management (39%) and finance (25%).
© Economist Intelligence Unit Limited 2009


Management magnified
Sustainability and corporate growth

require trade-offs but are mutually reinforcing. As Stan Litow, vice-president for corporate citizenship and
corporate affairs at IBM, has explained: “If corporate citizenship were a frill and had no clear benefit, it
ought not survive in any economic climate, good or bad. But if it is viewed as something tied to business
strategy with a real, measurable and clear return on investment established over time, then it’s not
viewed as something you can or should do less of in a time of economic crises.”1
Yet perhaps as a consequence of the economic downturn, much of the business community remains

unconvinced that sustainability initiatives are more than window dressing. In a March 2009 survey
conducted by the Economist Intelligence Unit, 67% of executives agreed that economic conditions would
force environmental issues down on the corporate agenda.2
So which is it? Given the pressure on sustainability, this report looks behind the rhetoric and evaluates
sustainability from a corporate growth perspective.

Sustainability and corporate performance
Inconsistent implementation of sustainability initiatives harms businesses. Survey respondents say
that over the past year, poor implementation of such projects has decreased their company’s ability to
execute strategy (21%) and to innovate (20%). Companies have also suffered in the past 12 months
from traditional issues associated with sustainability failures, such as damage to brand (cited by 15%
of respondents), increased regulatory risk (14%) and loss of market share (14%). Overall, 58% of
respondents say their company has suffered at least one negative consequence to their ability to operate
in the past 12 months as a result of inconsistent sustainability implementation.
Similarly, good performance on sustainability is accompanied by superior results elsewhere. Twentyseven percent of executives surveyed rate their organisation above average in every sustainability-related
category—ability to integrate initiatives into core strategy, investment in initiatives and reputation
among stakeholders. Members of this “sustainability leaders” group of companies report better than
average results in other areas as well [see chart].
Percentage of companies rating themselves much stronger than peers in select areas
(% respondents)
Sustainability leaders

All others

Financial performance
35
14

Revenue growth
33

10

Reacting to changing risks and opportunities
29
13
Source: Economist Intelligence Unit survey, September 2009.

© Economist Intelligence Unit Limited 2009

1. Economist Intelligence Unit,
Corporate citizenship: Profiting
from a sustainable business,
November 2008, quoted on
page 5.
2. Economist Intelligence Unit,
Countdown to Copenhagen:
Government, business and the
battle against climate change,
March 2009.

3


Management magnified
Sustainability and corporate growth

Sustainability isn’t about being nice, but seeing profits
The fundamental difference between sustainability leaders and other companies is a greater conviction
that business benefits will arise out of sustainability initiatives. In particular, leaders believe that
sustainability provides a market advantage: 43% say that it is important to customers compared with only

16% of respondents from other firms in the survey. Similarly, 39% of sustainability leaders believe that
sustainability can enhance revenue growth a great deal, compared with 26% from other firms.
The results can be impressive. While many companies were performing poorly in 2008, sales of General
Electric’s Ecomagination line of products, for example, rose by 21%, to US$17bn, compared with just
5.8% growth for the company as a whole. Ecomagination products now represent more than 9% of total
revenue. In March 2009, Proctor & Gamble felt confident enough to increase its 2012 target for sales from
its sustainable innovation products from US$20bn to US$50bn.
As a result, internal stakeholder groups at firms that are sustainability leaders are more likely to
consider the issue significant [see chart]. They are also more convinced of the importance of sustainability
to strategy. For example, 65% see them as very important to current overall strategy, compared with
34% of all others in the survey. Looking ahead, 80% of sustainability leaders see these initiatives as very
important to future growth, compared with 40% of all others in the survey. These findings flow into the
practical necessity of better performance, such as an increase in resources: 79% of sustainability leaders
say that they spend enough on sustainability, compared with 32% of other companies.
This perspective changes the corporate drivers of sustainability. According to the survey, leaders in
this area most often cite brand enhancement as a leading motivation for sustainability initiatives (47%),
Proportion who say stakeholder groups consider sustainability initiatives “very important”
(% respondents)
Sustainability leaders

All others

Board of directors
71
34

Senior management
57
28

Middle management
33
14

Employees
29
17

Investors
35
18

4

Source: Economist Intelligence Unit survey, September 2009.

© Economist Intelligence Unit Limited 2009


Management magnified
Sustainability and corporate growth

Leading motivations for sustainability initiatives
(% respondents)
Sustainability leaders

All others

Brand enhancement
47

25

Revenue growth
35
31

Cost savings
31
28

Environmental protection
31
37

Increasing profit
29
23

Opening of new markets
27
14

Public relations
27
29

External pressure from stakeholders to do good
22
25

Regulatory compliance
18
23
Source: Economist Intelligence Unit survey, September 2009.

followed by revenue growth (35%) and cost savings (31%). Other companies instead point first to a goal
which, although laudable, is not directly related to financial performance—environmental protection
(37%). Overall, matters that relate to the bottom line are more likely to resonate as sustainability drivers
with leaders than with other companies, while the reverse is true of traditional external drivers, such as
regulation or outside pressure [see chart]. Simply put: to be good at sustainability, companies must find
the business benefits.

