How to become a sustainable company

summer 2012 VOL.53 NO.4Robert G. Eccles, Kathleen Miller Perkins, andGeorge Serafeim How to Become a Sustainable Company Brought to you by RE P R I N T N UM B ER 53415

S U S TA I N A B I L I T Y Novo Nordisk A/S, a global healthcare company, follows a business philosophy based on balancing financial, social and environmental considerations.How to Become aSustainable CompanyFew companies are born with a broad-based commitmentto sustainability. To develop one, companies need leadershipcommitment, an ability to engage with multiple stakeholdersalong the value chain, widespread employee engagement and THE LEADING QUESTIONdisciplined mechanisms for execution. WhatBY ROBERT G. ECCLES, KATHLEEN MILLER PERKINS AND GEORGE SERAFEIM differentiates sustainable companies from traditional ones?CORPORATE SUSTAINABILITY HAS captured the attention of much of the world over thelast few years. Trends including the growth of nongovernmental organizations and movements such FINDINGSas Occupy Wall Street suggest that the public is no longer satisfied with corporations that focus solely Sustainable organizations are effectiveon short-term profit maximization. People want corporations to consider broad human needs. at engaging with external stakeholders Surveys show that a growing number of companies are taking notice of these shifts and have come and employees.to consider sustainability-related strategies necessary to be competitive.1 One recent study that com- They have cultures based on innovationpared companies that adopted environmental and social policies with companies that didn’t, and trust.authored by two of the authors of this article and another colleague, provides empirical support for They have a track this view. “High sustainability” companies significantly outperformed their counterparts over an 18- record of implementing large-scaleyear period in terms of both stock market and accounting criteria, such as return on assets and return change.COURTESY OF NOVO NORDISK A/S SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 43

S U S TA I N A B I L I T Y on equity.2 In terms of stock market returns, the of execution. Both are ongoing processes. “high sustainability” companies had an abnormal Once the second stage begins, the two stages re- stock market performance that was 4.8% higher inforce each other. Employee engagement enables than the “low sustainability” companies on a even more sophisticated external engagement be- value-weighted basis. They also exhibited lower per- cause a broader range of employees will be able to formance volatility. It is not surprising, then, that effectively engage with outside stakeholders. Mech- more and more companies are exploring how envi- anisms of execution bind leadership commitment, ronmental, social and governance performance can since these organizational-level attributes continue contribute to financial performance. from one generation of leaders to the next. Simi- Currently, organizations that exhibit a broad- larly, leadership commitment provides a strong based commitment to sustainability on the basis of motivating force for employee engagement because their original corporate DNA are few and far be- employees know that their leaders care about what tween. An exception is Novo Nordisk A/S, a global they are doing. External engagement strengthens healthcare company created in 1989 through a the company’s mechanisms of execution, since merger of two Danish companies. For decades, it stakeholder pressure challenges the company to has followed a business philosophy based on bal- constantly improve its quality. ancing financial, social and environmental Companies with an established organizational considerations. Novo Nordisk managers use the culture that includes strong capabilities for change, a values framework to drive their day-to-day deci- commitment to innovation and high levels of trust sions and make difficult choices, and the have a significant advantage. When these elements company provides financial and nonfinancial in- are missing, becoming a sustainable company is formation and data in one report. more difficult. Nevertheless, by moving through the For most companies, however, becoming sus- two stages, the necessary cultural characteristics are tainable involves a conscious and continuing effort likely to coalesce. And, if companies begin with a to build long-term value for shareholders by con- strong cultural foundation based on trust and inno- tributing to a sustainable society. To illuminate how vation — all too rare in most companies — we have the transformation occurs and how a sustainable found that those characteristics will only strengthen strategy can be formulated and executed, we studied over time. In contrast to the vast majority of tradi- the organizational models of companies that we tional companies, sustainable companies are willing refer to as “sustainable” by comparing them with and able to engage in the kind of ongoing transfor- companies that we call “traditional.” (See “About the mational change that is required as social Research.”) We focused on two primary questions: expectations evolve. They aggressively create new 1. ow does a sustainable company create the con- H processes, products and business models that im- ditions that embed sustainability in the prove environmental, social and governance company’s strategy and operations? performance — all of which conspire to boost finan- 2. hat are the specific elements of sustainable W cial performance through cost savings, new revenues, companies’ cultures that differentiate them from brand enhancement and better risk management. those of traditional companies? Finally, employees in