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Top CEOs Focus on Sustainability
By Sara Laks

A recent survey by the United Nations Global Compact and Accenture, “A New Era of Sustainability,” found that a majority of today’s most influential chief executives recognize that sustainability is crucial to corporate success.  Over 750 CEOs were interviewed, making this the largest survey of top level executives on the topic of sustainability.  The understanding that sustainability—a reconciliation of environmental, social, and economic demands—is no longer a separate concern from profitability has made its way into the core decision making of mainstream corporate boardrooms.

The adoption of sustainable practice by top level executives has taken a major jump in recent years; a similar survey conducted in 2007 reported that only 50 percent of CEOs considered sustainability issues in corporate strategy and core practices, as compared to 81 percent in 2010.  According to many CEOs in the 2010 Accenture and UN survey, the economic downtown in the past few years has reinforced the logic of “going green” by raising the importance of cost efficiency and the need to reach new markets.  Corporate responsibility is required to regain the trust of stakeholders in the wake of the grave consequences of corporate irresponsibility.  With more scrutiny than ever by investors, CEOs believe that now is the opportune time to take a lead on responsible management of the impacts that their businesses have on society and on the planet.

Despite the momentum at the strategy level today, CEOs still face several barriers to full implementation of sustainability goals.  One of the major obstacles cited in the 2010 survey was the complexity of implementing across business functions (49 percent).  The level of interconnectedness of today’s business world necessitates applying standards of social responsibility and environmental sustainability to global supply chains and subsidiaries.

A lack of recognition in the financial market was identified as another hurdle.  Eighty-six percent of CEOs said “accurate valuation by investors of sustainability in long-term investments” is crucial.  Getting investors to be aware that sustainability is good for the bottom line is seen as a necessary step in reaching the tipping point for sustainability.

CEOs overwhelmingly testify that sustainable practice has tremendous value-add power in terms of cost reduction, risk reduction, and enhanced brand repudiation.  But the translation of this into traditional economic metrics has been slow, with fewer than 50 percent of respondents reporting that sustainability issues came into play in consultations with financial analysts.

Here is some good news:  54 percent of respondents said that fully integrating sustainable practice across the business would be a reality in less than a decade, while 81 percent saw this happening in less than 15 years.  And there is more good news:  91 percent of CEOs say their companies are working to employ new technologies to address sustainability issues, such as renewable energy technologies or developing greater energy efficiency.  Education and climate change were the most commonly cites challenges top executives face today to future success.  To most effectively tackle these global challenges, 78 percent of respondents said that companies should engage in partnerships with a variety of stakeholders to address sustainability issues citing examples of collaboration with NGOs, governments and suppliers.

The bottom line here is that responsible business is good business and that those who remain slow to recognize this alpha value will fall further behind their competitors.  It’s now coming straight from the top; the global economy is in transition to a new business model that will reward companies that embrace sustainability as a competitive advantage.

Sara Laks
Assistant to the President
saralaks@firstaffirmative.com

Posted: July 9, 2010