The sustainable future:  Promoting growth through sustainability A research report sponsored by Enel February 15, 2010 Avi...
Objectives of the research <ul><li>Last year’s report, “Managing for Sustainability”, found that sustainability is moving ...
About the research <ul><li>The research had three main components : </li></ul><ul><li>Desk research </li></ul><ul><li>An o...
Key findings <ul><li>Corporate focus on sustainability is spreading from developed to developing countries </li></ul><ul><...
Key finding 1: Sustainability’s growth path A sharpening focus on sustainability worldwide … <ul><li>Globally,  57%  of re...
Key finding 1: Sustainability’s growth path <ul><li>…  with developing countries showing fastest growth in awareness </li>...
<ul><li>Emerging markets:  Awareness grows over time from 60% to 85%  </li></ul><ul><li>Developed markets : Awareness grow...
<ul><li>Voices in favour … </li></ul><ul><li>54 % of executives say  customers  have the strongest influence on their ESG ...
<ul><li>…  and voices opposed </li></ul><ul><li>44% of executives say urgent, immediate financial goals block a focus on s...
<ul><li>Keeping quiet … </li></ul><ul><li>Only  18%  of firms surveyed publish ESG targets and performance yearly </li></u...
<ul><li>…  but a bit less quiet in developing countries </li></ul>Key finding 4: Telling the world How, if at all, does yo...
<ul><li>In general, large companies are more likely to publish integrated reports than small ones </li></ul><ul><li>But ev...
<ul><li>Only  22%  say sustainability is a fundamental part of their risk management programmes;  35%  take an ad hoc appr...
<ul><li>76%  of executives agree that sustainability is a  pre-requisite for long-term growth </li></ul><ul><li>However, o...
Key finding 7:  Sustainability and the bottom line <ul><li>Companies have varied motives for focusing on sustainability: <...
Conclusions  <ul><li>Companies worldwide increasingly focus on ESG sustainability  </li></ul><ul><li>The link between ESG ...
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The sustainable future: Promoting growth through sustainability

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The sustainable future: Promoting growth through sustainability

