There is widespread and growing acceptance of the increasing value that sustainability programs have in the private sector today, yet over 30 percent of businesses do not have a strategy for sustainable growth in place, according to a survey from KPMG’s global Climate Change and Sustainability practice.
Just over 60 percent of companies surveyed said that they currently have a working strategy for corporate sustainability - up from just over half polled in a similar survey in 2008. Of those that do not have a strategy, over 70 percent expect to do so within one to five years and 25 percent indicated they had no specific timeframe. Yet, nearly 50 percent of all executives surveyed believe that implementing sustainability programs will contribute to the bottom line, either by cost reduction or increased profitability.
These figures come from Corporate Sustainability: a progress report, a survey of 378 senior executives representing a range of industries evenly split between the US and Canada, Asia Pacific and Europe, with contributions from the Middle East, Africa and Latin America.
The survey captured three main 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.
Larger, publicly listed companies are much more likely to have adopted a strategy than their smaller, privately held counterparts. Nearly 8 in 10 of the large companies polled have a strategy, compared with just under half of the smaller businesses.
Of those that do have strategies in place, only one in three have issued a public report on their progress.
“We are finding that most companies understand what they need to do strategically,” said Ted Senko, global head of Climate Change and Sustainability (CC&S) at KPMG and a partner in the US firm, “but they need help in building the strategic models and information systems to establish how effective they really are at reducing carbon, benchmarking their plans against the standards of their competitors, and optimizing their businesses to manage the challenges of a changing regulatory environment.
“A business sustainability strategy based on good measurement and analysis is very important in order to assess the financial payback when regulations on emissions and energy use could increase.”
Two-thirds of those polled believe that a new set of rules is either very important or critical, and there is widespread support for tougher international regulations if these would reduce the complexity and cost of complying with widely differing national and state rules.
Yvo de Boer, Special Global Adviser for KPMG’s Climate Change and Sustainability practice and the former Executive Secretary of the United Nations Framework Convention on Climate Change asserts that the upcoming climate change talks in Durban, South Africa later this year must result in approvals that will enable the creation of new market-based methods to help businesses meet sustainability targets.
“We must work to empower the private sector to make an impact on sustainability goals, but to do so, requires leadership in the private sector, and strong support from governments. This is vital if we are to mobilize the very large private financial flows necessary to bring climate goals within reach,” Mr. de Boer said.
Nevertheless, most large, public companies are pressing ahead with developing their own solutions.
On the issue of financing sustainability initiatives, the survey revealed some innovative new methods, where energy producers, for example, are using financing methods to promote efficiency, and bundling up projects with longer and shorter payback cycles into a basket of investments that will meet the firm’s payback requirements.
As the report cites, in task forces within the Global Reporting Initiative (GRI) and the International Integrated Reporting Committee (IIRC), progressive companies are already at work developing common standards for measurement and benchmarking and technology exchange.
“These are excellent examples of the progressive thinking that delivers the real value of a sustainability initiative within the entirety of a company’s activities,” Mr. Senko said. “But again, it needs good quality information and analysis, and clear government commitment before businesses can broadly make these commitments with confidence. “
"Although this survey is global, its conclusions are also relevant for Russian companies," says Igor Korotetskiy, Head of the Corporate Governance and Sustainability Group. "Insufficient funding for sustainable development programs, inadequate regulation and weak adoption of innovative management and technological solutions are the main reasons for the slow changes in sustainable development in Russian companies.
At the same time, our own observations show that a specific characteristic of Russian companies is that management pays little attention to sustainable development issues. Without the support of management, it will be very difficult to achieve a breakthrough in the first three areas mentioned," he added.
Note to editors:
Corporate Sustainability: a progress report is a KPMG research paper, conducted in co-operation with the Economist Intelligence Unit. Its initial conclusions were previewed at the climate change talks in Cancun, Mexico at the end of 2010. The full report is being released to mark the establishment of a KPMG global center of excellence in climate change and sustainability in Amstelveen, the Netherlands.
The report reviews the importance of sustainability within business today and executive attitudes towards this issue. For the purposes of this report, corporate sustainability is defined as: “adopting business strategies that meet the needs of the enterprise and its stakeholders today while sustaining the resources, both human and natural, which will be needed in the future.”
The report is based on the following inputs:
- A global survey of 378 senior executives, encompassing a range of industries, and evenly split between the US and Canada, Asia-Pacific and Europe, with a smaller representation from the Middle East, Africa, and Latin America. Organizations of all sizes were represented: 40% of respondents worked for firms with revenues of at least US$1bn, whereas 47% were from firms with revenues of US$500m or less. The respondent base was very senior: 26% were CEOs, presidents or managing directors of their firms; half represented the C-suite or board; and all respondents were in a management position. The survey was conducted in October 2010.
- To complement this, and provide specific context, the Economist Intelligence Unit conducted extensive desk research and in-depth interviews with numerous corporate sustainability executives and experts.