Leadership counts
Leadership at all levels is essential to effective sustainability programmes at all organisations. When
integrating sustainability into strategy, by far the two most important keys to success are clear directives
from policymakers or senior management (cited by 64% of all respondents) and the active involvement
of senior management (60%). Similarly, a lack of clear mandates or objectives is the leading barrier to
© Economist Intelligence Unit Limited 2009

5


Management magnified
Sustainability and corporate growth

success (cited by 37%), and a lack of interest by senior management comes in third (29%).
Unsurprisingly, engagement of leadership is seen as crucial everywhere in business. When it comes
to sustainability, however, there appears to be a disconnect in the levels of support between various
stakeholders. Sustainability initiatives are very important to the boards at 44% of companies, and to
senior management at 36%. But these figures are much higher than those of any other stakeholder,

whether inside the company—middle management (19%), employees (20%) and investors (23%)—or
outside—local communities (28%), customers (23%) and suppliers (9%). This indicates that management
needs to do more to educate both internal and external groups on the importance of sustainability to
corporate strategy.

6

© Economist Intelligence Unit Limited 2009


Management magnified
Sustainability and corporate growth

Conclusion

W

hen it comes to sustainability, many companies talk a good game yet institute isolated policies that
fail to resonate with managers and employees, let alone customers. Still, a significant number of
businesses genuinely see market opportunities from sustainability. At companies deemed by respondents
to be sustainability leaders, people at all levels of the organisation attach greater importance to the issue.
As a result, their businesses are much more likely to provide the financial resources necessary for success.
The data suggest that all industries stand to benefit from integrating sustainability into corporate
strategy. More than one-half of all companies surveyed have suffered some negative effect on their
ability to operate from inconsistent implementation of sustainability initiatives. And leaders in this area
are more likely to outperform their peers financially. The bottom line is that sustainability remains an
important issue for businesses today precisely because companies have discovered that success can lead
to good financial performance, no matter the economic climate.

© Economist Intelligence Unit Limited 2009

7


Appendix
Survey results

Management magnified
Sustainability and corporate growth

Appendix
Survey results
In your view, how important are sustainability initiatives to
your company’s overall business strategy today?

In your view, does your organisation do enough to integrate
sustainability initiatives into business strategy?

(% respondents)

(% respondents)

Very important
43

Somewhat important
35

Neither important nor unimportant

Yes

63

No

33

Don’t know

10

4

Somewhat unimportant
3

Not at all important
6

Don’t know
3

In your view, how important are sustainability initiatives to
your company’s future growth plans?

In your view, does your organisation spend enough of its
budget on sustainability initiatives?

(% respondents)

(% respondents)

Very important
51

Somewhat important
36

Neither important nor unimportant
3

Yes

45

No

45

Don’t know

10

Somewhat unimportant
4

Not at all important
3

Don’t know
2

In your view, how important will sustainability initiatives be
to your company 5 years from now?
(% respondents)
Very important
59

Somewhat important
28

Neither important nor unimportant
4

Somewhat unimportant
2

Not at all important
4

Don’t know
3

8

© Economist Intelligence Unit Limited 2009


Management magnified

Sustainability and corporate growth

Appendix
Survey results

What percentage of your working time is spent on integrating sustainability initiatives into business strategy?
(% respondents)

7

22

14

13

11

8

5

3

3

0

2

1

3

2

1

1

2

0

1

0

1

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

How important do you think your organisation’s sustainability initiatives are to the following stakeholder groups?
Select one for each row.
(% respondents)
Very important

Somewhat important

Neither important nor unimportant

Somewhat unimportant

Not at all important

Don’t know

Board of directors
44

35

10

3

5 2

Senior management
36

46

9

2

71

Middle management
19

43

24

6

6 1

Employees
20

34

27

12

6 2

Customers
23

34

29

8

4

3

Investors
23

36

24

3

7

7

Suppliers
9

29

35

11

8

8

Local community
28

0

20

© Economist Intelligence Unit Limited 2009

39

40

60

18

80

7

3

4

100

9


Appendix
Survey results

Management magnified
Sustainability and corporate growth

In your opinion, how does your organisation compare with its closest competitors in the following areas?
Rate on a scale of 1 to 5, where 1=We are much stronger and 5=We are much weaker.
(% respondents)
1 We are much stronger

2

3

4

5 We are much weaker

Don’t know

Profitability
20

35

29

8

5

4

Revenue growth
16

37

30

10

23

10

4 2

Ability to react to changing risks and opportunities

17

44

3

3

Ability to integrate sustainability initiatives into core strategy
14

33

30

12

4

7

Investment in sustainability initiatives
10

28

33

12

9

8

6

8

Reputation among stakeholders for sustainability
14

0

31

20

31

40

60

10

80

What are the biggest barriers to consistent, successful
implementation of sustainability initiatives across your
organisation? Select up to three.