sustainable companies have a Based on our research, we have developed an iden- high level of trust in each other, which allows them tity and cultural model for how to create a sustainable to take the necessary risks to innovate and change company. While the model is straightforward, imple- their behaviors to support sustainability. mentation is by no means easy, because it is grounded in large-scale change — something that Stage One: Reframing the few companies seek out or do well. The first stage Company’s Identity involves reframing the company’s identity through Reframing the company’s identity is composed of leadership commitment and external engagement. two elements: leadership commitment and exter- The second stage involves codifying the new iden- nal engagement. While these elements are closely tity through employee engagement and mechanisms linked, one can drive the other or they can occur si-44 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU

multaneously. To gain commitment, leaders must Surprisingly, our survey data show that leadersengage with groups outside of their organizational of traditional companies are more likely to be seenboundaries, such as investors and NGOs that repre- as having clear visions for sustainability than aresent civil society. Effective external engagement leaders of sustainable companies (5% vs. 20% atcannot happen without strong commitment from traditional companies). One possible explanationthe leadership team. By engaging the two elements, for this finding surfaced in our follow-up field in-a company can begin to fashion a new identity as a terviews: Leaders of sustainable companies oftensustainable enterprise. set aspirational goals and seek transformational change where the starting and end points are notLeadership Commitment When leadership com- necessarily known in full. For example, Interfacemitment drives the process, it usually comes from Inc., the world’s largest carpet company, based inthe personal resolution of a CEO to create a more Atlanta, Georgia, set a long-term corporate goal ofsustainable company. In general, top-level execu- having a net zero environmental impact. 3 Dowtives have the ability to create an enterprise-wide Chemical, for its part, a global leader in specialtyvision and the clout to see that it is realized. With- chemicals, has committed itself to achieving at leastout this commitment, becoming a sustainablecompany is a “nonstarter.” ABOUT THE RESEARCH Our data show that the leaders of sustainable This study is part of a large research program on “Innovating for Sustainabil- ity.” The purpose of this research is to understand how companies can bettercompanies differ from leaders of traditional compa- integrate sustainability into the core of their strategy and operations. This pro-nies in several ways. First, the top-level leaders of gram is equally focused on understanding how institutional investors cansustainable companies are perceived as taking a long- integrate sustainability into their investment decisions. In both cases, we areterm view when making decisions. They have an using a broad range of research methodologies, including case studies, in-unmistakable direction in mind and know that their depth field research, survey research, archival research and empirical analysis.i Throughout 2010 and 2011, we conducted more than 200 inter-sustainability goals will not be achieved overnight. In views in more than 60 companies to explore how sustainable companiespursuing their visions, they are more willing than were innovating for the development and execution of sustainable strategies.leaders of traditional companies to tolerate risk. We also developed some 20 in-depth teaching case studies and worked withLeaders at 72% of the sustainable companies are will- a number of companies to help them develop more sustainable strategies. Based on this work, we began to detect some intriguing patterns related toing to take measured risks in pursuit of sustainability, leadership and organizational elements.in contrast to 40% at traditional companies. More- We then tested for these patterns with a survey. First, we examined theover, sustainable companies are more likely to be sustainability performance on both environmental and social factors for 3,000+knowledgeable of the issues pertaining to sustainabil- companies worldwide for 2009, with data provided by Thomson Reuters’ ASSET4. We isolated the top 20% and the bottom 20% of companies in termsity (90% vs. 60% of the traditional companies) and of environmental and social performance. Then we imposed an additional filter,have a clearer business case for pursuing sustainable isolating companies from the top group based on whether they integrate socialgoals (83% vs. 30% at traditional companies). The and environmental metrics and narrative with their financial reporting, and iso-strong business case communicated from the top en- lating companies from the bottom group based on those that do not integrateables the company to incorporate sustainability into social and environmental metrics and narrative with their financial reporting. We identified 58 companies with very good sustainability performance and com-the core of its business. As a result, sustainable communication (which we refer to as the sustainable companies) and 108 with poorpany leaders integrate sustainability considerations sustainability and communication (which we refer to as the traditional compa-into basic business decisions such as operating bud- nies). We invited both sets of companies to participate in an online surveygets and capital investments (95% vs. 30% at examining organizational and cultural factors related to sustainable strategy; 28 companies, or 