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McKinsey & Company Releases New Analysis on Corporate Sustainability

McKinsey released results and analysis of its 2014 survey titled Sustainability’s Strategic Worth. The report is based on a survey of global executives that investigated the increasing role of sustainability in today’s business world. The key take away from the report is that sustainability is an increasingly important part of business today.  But, “when it comes to mastering the reputation, execution, and accountability of their sustainability programs, many companies have far to go.”

Previous surveys had shown that companies were most willing to incorporate sustainability into their business practices to cut costs. The new survey finds that company leaders are supporting broader sustainability initiatives more than ever. CEOs are now twice as likely as they were in 2012 to say that sustainability is among their top three priorities. Companies now feel it is most important “to align sustainability with their overall business goals, mission, or values” to gain the greatest value from sustainability. “[T]he more that companies prioritize sustainability, the more it needs to be integrated into (and even change) the core business.”

Many companies are working to create a sustainability culture within their organizations. Yet, they struggle to execute their sustainability programs. Some important underused tools are employee motivation, capability building, and coordination of sustainability work. McKinsey identified several company characteristics that set sustainability leaders apart from their peer organizations. These include:

  • Setting aggressive external and internal targets or goals for sustainability initiatives
  • Having a unified sustainability strategy with articulated strategic priorities
  • Including a broad leadership coalition for shaping the sustainability strategy, goals, and milestones
  • Understanding financial benefits of sustainability across the organization

The study highlights four approaches to creating a sustainable organization:

  • Engaged leaders across the company, employee encouragement, and a clear strategy
  • Clear structure, accountability, and middle-manager engagement
  • The use of external ideas, networks, and relationships, and top-leader and middle-manager engagement
  • Employee incentives for sustainability work, a focus on talent, and uniform engagement on sustainability at all levels of tenure

Companies viewed reputation for sustainability as the most prominent reason to invest in sustainability. While reputation management is a smart investment for companies, its true strategic value is difficult to measure. The top reputation management activity cited was “external reporting of and transparency on activities.” The implementation of this reputation activity differs among organizations and between industries. Companies have varying understandings of what external reporting entails.

McKinsey’s analysis concludes that it is not enough to set sustainability as a priority. Businesses need to do more to increase and better direct the implementation of these programs. Companies should look at successful corporate sustainability programs for guidance. They need to make more meaningful strategic changes to their business practices and identity.

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