In your opinion, which of the following factors are most
important to successful integration of sustainability
initiatives at your organisation? Select all that apply.

(% respondents)

(% respondents)

100

Clear directive from policy-makers or senior management

Lack of clear objectives or mandates

64

37

Active involvement of senior management

The complexity of consistent implementation

60

36

Lack of interest from/understanding by senior management

Alignment with broader company goals

43

29

Difficulty in aligning sustainability goals with financial ones

Sufficient funding
38

27

Inability to quantify financial costs and benefits (ROI)

Establishment of processes
33

22

Insufficient funding/resources (eg, the organisation does not spend
enough of its budget on sustainability)
21

Cost (eg, the financial cost of implementation is too high relative to
perceived benefits (ROI))

Alignment of financial incentives with successful implementation
33

Thorough planning before implementation
33

Return on investment

20

Lack of interest/push back from employees

25

Use of technology

19

Poor planning of implementation

24

Broad consultation with employees

17

Cultural issues

23

Effective communication with customers
15

Negative impact on competitive position
9

Inability to set strategy (what initiatives to take on first)
9

16

Other
2

Don’t know
1

Other
4

Don’t know
3

10

© Economist Intelligence Unit Limited 2009


Management magnified
Sustainability and corporate growth

Appendix
Survey results

What are your company’s primary motivations for new

sustainability initiatives? Select up to three.

Has inconsistent implementation of sustainability initiatives
across your organisation caused any of the following in the
past year? Select all that apply.

(% respondents)

(% respondents)
Environmental protection
Decreased ability to execute strategy

35

Revenue growth

21

Decreased innovation

32

Brand enhancement

20

Slower time to market with new products

31

Cost savings

18

Reduced collaboration across teams

28

Public relations

16

Loss of brand reputation

28

Increasing profit

15

Loss of market share

25
14

External pressure from stakeholders to do good

14

Regulatory compliance

Increased regulatory risk

24

Reduced customer satisfaction

22

Opening of new markets

11

Other

17

Internal pressure to do good

6

Don’t know

17

Recruitment and retention

29

7

Worker rights
3

In your view, to what extent can sustainability
enhance company revenue growth?
(% respondents)

© Economist Intelligence Unit Limited 2009

To great extent

29

To some extent

57

Not at all

9

Don’t know

4

11


Appendix

Survey results

Management magnified
Sustainability and corporate growth

In which country are you personally located?

Which of the following best describes your job title?

(% respondents)

(% respondents)

US

Board member
21

India

4

CEO/President/Managing director
15

27

Brazil

CFO/Treasurer/Comptroller

5

4

Canada, Australia, Spain

CIO/Technology director

4

2

China, UK, Nigeria, UAE

Other C-level executive

3

6

Germany, Hong Kong, Japan, Russia, Austria, Denmark, Poland, Singapore

SVP/VP/Director

2

21

Argentina, Greece, Iceland, Indonesia, Mexico, Portugal, Romania,
South Africa, Sweden, Uganda, Ukraine, Egypt, Finland, Hungary, Jordan,

Kenya, Lithuania, New Zealand, Philippines, Slovenia, South Korea,
Switzerland, Taiwan, Trinidad and Tobago, Zambia

Head of business unit
3

Head of department
9

1

Manager
19

Other
5

In which region are you personally based?
(% respondents)
Asia-Pacific
31

North America
26

What is your primary industry?
(% respondents)
Financial services

Western Europe

20

21

Professional services

Middle East and Africa

13

10

Energy and natural resources

Latin America

9

8

Healthcare, pharmaceuticals and biotechnology

Eastern Europe

9

5

IT and technology

7

Manufacturing
7

What is your organisation’s global annual revenues
in US dollars?

Government/Public sector

(% respondents)

Telecommunications

6
5

Consumer goods
$500m or less
$500m to $1bn

4

41
8

$1bn to $5bn

17

$5bn to $10bn

7

$10bn or more

26

Transportation, travel and tourism
4

Construction and real estate
3

Retailing
3

Chemicals
3

Entertainment, media and publishing
3

Education
2

Aerospace/Defence
1

Logistics and distribution

1

Agriculture and agribusiness
1

12

© Economist Intelligence Unit Limited 2009


Management magnified
Sustainability and corporate growth

Appendix
Survey results

What are your main functional roles?
Please choose no more than three functions.
(% respondents)
Strategy and business development
43

General management
39

Finance
25

Marketing and sales
20

Operations and production
16

Risk
13

IT
11

Information and research
8

R&D
8

Customer service
7

Human resources
6

Supply-chain management
4

Procurement
3

Legal
2

Other
3

© Economist Intelligence Unit Limited 2009

13


Cover image: iStockphoto.com

Whilst every effort has been made to verify the accuracy
of this information, neither the Economist Intelligence
Unit Ltd nor the sponsors of this report can accept any
responsibility for liability for reliance by any person
on this report or any other information, opinions or
conclusions set out herein.


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