New Metrics

Why Corporate Responsibility Has the Potential to Deliver Financial, Competitive Returns

I’ve been working in the Sustainability and Corporate Responsibility (CR) field for twenty years. In that time, skeptics have persistently challenged the discipline: Do corporate environmental, social, and governance practices drive or distract from tangible financial, competitive, and wider business performance?On the one hand, anyone who attended SB’15 in San Diego should celebrate the present as the best of times to answer this question. Eyes are opening – backed by rigorous assessment – on the financial and wider competitive potential of low-carbon innovations, circular economic and other breakthrough economic strategies, and base of the pyramid development.

By Steve Rochlin | Published 9 years ago | About a 3 minute read

I’ve been working in the Sustainability and Corporate Responsibility (CR) field for twenty years. In that time, skeptics have persistently challenged the discipline: Do corporate environmental, social, and governance practices drive or distract from tangible financial, competitive, and wider business performance?

On the one hand, anyone who attended SB’15 in San Diego should celebrate the present as the best of times to answer this question. Eyes are opening – backed by rigorous assessment – on the financial and wider competitive potential of low-carbon innovations, circular economic and other breakthrough economic strategies, and base of the pyramid development.

But what about the wide and vast array of environmental, social, and governance practices that don’t meet – or don’t easily fit into – a financial calculus that shows a competitive payback delivered in timely fashion? Is sustainability worth doing, then? Should the resources invested in CR and sustainability be kept small, out of sight, and out of mind? Or should companies increase commitments in concert with the growing expectations of wider stakeholders?

IO Sustainability and Babson College, with the support of Lead and Commissioning Sponsor Verizon and Supporting Sponsor Campbell Soup Company set out to find answers.

Circularity by Design: How to Influence Sustainable Consumer Behaviors

Join us Thursday, December 5, at 1pm ET for a free webinar on making circular behaviors the easy choice! Nudge & behavioral design expert Sille Krukow will explore the power of Consumer Behavior Design to drive circular decision-making and encourage behaviors including recycling and using take-back services. She will share key insights on consumer psychology, behavior design related to in-store and on-pack experiences, and how small changes in the environment can help make it easy for consumers to choose circularity.

Tell me more!

We started by asking C-Suite executives from Fortune 1000 companies what would persuade them. Don’t conduct another narrow study, they said. Don’t focus on one area. Look at everything from share price, to sales, to Human Resources, and more. Tell us what the weight of the research says. Give us the results in dollars and Euros or other quantifiable means that make sense. Then share with us what companies do to create business value from CR and sustainability.

Our report, Project ROI: Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability, does just that. It shows the return of high-performing CR/sustainability initiatives on factors such as market value, human resources, and risk mitigation. Some key findings from our review of over 300 leading research studies are that well-run Corporate Responsibility programs have the potential to:

Increase market value by 4-6 percent
Reduce cost of equity by 1 percent
Increase sales up to 20 percent
Provide risk protection of 4-7 percent of company value
Increase employee productivity up to 13 percent
Reduce employee turnover rate by 25-50 percent.

These are a taste of some of the claims that I’m confident we can make that CR and sustainability – if managed well – have the potential to deliver. The report includes an even wider array of compelling value metrics.

Getting these results requires embracing highly disciplined and strategic management practices. For example, driving sales means developing close partnerships with Marketing to work together to:

Identify the core 1-20 percent of the customer base ready, willing, and able to be activated as the company’s “CR brand ambassadors”;
Assess how customers intuitively relate the company’s products, brand, and culture to environmental and/or social sustainability issues;
Building in, rather than bolting on, sustainability messages; and
Working through the delicate balance of activating customer pride, and even a bit of guilt, in responding to sustainability messages.

That’s a flavor. Take a look at our results and tell us what you think. Join us at Sustainable Brands' New Metrics 2015 in Boston, October 6-8, where we will continue the conversation and share more of the findings. See if you agree that it’s time to move beyond unproductive disputes about whether CR and Sustainability builds or reduces financial value, to the question of how we go about designing strategic and impactful approaches that create benefits for shareholders and stakeholders alike.