The Sustainability Buzz

Profiting from Sustainability: The New Harvesters

HarvestA new group of organizations are coming into view, a group that says they’re profiting from their sustainability initiatives.  This group, called “Harvesters,” sets itself apart from other companies by fundamentally changing its strategy and operational framework to incorporate sustainability, and they are the focus of this year’s report, Sustainability Nears a Tipping Point, by the MIT Sloan Management Review and Boston Consulting Group.

Last year’s study, which we previously wrote about in The Sustainability Buzz, outlined the competitive advantage gap between the sustainability “embracers” and “cautious adopters,” and this year’s study goes further to describe that this new class of businesses is not only seeing competitive advantage but also the profits attendant to that advantage.  Resource-intensive industries, like energy and utilities, consumer products, chemicals and utilities, still lead the way, but compared to last year, companies from service and technology industries also are seeing the competitive merits of sustainability and are permanently placing the issue on their agenda.

This year’s study also finds that more companies are drawing the connection between sustainability and innovation.   The study reports that 25% of respondents selected improved innovation in products and services as a top benefit of sustainability (up from 16% last year); 22% chose business model and process innovations as a top benefit (up from 15%).  No one is seeing these benefits more clearly than the Harvesters, who are experiencing increased profits from sustainability.

So what makes these Harvesters different?  Three key areas have emerged that set these Harvesters apart—they have a business case for sustainability, they’ve modified their organizational structure, and they’re operating more collaboratively.

The Business Case

First, they have a business case for sustainability.  In fact, they’re three times more likely to have one than non-Harvesters.  They’re also twice as likely to have a separate sustainability reporting process and more than twice as likely to have operational and personal key performance indicators (KPIs) for sustainability.  57% of Harvesters have set company or operational key performance indicators related to sustainability, compared with 25% of non-Harvesters.

These companies may still struggle with quantifying comprehensive metrics, measuring brand reputation, and predicting resource price uncertainties, but being proactive in making internal changes to adapt to anticipated external changes lessens their struggle.  In contrast, only 9% of cautious adopters—ones who adopt sustainability practices in response to legislation or other outside pressures—reported that sustainability added to their profitability.  Clearly, having a strong business case for sustainability is a key ingredient in reaping profitable rewards, but that’s not all.

New Organizational Structure

The study reports that Harvesters are “adopting new structures, instituting new lines of communication and establishing new performance metrics” instead of trying to fit sustainability-related resources into established organizational structures (a variation on the square peg-round hole approach).  In a typical Harvester organization, the sustainability officer has the backing of the CEO and is often supported by separate senior management committees that support sustainability objectives.  Harvesters are 50% more likely to have have a CEO that supports sustainability, and they’re 62% more likely to have financial incentives tied to sustainability performance.  As the study states, “Harvesters tend to have a distinctive organizational mindset and design that support sustainability.”

Collaborative Operations

Finally, Harvesters are more collaborative with internal and external stakeholders.  Harvesters especially collaborate among geographic business units.  “So if we’re talking about something that’s working really well in Europe, we look at whether there’s a way to bring it to the U.S.” says Dave Stangis, Campbell Soup’s Vice President of CSR, Sustainability and Community Affairs.  Additionally, Harvesters collaborate more with customers and suppliers.  Both Walmart and Procter and Gamble have sustainability scorecards for suppliers that measure things like energy use, water use, waste management and greenhouse gas emissions.

This is not to say that you can’t see profits from acting more sustainably without large-scale change.  Cornell University professor Stuart Hart describes “eco-efficiency gains” as things such as reductions in energy consumption, and these can still contribute to profitability even without having sustainability strategy embedded in your organization yet.  But Harvesters are going beyond those gains to innovate, achieve competitive advantage and reap the financial benefits of making that business case for sustainability.  Wouldn’t you like to join them?

Source: Sustainability Nears a Tipping Point (Findings from the 2011 Sustainability and Innovation Global Executive Study and Research Project). MIT Sloan Management Review and Boston Consulting Group. Winter 2012. Get the full report here.

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