17%, responded. Of these, 18 companies met our criteria astraditional companies). sustainable and 10 companies were classified as traditional. Equally important, leaders of sustainable compa- We used a 68-item assessment instrument developed by Miller Consul-nies demonstrate personal commitment to tants, of Louisville, Kentucky, to look at organizational leadership, organizationalsustainability that inspires others throughout the or- systems and climate, change readiness, internal and external stakeholders, andganization (83% vs. 50% at traditional companies). disclosure issues. The results were validated through interviews with experts in the relevant domains. The instrument was developed based on our prelimi-As a result, more employees in sustainable companies nary research and tested through a pilot that compared the responses ofview sustainable strategies as essential to the compa- representatives from leading sustainable companies with responses from any’s success (80% vs. 20% for traditional companies). control group of companies.SLOANREVIEW.MIT.EDU SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 45

S U S TA I N A B I L I T Y three breakthroughs by year 2015 that will signifi- groups. “To build a culture of innovation, we have cantly help solve world problems. 4 Sustainable to drive out narrow thinking and learn continu- companies also recognize that transformational ously. When I worked with a group of my peers change requires taking on a large number of from other global companies, I started to see things smaller-scale change initiatives. from a much different light.”6 Leaders of traditional companies, by contrast, Sustainable companies collaborate with other are more likely to be committed only to smaller- companies and organizations to advance their scale change (sometimes referred to as transitional goals. For example, in 2011, Dow Chemical formed change), where the beginning and end states are an alliance with The Nature Conservancy. TNC’s clearly known. Examples of a transitional change collaborative work is focused on assisting compa- could include moving from an energy system based nies, including Dow, to recognize, value and on fossil fuel to a system based on a renewable incorporate nature into global business goals, deci- source of energy or implementing a redesigned sions and strategies. 7 At times, sustainable process that will reduce waste. These goals are more companies have gone so far as to partner with com- precise and clearly defined than some of the more petitors to seek solutions to their challenges, and expansive ones. they actively support their supply chains. Some of the most critical stakeholder relationships occur External Engagement Companies that thrive within a company’s supply chain, reflecting the re- with a sustainable strategy realize the importance of ality that companies cannot achieve their reaching beyond their own internal boundaries to a sustainability objectives without widespread sup- variety of external stakeholders. In their book Green port and cooperation. One of the strongest to Gold, Daniel C. Esty and Andrew S. Winston iden- differences between the sustainable and traditional tified at least 20 stakeholder groups that are likely to companies in our data is that sustainable compa- wield a degree of power over companies with regard nies encourage their supply chains to adopt to their sustainability performance.5 When external sustainable strategies (83% vs. 20% for traditional engagement drives the initiation of the process in companies). Many of them work closely with their this stage, it is usually catalyzed by a dramatic event suppliers to support these efforts. PepsiCo, for ex- or series of events. The experience of a crisis often ample, invites its suppliers to an annual gathering pushes leaders to do some serious soul-searching. where they share best practices and discuss prog- Although some companies stonewall and dig into ress on sustainability. These gatherings reduce the their traditional models, others see a crisis as an op- natural tension between suppliers and customers. portunity for self-examination. They begin to According to David Walker, senior director of bev- realize the benefits of learning about the concerns erage productivity at PepsiCo, an improved and expectations of key stakeholders. In turn, this working relationship unlocks the potential to max- affects the company’s license to operate and thereby imize sustainability in the supply chain. For creates value for both stakeholders and sharehold- example, PepsiCo and its suppliers share best prac- ers. Once this realization hits home, the company tices on energy reduction, create common metrics begins to reach out beyond its own institutional to track progress and engage in joint planning ses- boundaries to learn, collaborate and communicate. sions to ensure that ideas are executed.8 Sustainable companies learn from the outside. The actions of sustainable companies are ac- In doing so, they are far more likely to encourage companied by clear and consistent messages to their employees to assimilate knowledge from stakeholders (90% of sustainable vs. 30% of tradi- sources external to their company than are traditional companies say that their messaging to tional companies (72% vs. 20% at traditional external stakeholders is consistent and clear). companies). According to Bruce Bremer, former Transparency is a critical asset, and sustainable manager of facility engineering for Toyota Engi- companies achieve it by communicating their tar- neering & Manufacturing North America, Toyota gets broadly and by reporting honestly and widely encourages employees to work with external peer on their progress toward meeting those targets.46 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU

