June 14, 2011
Sustainability Profits Companies
By Ron Robins, Founder & Analyst
For most companies, that which drives up
their stock values is what ultimately matters. And
adopting ‘sustainability’ practices can do that. A study
of the ‘Global 100 Most Sustainable Corporations’ as
determined by Corporate Knights found that, “from…
February 1 2005, the Global 100 Most Sustainable
Corporations has achieved a total return of 54.95 per
cent, outperforming its benchmark (the MSCI All Country
World Index) by more than 16 per cent to December 31st,
2010.”
And US companies who are proactive concerning their
environmental practices are found to have a lower cost
of debt, says a study by Rob Bauer and Daniel Hann of
Maastricht University, Netherlands, published December
23, 2010. (The study won the respected 2010 Moskowitz
Prize for Socially Responsible Investing, offered by the
Haas School of Business at the University of
California.)
Whether most executives are aware or not of such
results—and probably most are not—they are nevertheless
advocating and implementing sustainability programs for
their companies around the world. A KPMG International
study of executives released April 18 said that, “nearly
55 per cent of US executives say their organization has
a formal sustainability strategy in place… Another 12
per cent say they are working on a strategy and an
additional 19 percent expect to eventually develop a
formal plan… Asked to identify the top three benefits
from their sustainability program, the respondents most
often chose: better or more efficient business processes
and practices; increased profitability or shareholder
value; and the ability to attract or retain new or
existing customers… ”
Interest in sustainability related issues is growing in
companies everywhere. As an example, in the Middle East,
a survey published in July 2010 by Sustainability
Advisory Group found over 80 per cent of executives in
that region proclaimed issues related to sustainability
were critical or important to their organization in the
next ten years.
So what are companies really doing in regard to
sustainability? The London based firm, SustainAbility,
publishes a highly regarded ranking of global companies
and their sustainability efforts. The highest ranked
firms for 2011 were Unilever, General Electric,
Interface, Wal-Mart and Marks & Spencer. An outline of
their sustainability accomplishments is given below.
Apparently, Unilever, which manufactures food, ice
creams, soaps, shampoos and everyday household care
products, and more, scored highly partly because of its
Sustainable Living Plan. The plan, Unilever says,
contains over “50 concrete targets that will: help more
than one billion people improve their health and
well-being; halve the environmental impact of our
products; [and] source 100 per cent of our agricultural
raw materials sustainably.” Specifically, “By 2020 we
aim to halve the greenhouse gas impact of our products
across the lifecycle – from the sourcing of raw
materials, through to consumer use and disposal… to
halve the water associated with the consumer use of our
products… to halve the waste associated with the
disposal of our products... Today we source 10 per cent
of our agricultural raw materials sustainably. By 2012
we will source 30 per cent; by 2015 50 per cent; and by
2020 100 per cent.”
General Electric (GE) has its ‘ecomagination’ group.
Ecomagination products include aircraft engines,
locomotives, and wind turbines. GE says, “We launched
ecomagination in 2005. We’ve succeeded by embracing the
world’s environmental issues as an enormous business
opportunity… Overall, in the first 5 years, we invested
$5 billion in clean tech R&D, and we generated $70
billion in ecomagination revenues… As for our own
operations, we committed to reduce our environmental
footprint and, in 2009, our greenhouse gas emissions
were down 22 percent compared to 2004, well ahead of our
goal.” GE also claims that since 2005 they have reduced
water consumption by 25 per cent and attained a 50 per
cent reduction in energy intensity.
US headquartered Interface is the world’s largest
manufacturer of modular carpet (carpet ‘tiles’). The
company says its vision is, “to be the first company
that, by its deeds, shows the entire industrial world
what sustainability is in all its dimensions: People,
process, product, place and profits.” Ray C. Anderson is
founder and chairman of Interface and on November 9,
2010, he wrote on GreenBiz.com that, “We are now 10
years from 2020, our target year for achieving zero
[environmental] footprint... at the end of 2009, we were
about 60 per cent of the way.” (A zero environmental
footprint suggests, on a net basis, making zero demands
on the earth’s resources.)
It seems that Ray Anderson of Interface may have
provided some inspiration for Wal-Mart to also jump into
sustainability. At the instigation of Wal-Mart’s CEO, Mr
Anderson addressed Wal-Mart executives at a meeting on
sustainability in 2004. In October 2005 Lee Scott, CEO
called for Wal-Mart, “ …to be supplied 100 percent by
renewable energy, to create zero waste and to sell
products that sustain our environment and resources.” A
major recent innovation in this regard is Wal-Mart’s
pioneering of a product ‘sustainability index.’ The
company says that, “with this initiative [the
sustainability index], we are helping create a more
transparent supply chain, accelerate the adoption of
best practices and drive product innovation and
ultimately providing our customers with information they
need to assess products’ sustainability.”
Marks & Spencer (M&S) is the renowned UK
supermarket/department store chain. It plans to become
the world’s most sustainable retailer by 2015. In its
How We Do Business 2010 report, M&S says that since 2007
they have “cut carbon emissions from our operations by 8
per cent... improved store energy efficiency by 19 per
cent (after weather adjustment); reduced the amount of
waste sent to landfill by 33 per cent; reduced the
average weight of non-glass packaging on General
Merchandise by 36 per cent and Food by 20 per cent per
item… used 400 million fewer carrier bags than in
2006/07; increased sustainably sourced wood to over 70
per cent and sustainable fish to over 60 per cent...
[and] become the UK’s largest retailer of Fairtrade
certified cotton clothing and helped our suppliers set
up 10 Ethical Model Factories.”
Thus, corporations adopting sustainable initiatives are
likely to save costs, and may even drive revenues and
profits higher. And they might enjoy broader stock
market recognition for their sustainability, which could
boost their stock prices as well!
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