Monday, 3 October 2011

Corporate Sustainability: The Road Ahead

With growing awareness among investors, consumers, employees and local communities on social and environmental risks posed by excessive use of natural resources, stakeholder rights' infringement and unabated pollution, corporate board rooms are gearing up to incorporate sustainability principles into their business strategies.

The recent CDP Global 500 report released by Carbon Disclosure Project that analyzed disclosures from 396 of the world’s largest companies, revealed that 68% have climate change at the heart of business strategies, compared with 48% in 2010. The report also shows that there has been an increase in ROI for companies that incorporated low-carbon technologies.

Global Reporting Initiative has also reported an improvement in quality of sustainability reporting and an increase in the number of companies reporting on GRI guidelines.

While these figures are encouraging and validate the benefits of incorporating sustainability principles, there is still a long way to go. Many leading companies are yet to join this bandwagon and are struggling in making basic environmental disclosures. A research conducted by KPMG and Economic Intelligence Unit, finds that a third of businesses globally are yet to implement sustainability plans. The study points out the following reasons for slow progress on sustainability:
  • A lack of common set metrics and tools – and information systems - for measurement and analysis of the impact of sustainability programs
  • A lack of available financing that will put sustainability on par with operational programs that have a higher short-term return on investment (ROI)
  • A lack of a clear and rigorous international framework of regulation within which companies can plan with confidence

However, it is beyond doubt that the current ‘license to operate’ would depend largely on the extent to which companies respond to social and environmental risks. According to a study by Gartner, improving sustainability would become a top five priority for 60% of major Western European and North American CEOs. The road ahead would have its own issues and challenges that would need 'out-of-the-box’ solutions.
What is needed most for companies is to focus on – innovation. This involves finding innovative solutions to minimize or eliminate waste during product design, choice of raw materials used, processing, manufacturing, packaging, marketing, transporting, storing or end-usage and disposal.

The C-suite needs to take a holistic-approach that extends throughout the product life-cycle and encompasses the entire supply chain, transgressing the traditional organizational boundaries, in order to put in place a relevant sustainability strategy that not only reduces ecological footprint but also promises sustainable returns to investors. 

The CDP Global 500 report shows that there was a marked rise in the number of companies reporting reduced greenhouse gas emissions as a result of emissions reduction activities (45%, up from 19% in 2010). Reducing carbon emissions through a combination of energy-efficient technology and renewable energy sources is gaining wide acceptance. Innovations have taken place both at an incremental level through reuse-recycle methods and at a radical level by fossil fuel substitution.

With energy prices on the rise and also prone to steep fluctuations, this strategy has the potential to offer better returns and it also improves the business process efficiency. 

However, apart from carbon emissions there are other environmental concerns that offer opportunities for innovation. Some of them for instance, are - the FMCG and Retail industry where sustainable packaging is an area of concern. The use of toxic or bio non-degradable materials in packaging needs to be discontinued. The food industry needs to ensure that its vendors or farmers are following sustainable agricultural practices and are not posing a threat to forests and wildlife. Paper industry needs to be concerned about how it is sourcing wood pulp. IT/ITES industry has to take adequate steps to handle e-waste. Telecom industry needs to come clean on its use of fossil fuel. 

All these and more challenges can be tackled through innovation. Companies need to understand that innovation is at the core of sustainability, without which it would not be possible to drive an organization towards sustainability.

About is a leading Sustainability News and Analysis portal, catering to a global business and scientific community. It offers unique opportunities to corporate, academia and development agencies to promote sustainability initiatives.

Through our continuous engagement with eminent professionals, corporate leaders, business analysts, scientists and students from all over the world, we bring forth fresh perspectives relevant to understand various issues and challenges pertaining to sustainability.


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