They do not change their core messages on a whim,nor do they engage in spin or “green-washing.” In-stead, they talk about “the warts” as well as theirsuccesses. Natura Cosméticos S.A., a Brazilian cos-metics and fragrances company, exemplifies thisapproach. In its annual integrated report, Naturadoes not try to hide the commitments that it failedto achieve in footnotes, as many companies dowith negative information. On the contrary, it dis-cusses the commitments that were not achieved inthe prior year and the renewed commitments inthe beginning of the annual report.9 Rodolfo Gut-tilla, Natura’s director of corporate affairs,maintains that transparency in reporting facilitatesa better dialogue between the company and its ties are supported by leadership commitment and Anheuser-Busch InBev has incorporatedstakeholders: “Through the reports, stakeholders external engagement, they will remain local initia- sustainability-relatedare able to see what others are doing; they can see tives that fall short of creating a new identity. goals into individual employee goals.how their interests are being integrated into themanagement of the company, and they can begin to Employee Engagement Because sustainableunderstand the interconnections that exist between strategy execution requires behavioral change byactions and impacts all along the value chain.”10 individuals, the personal engagement of employees is crucial. For people to change their behavior, theyStage Two: Codifying have to believe it is worth it. They have to under-the New Identity stand and believe in the reasons for the change andThe first stage — reframing the company’s overall recognize what they need to do to contribute to it.identity based on leadership commitment and ex- We define employee engagement as actions a com-ternal engagement — is a necessary, but not a pany takes to secure the interest and attention ofsufficient condition for becoming a sustainable employees in their sustainability efforts. Engagedcompany. The second stage involves building inter- employees are emotionally connected to their worknal support for the new identity through employee and to their workplace. As a result, they tend to beengagement and mechanisms for execution, two more productive and more willing to engage in dis-elements that are closely intertwined. Of course, cretionary efforts to achieve company goals.leadership commitment and external engagement Sustainable companies are much more likelydon’t end: They are embedded in and drive the cod- than traditional ones to have a clear strategy for en-ification of the company’s new identity. In essence, gaging employees (72% vs. 30% of traditionalthe first stage continues into the second stage, and companies). They shift the engagement from local,once both stages are in process, they reinforce each disconnected initiatives to company-wide efforts.other. Together, they then create a culture support- In order for the engagement strategy to be clear andive of sustainability, as described below. effective, the business case developed during the As with Stage One, individual elements can first stage must be firmly in place, and leaders mustdrive the other elements or they can occur simulta- understand and appreciate the role of the employ-neously. Execution mechanisms serve as a platform ees. Sustainable companies implement theirfor engaging employees. At the same time, execu- engagement strategy by (1) communicating thetion mechanisms require strong support from impact that the employees’ contributions will haveemployees. Regardless of which element drives the on the company, (2) articulating the connectionother, Stage Two is about making the company’s between each employee’s work and the sustainabil-newly framed identity a reality. While grassroots ity goals and (3) enabling cross-functionalactions can impact Stage Two, unless these activi- communication and idea exchange. Anheuser-COURTESY OF ANHEUSER-BUSCH INBEV SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 47

S U S TA I N A B I L I T Y Busch InBev, the world’s largest brewer, has sults and ensure that the objectives are met. Even so, incorporated sustainability-related goals into indi- finding appropriate metrics and tools for measure- vidual employee goals from senior leadership on ment continues to challenge sustainable and down to line management for several years. The traditional companies alike. company believes that its employees think more Many of the current methods used to track the creatively and work more collaboratively because impacts of sustainability-related efforts are inade- they feel personally invested in the company’s sus- quate for measuring consistent, complete and precise tainability efforts and share important goals. Such data. For example, although some companies at- actions not only extend the impact of the leaders’ tempt to use standard tools such as Six Sigma and messages but also spread lessons learned from local performance scorecards to assess the impact of initia- initiatives to the company as a whole. tives connected to sustainable strategies, even these tools fall short in providing the robust valuation Mechanisms for Execution The CEO often initi- methodologies needed to clearly measure and link ates the codification of the new behavior by driving sustainable strategies to business results.11 Many tra- the change through organization-wide mecha- ditional metrics do not measure the aspects of nisms and by promoting employee engagement. sustainability that are material to the specific com- Our study found that some of the most pro- pany or measure sustainability across the entire value