Corporate Sustainability & Performance: Search for the Evidence

Guest Blog Post by Dr. Nitish Singh, St. Louis University

Sustainability is the buzzword these days; various companies use this word loosely to highlight their concern for environment and/or society. However, most companies do not see the full value of what sustainable business strategy can deliver in terms of enhancing both environmental and economic performance. A global survey of 1,500 corporate executives by MIT Sloan Management Review and BCG found that many executives (35 percent) see sustainability as a tool to manage brand image; fewer than 10 percent of the surveyed executives were able to see the value of sustainability in terms of cost savings, innovation, stakeholder expectation, effective risk management and overall competitive advantage (Berns et al., 2009).

I want to compare sustainability to an iceberg-wherein most companies see only the tip of it and do not realize how integrating sustainability orientation can impact environmental, social and economic performance in a big way. Corporate sustainability is about taking a long-term perspective toward environmental, social and economic performance; commonly referred to as the ‘triple bottom line’. Besides, corporate sustainability is also about taking a much more in-depth and integrative view of all value-creating activities to optimize corporate performance based on the ‘triple bottom line criteria.’ An in-depth and integrative view of corporate sustainability can help companies not only achieve environmental and social goals, but also lead to lowering cost, boosting innovation and technological capabilities, creating operational efficiency, enhancing resource productivity, achieving product/service differentiation, maintaining long-term customer relationships, managing stakeholder perceptions , and exploring new market opportunities.

In academia we see emerging evidence that links sustainability to various corporate performance measures including higher financial performance. A study by Byus et al (2010) found that companies that were ranked on Dow Jones Sustainability Index for their sustainability rankings, also showed higher financial performance when compared to similar non-DJSI firms. Below is some emerging academic research providing evidence that corporate sustainability is not just a good buzzword, but a business strategy that can yield significant competitive advantage.

Sustainability and Marketing

Studies show that sustainability helps companies gain significant reputational advantage via product differentiation, product packaging and advertising, managing stakeholder expectations, proper disclosure and gaining credibility (Chen 2010; Christmann, 2000; Kolk and Pinkse, 2008; Shrivastava, 1995). The superior reputation gained through this process helps companies also enhance the bottom line (Plaza-Úbeda et al., 2009).

Sustainability and Efficiency Gains

Academia has also produced rich evidence to showcase how sustainability impacts overall corporate efficiency. Investments in environmental management help companies identify, reduce and eliminate waste; achieve product simplification and reverse logistics leading to closed loop production methods; and leverage renewable and virgin materials to enhance material recovery and achieve upcycling rather than just recycling (McDonough and Braungart, 2002; McDonough et al., 2003; Unruh, 2008). These efficiency improvements directly result in elimination of waste, conservation of resources and reduction in the usage of raw materials. In turn, this enhances both environmental and economic performance.

Sustainability and Innovations

Research is also showing how innovations geared toward reducing environmental impact are also yielding significant product and process improvements and enhancing corporate profits (e.g. Dangelico and Pujari, 2010; Machiba, 2010). For example, Japanese fast speed trains mimicked the design of the beak of a Kingfisher. The unique structure of the Kingfisher’s beak allows it to dive and catch fish with least resistance and little splash. This biomimicry-based innovation by Japanese rail resulted in 15 percent less energy use and 10 percent more speed.

Sustainability can also help companies create inter-organizational alliances to do materials pooling, engage suppliers, and share knowledge at an industry level to enhance overall industry competitiveness. Thus, sustainability has a lot to offer companies, which can really delve deep and find the core of the ‘sustainability iceberg’ and leverage it to enhance their triple bottom line. It is beyond the scope of this short piece to discuss more in-depth various strategic improvements, innovations and cost savings that can result from corporate sustainability. It is up to the industry, academia, government, and ‘us,’ the people, to engage in more research, education, and environmentally sustainable practices to really enhance the competitiveness, sustainability and viability of our global economy.