  1. 1. The sustainable future: Promoting growth through sustainability A research report sponsored by Enel February 15, 2010 Aviva Freudmann Research Director Continental Europe, Middle East and Africa Economist Intelligence Unit
  2. 2. Objectives of the research <ul><li>Last year’s report, “Managing for Sustainability”, found that sustainability is moving into the business mainstream </li></ul><ul><li>This study broadens the inquiry to Environmental, Social and Governance (ESG) sustainability … </li></ul><ul><li>… and compares developing and developed regions in terms of commitment to sustainability </li></ul><ul><li>This report also considers the relationship between commitment to sustainability and financial performance… </li></ul><ul><li>… and shows how companies manage and measure performance on sustainability </li></ul><ul><li>Sustainability is defined as “operating in a way that ensures long-term viability” </li></ul>
  3. 3. About the research <ul><li>The research had three main components : </li></ul><ul><li>Desk research </li></ul><ul><li>An online survey of 284 executives conducted in December 2010 and January 2011 </li></ul><ul><li>High level : Over 50% are CEOs, presidents and managing directors </li></ul><ul><li>Strategic thinkers : Around 74% are responsible for strategy and business development </li></ul><ul><li>Global : All regions of the world represented </li></ul><ul><li>Business cross-section : All major industries represented </li></ul><ul><li>Both rich and poor : More than half (53%) are based in developing countries </li></ul><ul><li>Both large and small : 43% represent large companies (more than US$500m in annual revenue) </li></ul><ul><li>Nine in-depth interviews with senior executives and industry experts </li></ul><ul><li>Campbell Soup (US) </li></ul><ul><li>Global Reporting Initiative (Netherlands) </li></ul><ul><li>INSEAD (France) </li></ul><ul><li>Impahla Clothing (South Africa) </li></ul><ul><li>KPMG (Russia) </li></ul><ul><li>Novo Nordisk (Denmark) </li></ul><ul><li>SLN Tekstil (Turkey) </li></ul><ul><li>Solvay (Belgium) </li></ul><ul><li>Vale (Brazil) </li></ul>
  4. 4. Key findings <ul><li>Corporate focus on sustainability is spreading from developed to developing countries </li></ul><ul><li>Customers are the most influential drivers of companies’ commitment to sustainability goals and practices </li></ul><ul><li>Short-term financial pressures are the main obstacle to a corporate focus on sustainability practices </li></ul><ul><li>Sustainability reporting is not widespread—but is growing fast, particularly in emerging markets </li></ul><ul><li>Senior executives are divided on the benefits of integrated (financial and sustainability) reporting </li></ul><ul><li>Companies are inconsistent about integrating sustainability considerations into risk management </li></ul><ul><li>The relationship between ESG sustainability practices and long-term financial results is becoming clearer </li></ul>
  5. 5. Key finding 1: Sustainability’s growth path A sharpening focus on sustainability worldwide … <ul><li>Globally, 57% of respondents say sustainability has been important for their firms over the past three years… </li></ul>… while 78% say sustainability practices will be important for their companies in the next three years. n = 281 78 % n = 281
  6. 6. Key finding 1: Sustainability’s growth path <ul><li>… with developing countries showing fastest growth in awareness </li></ul>How important has ESG sustainability been to your company in the past three years ? How important will ESG sustainability be to your company in the next three years ? n = 151 26 % n = 131 22 % n = 148 n = 131
  7. 7. <ul><li>Emerging markets: Awareness grows over time from 60% to 85% </li></ul><ul><li>Developed markets : Awareness grows over time from 53% to 70% </li></ul><ul><li>One driver of this growth : Suppliers in poor countries see ESG as a bridge to better ties with clients, investors in rich countries </li></ul><ul><li>Example : Puma’s supply chain </li></ul>Key finding 1: Sustainability’s growth path Sustainability’s growth path in emerging markets
  8. 8. <ul><li>Voices in favour … </li></ul><ul><li>54 % of executives say customers have the strongest influence on their ESG policies—more than any other stakeholder </li></ul><ul><li>Business customers are more likely than individual consumers to exert influence </li></ul><ul><li>The influence of regulators and investors is rising, interviewees say </li></ul>Key finding 2: Agents of change n = 270
  9. 9. <ul><li>… and voices opposed </li></ul><ul><li>44% of executives say urgent, immediate financial goals block a focus on sustainability </li></ul><ul><li>Only 14% of managers see a link between sustainability and short-term profit, even though some ESG initiatives pay off in under a year </li></ul>Key finding 3: Internal barriers “ The biggest obstacle is market short-termism. Executives are still committed to showing their results on a quarterly basis.” Ernst Ligteringen , CEO, Global Reporting Initiative n = 284
  10. 10. <ul><li>Keeping quiet … </li></ul><ul><li>Only 18% of firms surveyed publish ESG targets and performance yearly </li></ul><ul><li>Fully 40% have no plans to publish their sustainability practices and goals </li></ul>Key finding 4: Telling the world n = 284 Separate communication strategy for ESG
  11. 11. <ul><li>… but a bit less quiet in developing countries </li></ul>Key finding 4: Telling the world How, if at all, does your company report its performance in ESG sustainability? Select all that apply. Do not currently publish ESG <ul><li>In developing countries, 45% of those who do not currently publish say they plan to do so in the next two years, versus 19% in developed countries </li></ul>n = 151 n = 132
  12. 12. <ul><li>In general, large companies are more likely to publish integrated reports than small ones </li></ul><ul><li>But even in large firms, integrated reporting has yet to catch on. In large firms, 35% report ESG information annually, yet only 18% publish an integrated report </li></ul><ul><li>Some interviewees argue that targeting information to specific groups is more effective than creating omnibus, integrated reports </li></ul>Key finding 5: Integrated financial/ESG reporting How, if at all, does your company report its performance in ESG sustainability? Select all that apply. n = 88
  13. 13. <ul><li>Only 22% say sustainability is a fundamental part of their risk management programmes; 35% take an ad hoc approach </li></ul><ul><li>While the focus on sustainability is growing, just 22% of respondents expect to include it in their risk management in future </li></ul>Key finding 6: Sustainability and risk management n = 282 An occasional appearance <ul><li>Best practice example : </li></ul><ul><li>Campbell Soup: Using ESG thinking to manage global risks </li></ul>
  14. 14. <ul><li>76% of executives agree that sustainability is a pre-requisite for long-term growth </li></ul><ul><li>However, only 14% see a strong link between their company’s short term financial performance and its commitment to ESG </li></ul><ul><li>These findings suggest that executives see ESG as a long term play, and therefore sometimes fail to grasp short-term opportunities of sustainability </li></ul><ul><li>Some companies report short-term payoffs from sustainability oriented practices </li></ul><ul><li>Example : Novo Nordisk </li></ul>Key finding 7: Sustainability and the bottom line To what extent do you agree that ESG sustainability strategy is a pre-requisite for your company’s long-term growth? n = 248
  15. 15. Key finding 7: Sustainability and the bottom line <ul><li>Companies have varied motives for focusing on sustainability: </li></ul><ul><li>Doing the ‘right thing’ ethically </li></ul><ul><li>Ensuring long-term profitability </li></ul><ul><li>Complying with laws </li></ul>“ Interest in sustainability policies is stronger among companies with a long-term investment horizon, for example in mining and energy.” Ernst Ligteringen , CEO, Global Reporting Initiative Financial considerations are not the only ones
  16. 16. Conclusions <ul><li>Companies worldwide increasingly focus on ESG sustainability </li></ul><ul><li>The link between ESG and long-term corporate growth is becoming clearer to executives </li></ul><ul><li>Developing countries are overtaking developed ones in their focus on ESG </li></ul><ul><li>There is room for improvement in many areas, including reporting ESG goals and results </li></ul><ul><li>Some companies find profit opportunities in sustainability even in the short term </li></ul><ul><li>There are pros and cons to integrating financial and ESG sustainability reporting </li></ul>“ Companies that are going to survive will have to work in a sustainable way.” Vânia Somavilla, director of environment and sustainable development , Vale

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