nounced differences between sustainable and chain. Since traditional measures are subject to a va- traditional companies are the presence of mecha- riety of caveats, Dow developed its own innovation nisms for execution and how they are used. metrics for its 2015 Sustainability Goals. The com- Sustainable companies are far more likely to have pany developed a proprietary Sustainable Chemistry enterprise-wide management systems for execut- Index to comprehensively measure critical aspects of ing sustainable strategies (83% vs. 20% for sustainability for its products and business units traditional companies). These systems consist of across the value chain; it also developed a specific set structured frameworks of practices and proce- of criteria and metrics to measure its achievement of dures that enable the organization to execute in a Breakthroughs to World Challenges.12 consistent and lasting manner. Since specific sus- Despite the challenges, the sustainable compa- tainability objectives often involve trade-offs, an nies we looked at indicated that they are pressing enterprise-wide approach allows for a portfolio forward and trying out new metrics. Rather than perspective to achieve the desired balance among letting the metrics challenges stall their progress, actions and outcomes. sustainable companies are actively addressing the Among the enterprise-wide management systems issues creatively. companies use are processes that connect sustainability to corporate strategy, with direct ties to A Supportive Organizational Culture performance evaluation and compensation (66% vs. Over time, the codification of a sustainable compa- 10% for traditional companies). Sustainable company’s new identity will reinforce, or even establish, a nies also incorporate sustainability metrics into the culture based on change capabilities, trust and in- capital budgeting process, develop solid valuation novation. Leadership commitment and external processes that take externalities into account, set clear engagement are necessary for transformational targets for sustainability objectives and establish tar- change. Employee engagement fosters trust and in- geted programs linking the objectives to business novation, and mechanisms for execution ensure results (90% vs. 10% for traditional companies). that change happens as innovations diffuse IBM, for example, embeds sustainability strategies throughout the organization. In turn, a culture and practices into its global environmental manage- supportive of sustainability will increase the effec- ment systems, and recently it has begun requiring its tiveness of leadership commitment, external suppliers to adopt these systems. Sustainable compa- engagement, employee engagement and mecha- nies are far more likely than traditional ones to have nisms for execution. (See “The Role of Corporate established accountability processes that measure re- Culture in Sustainability.”)48 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU

Change Capabilities A common cultural element THE ROLE OF CORPORATE CULTUREthat enables the process is the change readiness of IN SUSTAINABILITY Employee engagement fosters trust and innovation, and mechanisms forthe culture.13 Our data show strong differences be- execution ensure that change happens as innovations diffuse throughouttween the sustainable and the traditional companies the organization. A culture supportive of sustainability will increase theon this variable: Some 90% of the sustainable com- effectiveness of leadership commitment, external engagement, employeepanies report having a strong track record of engagement and mechanisms for execution.implementing large-scale change successfully, com- Creates and Amplifiespared to 50% for the traditional companies. Thisdifference is critical. As we have noted, unlike more Corporate Corporatetransitional change, where the beginning and end Identity Culture Stage 1:points are clearly defined from the outset, transfor- Reframing Trust Identitymational change may start with a clear direction but Innovationlack exact beginning and end points. Capacity for Stage 2: Transformational change can take years or even Transformational Codifying Change New Identitydecades to accomplish. Particularly when it is di-rected toward a concept that is still being developed,it is not possible to have a clear blueprint to follow. ReinforcesNot surprisingly, the pattern for sustainable com-panies has been not to start with a precise plan but ously promote and facilitate learning, broadto head in a direction, tolerate risk and make ad- thinking and creativity.justments en route. Of course, transformational Sustainable companies use a variety of ap-change also depends on a large number of smaller, proaches to incorporate continuous learning intoincremental changes, which must be effectively ex- their cultures. For example, they employ processesecuted in order for the transformational change to that help people across the enterprise to learn frombe successful. In fact, 90% of the sustainable com- each other. Innovation is most likely to occur in or-panies report having a strong track record of ganizations where lateral communication is enabledimplementing incremental changes successfully, and people with different frames of reference cancompared to 70% of the traditional companies. come together to share ideas. Rather than suppress-Companies with developed capabilities for trans- ing conflict, sustainable companies tend toformational and incremental change may be able to encourage the airing of diverse points of view. Theymove more quickly; those lacking the cultural ca- appreciate that, when handled well, enterprise-widepabilities will inevitably proceed in a