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The sustainable future: Promoting growth through sustainability

The sustainable future: Promoting growth through sustainability






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    The sustainable future: Promoting growth through sustainability The sustainable future: Promoting growth through sustainability Presentation Transcript

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