Many CEOs want to make a difference. Convinced that companies should play a positive role in environmental stewardship and social development, they declare sustainability a top priority, launch a transformation program, hire a chief sustainability ofﬁcer, and commit millions of dollars and hundreds of hours of management time to the effort. Then momentum fades.
It’s a frustrating setback—and a common one. A new report released Bain & Company, finds that only 2 percent of corporate sustainability programs achieve or exceed their aims, compared to 12 percent of other corporate transformation programs.
These are the results of ***Achieving Breakthrough Results in Sustainability***, a survey of more than 300 companies such as Coca-Cola, Nestlé and Novozymes engaged in sustainability transformation and interviews with the heads of sustainability at companies that have been recognized for their sustainability results.
“Too often, sustainability gets stuck in first gear, while the need for change is accelerating,” said Jenny Davis-Peccoud, who leads Bain’s Sustainability & Corporate Responsibility practice. “Once companies learn to navigate common roadblocks, they open the door to be a leader in the industry.”
Bain found that many employees do not see sustainability as a business imperative, with more than 60 percent of survey respondents citing public reputation as the key driver for sustainability change. Employees also deprioritize sustainability because of perceived business trade-offs and an absence of incentives. Lack of resources and competing priorities are the two top obstacles employees say threaten to derail sustainability programs, and less than a quarter of respondents say they are held accountable for sustainability through incentives.
Nestlé, for example, announced water and other environmental management commitments in 2012, including a pledge to reduce water withdrawals per ton of product by 40 percent, compared with 2005 levels. “The feedback loop of committing, acting, reporting and then getting positive feedback from ratings agencies became a real driver for positive change,” said Janet Voûte, former head of public affairs at Nestlé.
In 2015, Nestlé beat its water target, reducing usage per ton of product by 41.2 percent from 2005 levels. The company’s US factories are withdrawing 10 percent less water per ton of product than they did five years ago. Nestlé now ranks no. 1 in the food, beverage and tobacco category of the Dow Jones Sustainability Index.
Coca-Cola has also made significant sustainability progress, which it attributes to its strategic and selective approach in regards to its public sustainability commitments. In 2014, Bea Perez, the brand’s chief sustainability officer, streamlined the Coca-Cola’s numerous publicly announced targets to 12 goals that extend across the value chain, including a franchise system of more than 200 independent bottling companies and suppliers.
To manage the transition, Coca-Cola launched an open dialogue with stakeholders for input on a new sustainability framework, and implemented changes based on the feedback. Stakeholders supported the company’s focus on select targets that align with the business. In 2015, Coca-Cola met its goal five years ahead of schedule to replenish or balance the amount of water the company and its bottling partners use globally back to nature and to communities.
For Novozymes, senior leadership support and broad executive-level action proved to be the most important factor contributing to success. In 2008, the company created an executive sustainability board, including vice presidents of each business function, as a catalyst for change. Giving each member direct responsibility for results helped ensure that efforts to meet sustainability targets also created value for the business. Novozymes, which produces enzymes that help reduce the consumption of energy, raw materials and chemicals, estimates that in 2015, its customers reduced their carbon emissions by 60 million tons through the use of its products.
By 2015, Novozymes had placed sustainability at the core of its business, incorporating it into the company’s purpose, strategy and long-term targets. The leadership team decided at that point to dissolve the sustainability board since its commitment was firmly established as a top business priority.
Organizational change takes time and management commitment, but companies that succeed say it is worth the investment. Sustainability efforts can invigorate the core business, bolster the customer value proposition, secure the supply of key resources, lower operational costs and improve employee satisfaction.
The study makes four recommendations to help companies achieve sustainability gains:
- Make a public commitment. Many executives hesitate to make their goals public, fearing reprisal from third-party watchdogs if they fall short. Sustainability leaders manage that downside risk by engaging proactively with stakeholders. They afﬁrm that the beneﬁts of public commitments signiﬁcantly outweigh the risks by creating a shared sense of mission and helping companies stay the course during difficult phases.
- CEOs: lead by example. Our research shows senior leadership support is the most important factor contributing to success, and visible actions—not just words—make the difference. CEOs create the vital lift-off energy for sustainability efforts and regenerate momentum throughout the journey.
- Highlight the business case. Sustainability leaders help employees understand the business case that links sustainable products and processes with success, and there’s no shortage of proof. Growth for brands with a demonstrated commitment to sustainability was four times faster than non-sustainable products in 2015, according to the Nielsen Global Corporate Sustainability Report.
- Hardwire change through incentives and processes. Companies that achieve ambitious sustainability goals embed sustainable behaviors and processes throughout the business and make line managers responsible for delivering results. For example, some companies change their capital-approvals process to include sustainability factors, or increase time horizons in business case assessments, allowing more initiatives to qualify for investment.