Sustainability & Social Responsibility
Perception Versus Reality
March/April 2013, eSide Supply Management Vol. 6, No. 2
A study shows how companies are integrating sustainability into their missions and brands, and outlines five corresponding best practices for leadership.
In 2011, Wilton, Connecticut-based Brandlogic Corporation published its inaugural sustainability leadership report, which summarized the findings of a study it conducted in cooperation with an analytics firm, CDR, and with support provided by Institute for Supply Management™ (ISM). Together, the constituents drilled down on the sustainability practices and perceptions of 100 global companies across a comprehensive spectrum of industries.
"Our goal was to provide a new perspective on sustainability by comparing perceptions of key stakeholders to reported corporate performance on environmental, social and governance (ESG) factors," explains James L. Cerruti, senior partner, strategy and research at Brandlogic.
Since then, Cerruti and his cohorts have had direct discussions of the results with about half the companies involved in the study. "These discussions regarding best practices led us to examine the activities of the leaders identified by our study in more depth," he says.
This follow-up work has allowed Cerruti and his colleagues to identify five best practices that are broadly shared by companies that display sustainability leadership today. This recent report spotlights these emerging new standards for corporate sustainability leadership — in particular, the organizations that best exemplify the implementation of these standards in their practices.
How Sustainability Translates to Leadership
As Cerruti points out, the measurements for what constitute corporate leadership are a moving target. "The criteria have evolved over time, from excellence in R&D and new product development, to operational excellence and process reengineering, to a focus on core competencies — and, in recent years, the ability to innovate," he explains. Today, the framing of corporate leadership is shifting again, to corporate sustainability.
"This isn't surprising, given the intense competition for resources on a global scale," Cerruti says. "It's quite natural for the world to look to the large institutions that control so much of the planet's physical resources and human talent to lead the way to a more sustainable future."
Beyond this, as Cerruti points out, the move toward sustainability is "recognition that those who can make efficient and responsible use of natural resources and human capital are more likely to be the destination of choice for talent and investment."
Sustainability Standouts' Five Areas of Focus
Focusing on the 100 companies self-identified as sustainability standouts in the 2011 study, Cerruti and his collaborators next concentrated on outside perceptions — of investment professionals, procurement and supply chain management professionals, and graduating university/college students — regarding those organizations' sustainability practices. A survey was conducted in the United States, United Kingdom, Germany, China, Japan and India. Overall, more than 16,000 ratings were obtained.
The results identified a number of "true leaders" — organizations that scored highly in both actual and perceived sustainability performance. "These are companies whose leadership teams excel in both the operational and communications dimensions of sustainability relative to their peers," Cerruti explains.
Among these companies — Nestlé, ABB, BMW, IBM and Cisco — five practices were largely shared:
1) Sustainability is an integral part of business strategy, not a peripheral compliance issue. To illustrate this leadership indicator in practice, Cerruti and his team spotlight Nestlé. They credit the company for focusing its corporate strategy around creating shared value.
"This combines adherence to key operating principles and achievement of targeted societal improvements in the communities from which they source products around the globe," the report states. "Nestlé analyzes its value chain to find ways to collaborate with local leaders to improve nutrition, water quality and rural development. Success in these efforts is viewed as crucial to Nestlé's future success and therefore integral to both business strategy and corporate reputation."
2) Responsibility is taken for the impact of internal operations, as well as those of associated entities such as supply chain partners. Alliances have been formed to foster progress on targeted sustainability issues. In this respect, Cerruti and company recognize ABB, which, according to their perception findings, takes responsibility in three main areas: 1) raising environmental performance/lowering impacts; 2) improving management of health, safety, social, environmental and security risks in its operations and projects; and 3) improving sustainability performance in its supply chain and acquired companies.
"The ABB Supplier Code of Conduct (SCC), which defines minimum standards for any company wishing to sell to ABB, underpins these efforts," the report explains. "The code covers supplier performance in fair and legal labor conditions, occupational health and safety, environmental responsibility and business ethics. The SCC also requires suppliers to be responsible for the sustainability performance of subcontractors."
3) Global Reporting Initiative (GRI) standards for reporting have been implemented and the materiality of the issues they highlight is understood, for both the company and all stakeholders. Leaders excel at meeting these standards fully and transparently — even those that may not seem relevant. According to the perception findings, BMW stands out as an exemplar for the quality, as well as thoroughness, of its sustainability reporting.
"Its top ranking for seven years running in the Dow Jones Sustainability Index is testimony to its leadership," the report states. In practice, BMW breaks its reporting into three focus areas:
- Product responsibility — With 97 percent product recyclability part of the design
- Environmental protection — Identifying measures for improved protection at early stages of investment
- Society — Road safety, education and health.
4) Sustainability has been integrated into the brand and client value propositions. The findings recognize IBM as having decided — earlier than many organizations — to integrate sustainability into its brand and customer value propositions. "It has effectively used its Smarter Planet™ theme to communicate how the company helps its clients enhance their performance in ways that foster sustainability," the report states. "Recent IBM advertising has been focused almost exclusively on outcomes and social benefit, rather than products and services."
As Cerruti points out, most of the study's sustainability leaders follow IBM's example rather than building reputation through secondary communication channels.
5) Operational initiatives and related communications are focused on carefully selected themes tied to the core of the business. In this respect, the report recognizes Cisco's "varied, yet complementary" communications to key stakeholder groups — communications that are thematically focused on both social and environmental platforms.
Socially, as the report points out, Cisco is focused on education — helping people around the world develop and use IT skills. On the environmental side, the company operates on a theme of "Energy-Wise," helping customers reduce greenhouse emissions and create smart buildings.
"Cisco provides a range of communications geared toward different audiences, including the socially responsible investment community, the market for talent, those focused on social responsibility and/or environmental issues, along with a more general audience," Cerruti acknowledges.
Positioned to Excel
As Cerruti points out, the follow-up study findings indicate that leader companies have successfully integrated sustainability themes into their corporate stories, mission, vision and values rather than treating sustainability as a reporting exercise.
Moreover, he says, companies that display true leadership in this emerging field are positioning themselves to excel in an increasingly challenging environment. "They're taking the high ground, both internally by building sustainability into the business and externally by informing the world about their efforts," he concludes.
RaeAnn Slaybaugh is a senior associate/e-writer for Institute for Supply Management™. For more information, send an email to firstname.lastname@example.org.
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