Survey: CEOs See Sustainability Shifting From Discretionary Choice to Corporate Priority

In Good Company debuted a little over a year ago with a broad focus in mind: To track how corporate responsibility and sustainability evolves at companies and explore how they along with academic institutions react to increasing demand for accountability and transparency in the marketplace. Along the way, we also hoped to analyze and throw some perspective on how all this plays out for graduating students, for mid-career professionals and the maturity of companies as corporate citizens. As a result, in the past months, we've asked many questions, hosted several polls, and reported on a multitude of surveys and analyses—each managing to address distinct aspects and stakeholders in the CSR discussion.

Yesterday, the United Nations Global Compact (UNGC) and consulting firm Accenture released findings of a survey, finally comprehensive enough in its scope that addresses every stakeholder in the market, i.e., employees, consumers, recruiters, executives, students, entrepreneurs, nonprofits as well as government regulators and advocates. The survey population: 766 CEOs from leading global companies (156 from North America) with the largest representation from the "Professional Services" industry (18%) followed by consumer products at 14%.

Titled "A New Era of Sustainability: CEO reflections on progress to date, challenges ahead and the impact of the journey toward a sustainable economy," the survey focused on three key questions:

1) Sustainability is changing—how is your company addressing it?
2) Next step: Taking it from strategy to execution; and
3) What's ahead: Competing in an era of sustainability

Sustainability is Changing

The survey begins with a magnifying glass: How important are sustainability issues to the future success of your business? While a majority of the respondents stressed the importance of sustainability, an overwhelming 93% highlighted the criticality of sustainability issues going forward. Representing companies like Alcatel-Lucent, Diageo, GlaxoSmithKline, HSBC Holdings, National Grid, Unilever, Novartis, Goldman Sachs, PepsiCo and Timberland, the surveyed CEOs emphasize that the downturn counter-intuitively gave them the opportunity to really assess how their sustainability initiatives "deliver core business value like cost reduction and revenue growth." To break it down (see graph on left for a breakdown by industry),

--Economic downturn raised importance of sustainability as an issue for top management: 80%
--Company reduced investment in sustainability as a result of the downturn: 12%
--The downturn led company to align sustainability more closely with core business: 74%

So far, so good. With the importance of sustainability seemingly established, the survey next asks what really drives this new priortization at companies, i.e., What factors, have driven you, as a CEO, to take action on sustainability issues? I'll admit at the sake of naivety, that I had hoped for different answers—with that many CEOs emphasizing corporate sustainability as a priority for them, why wouldn’t one?

 While a resounding majority cite brand, trust and reputation as the No. 1 reason (72%), potential for revenue growth (44%) and personal motivation (42%) come in the second and third spots. And perhaps some reason for cheer: 31% cite employee engagement and recruitment as their main motivation.

Next step: From strategy to execution

While the survey goes deeper into the question of trust, asking CEOs how they perceive trust for their company as well as industry, it targets action plans next. And this is the section of the survey that exemplifies best how sustainability is moving from a discretionary choice to becoming a corporate priority. The report states:

The widespread perception of the increased importance of sustainability may reflect a new appreciation of the scale and complexity of global challenges facing business today. As issues of climate change and the natural environment, social development and global corporate governance become ever more pressing, CEOs are acutely conscious of the challenges ahead. These challenges have a direct impact on companies’ operations, but also demonstrate the role business must play in addressing the demands of the new century. As one emerging market CEO told us, “Sustainable development will be a basic guarantee for our company’s survival and growth.” It appears that action on sustainability issues has shifted from being a discretionary choice to a corporate priority.

The survey also highlights a wide disconnect that remains even today between the perceived importance of environmental, social and corporate governance for companies and how these play out in their own business strategies. Or as the report puts it, "while the belief in the strategic importance of sustainability issues is widespread among CEOs, executives continue to struggle to approach them as part and parcel of core business strategy." For example, take a look at the two graphs below. In response to whether these issues should be fully embedded into the strategy and operations of a company, 96% of them "agree" or "strongly agree." However, when asked whether this was true for their company, the percentage drops to 81%. Although, a comparison with 2007 results shows an increase of 31% in the number of CEOs who agree that sustainability is embedded in their companies.

What's ahead: Competing in an era of sustainability

Again, while the importance of sustainability seems widespread among the executive suites, marketplace complexities continue to present challenges. Asked how long it would take for sustainability to be fully embedded within the core business strategies for majority of companies globally, there was no clear consensus with 44% predicting 5-10 years, 26% opting for 10-15 years and only 10% picking the next five years.

Of course, regardless of the timeline, the resulting business environment of a fully embedded company-wide culture of sustainability has the immensity of being profoundly different. That the survey went beyond the statistical findings to illustrate what this marketplace might look like is worth noting. Some of the highlighted points included:

--A broader sense of what value creation means to society;
--More effective use of technology toward driving transparency and resource efficiency;
--More effective business practices to tackle different consumer needs as well as alternative supply chains; and
--(Perhaps most importantly) Sustainability leadership and culture that embeds CSR into how employees and executives think about strategy and execution. For regular readers of this blog, this will sound familiar. Through guest blogs by graduating students like Ashley Jablow [Will an MBA in Sustainable Business Get Me a Job?], as well as commentary [How Will Wall Street Shortcomings Redefine the MBA Curriculum?] and interviews [Kathrin Winkler, Chief Sustainability Officer at EMC], I have often tackled the question of changing curriculum at business schools and the corresponding lack of interest from companies in the recruitment environment.

The report concludes that that while CEOs see a final destination, per se, for connecting sustainability and their businesses, the methods and timeline to get there remain uncertain. And some of the proposed action points include:

1) Generating new knowledge, skills and mindsets to drive sustainable development
2) Corporate training in sustainability
3) Attracting and engaging employee
4) Leading to an investment environment more favorable to sustainable businesses.
5) Embedding new concepts of value and performance at the organizational and individual levels.

Not surprisingly, this puts the onus on companies to develop talented human capital that is vigilant, aware and cognizant of pursuing a successful career at a company that aligns with their values and commitments. And this has already begun to emerge as the greatest challenge for corporate America. Or an advantage, if you choose to recognize it as one.