 Dr. Nitish Singh is Associate Professor of International Business at The Boeing Institute of International Business at Saint Louis University. He is also the Director for Alternative Delivery Programs-assisting with online and blended course offerings. He serves as Scholar member at Center for Sustainability , program leader for Certificate in Ethics and Compliance and Certificate in Web globalization St. Louis University. He is the author of the book “Localization Strategies for Global e-Business” published by Cambridge University Press, 2012, and has published more than 40 academic papers in top journals.

 Saint Louis University is one of the few universities in the St. Louis region to offer a Master’s Degree in sustainability, and its John Cook School of Business is one of the global innovators providing comprehensive training in Ethics and Compliance Management via its online certificate in corporate ethics and compliance management.

References

  • Berns, M., Townend, A., Khayat, Z., Balagopal, B., Reeves, M., Hopkins, M. and Kruschwitz, N.: 2009, ‘The business of sustainability: Findings from the first annual survey and interview project’, MIT Sloan Management Review, 51(1), 19-26.
  • Christmann, P.: 2000, ‘Effects of “best practices” of environmental management on cost advantage: The role of complementary assets’, Academy of Management Journal, 43, 663-681.
  • Chen, Y.: 2010, ‘The Drivers of Green Brand Equity: Green Brand Image, Green Satisfaction, and Green Trust’, Journal of Business Ethics, 93(2), 307-319.
  • Dangelico, R. and Pujari, D.: 2010, ‘Mainstreaming Green Product Innovation: Why and How Companies Integrate Environmental Sustainability’, Journal of Business Ethics, 95(3), 471-486.
  • Kolk, A. and Pinkse, J.: 2008, ‘A Perspective on Multinational Enterprises and Climate Change: Learning from “An Inconvenient Truth”, Journal of International Business Studies 39(8), 1359-1378.
  • Machiba, T.: 2010, ‘Eco-innovation for enabling resource efficiency and green growth: development of an analytical framework and preliminary analysis of industry and policy practices’, International Economics and Economic Policy, 7(2-3), 357-370.
  • McDonough, W. and Braungart, M.: 2002, Cradle to Cradle: Remaking the Way We Make Things. New York: North Point Press.
  • McDonough, M., Braungart, M., Anastas, P. T. and Zimmerman, J. B.: 2003, ‘Applying the principles of green engineering to cradle-to-cradle design‘,  Environmental Science and Technology, December(1), 434A-441A.
  • Plaza-Úbeda, J. A., Burgos-Jiménez, J., Vazquez, D. A., and Liston-Heyes, C.: 2009, ‘The win-win paradigm and stakeholder integration’, Business Strategy and the Environment, 18(8), 487-499.
  • Shrivastava, P.: 1995, ‘The role of corporations in achieving ecological sustainability’, Academy of Management Review, 20(4), 936-960.
  • Unruh, G. C.: 2008, ‘The biosphere rules’. Harvard Business Review, 86(2), 111-117.
  • Doing Well by Doing Good: Corporate Social Responsibility and Profitability. Byus, Kent; Deis, Donald; Ouyang, Bo. SAM Advanced Management Journal, Winter 2010, Vol. 75 Issue 1, 44-55, 12.

 

 

  • Ashley Pitlyk

    Thanks for submitting this excellent guest post, Dr. Singh! I’m always thrilled when I see my alma mater is making significant steps in sustainability research!

    I think one of the hardest challenges people in our industry have to make is how to quantify the value of corporate reputation. Your post shows us that there is indeed quantifiable evidence out there to support our arguments. Establishing sustainability objectives doesn’t just make people feel good about a company, it also makes good business sense. Keep up the great research!

  • Christi Dixon

    One of my favorite points in this piece is that “Sustainability can also help companies create inter-organizational alliances to do materials pooling, engage suppliers, and share knowledge at an industry level to enhance overall industry competitiveness.” Too often, organizations don’t invest in sustainability initiatives because it’s a long-term effort…I love that coalition-building and shared sourcing can happen in the near term. We know that business results (or the prospect of not achieving them) spurs change!