more halting conversations tend to create understanding acrossfashion and are more likely to need help. the organization. In addition to leading to synergy and innovation, these conversations also build trust.Innovation For sustainable companies, innovationis a core cultural capability. To improve financial Trust Having the conviction that people can beperformance along relevant environmental, social taken at their word and that they will do their bestand governance dimensions, sustainable compa- to deliver on commitments and promises is thenies tend to focus on innovations in processes, bedrock of success. Creating a sustainable companyproducts and business models. A commitment to requires trust on the part of every employee. With-sustainability becomes a “forcing function” for in- out trust, employees are reluctant to take the risksnovation. Both employee engagement and external that innovation requires, and they are reluctant toengagement are important sources of new ideas engage. Trust is the difference between listeningthat become the basis for value-creating innova- and believing. It permits people to act in new waystions. The innovations build on and contribute to that truly contribute to the development of a sus-the organization’s existing capabilities for innova- tainable company.tion — a process sustainable companies encourage Sustainable companies foster trust by (1) dem-by rewarding innovation. Moreover, they vigor- onstrating that they value the contributions ofSLOANREVIEW.MIT.EDU SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 49

S U S TA I N A B I L I T Y employees, (2) consciously aligning their actions George Serafeim is an assistant professor of business with their values, (3) honoring their commitments administration at Harvard Business School. Comment on this article at http://sloanreview.mit.edu/x/53415, or and (4) basing decisions on what is good for share- contact the authors at smrfeedback@mit.edu. holders and for the broader concerns of the organization and society. Leaders of sustainable REFERENCES companies understand the value that results when 1. For more information, see D. Kiron, N. Kruschwitz, K. people within the company know that they can Haanaes and I. von Streng Velken, “Sustainability Nears a count on the integrity, competency, intentions and Tipping Point,” MIT Sloan Management Review 53, no.2 (winter 2012): 69-74. reliability of their leaders and coworkers. Trust 2. R.G. Eccles, I. Ioannou and G. Serafeim, “The Impact of grows when people perceive that they are part of a a Corporate Culture of Sustainability on Corporate Behav- collective effort to deliver value to stakeholders in a ior and Performance,” working paper 17950, National way that contributes to the betterment of their Bureau of Economic Research Working Paper Series, Cambridge, Massachusetts, March 2012, www.nber.org/ world. Work becomes more meaningful, and peo- papers/w17950. ple become more engaged and productive. 3. M.W. Toffel, R.G. Eccles and C. Taylor, “Interface Fostering trust effectively allows a team produc- RAISE: Sustainability Consulting,” Harvard Business tion approach, where the efforts of multiple School case no. 611-069 (Boston: Harvard Business School Publishing, 2011). stakeholders are crucial for the company’s success, to everyday operations in which employees are 4. R.G. Eccles, G. Serafeim and S.X. Li, “Dow Chemical: Innovating for Sustainability,” Harvard Business School willing to make company-specific investments case no. 112-064 (Boston: Harvard Business School Pub- without fear that their efforts will not be recog- lishing, 2012). nized and rewarded. By enabling and encouraging 5. D.C. Esty and A.S. Winston, “Green to Gold: How these investments, the company cultivates the Smart Companies Use Environmental Strategy to Inno- vate, Create Value, and Build Competitive Advantage” foundation for a competitive advantage in the mar- (New Haven: Yale University Press, 2006). ketplace: engaged employees who are able to 6. Interview with Bruce Bremer, Dec. 10, 2011. cooperate in order to drive corporate performance. 7. For more information, see: www.nature.org/aboutus/ workingwithcompanies/companies-we-work-with/dow/ Starting the Journey index.htm and http://my.nature.org/gifts/?src=CPC.AWG. CE2.AG2.CC2.CL2.MT3.KW754&gclid=CMOZ5f3h9a8C to Sustainability FQrf4Aod1nqREg. Today companies must choose whether to start the 8. Interview with David Walker, senior director of bever- journey to become sustainable or to adhere to the age productivity, PepsiCo, May 9, 2012. more traditional model. Although each company 9. For more information, see “Natura Report 2010,” must make that choice for itself, we believe that Natura Brasil, http://natura.infoinvest.com.br/enu/3766/ changing social and investor expectations will only GRI_INGLES_COMPLETO_impressao.pdf. increase the pressure on companies to adopt the sus- 10. R.G. Eccles, G. Serafeim and J. Heffernan, “Natura Cos- méticos, S.A.” Harvard Business School case no. 9-412-052 tainable model. Doing so requires unswerving (Boston: Harvard Business School Publishing, 2011). leadership commitment, without which the journey 11. D.A. Lubin and D.C. Esty, “The Sustainability Impera- cannot begin. In reframing its identity, the company tive,” Harvard Business Review (May 2010): 1-9. must learn to engage openly with external stake- 12. Interview with Mark Weick, director of sustainability holders. Maintaining transparency without recourse programs and enterprise risk management, Dow Chemi- cal Co., May 8, 2012. to defensive strategies is integral to a sustainable strategy. As this strategy is implemented through 13. D. Anderson and L.A. Anderson “Beyond Change Management: Advanced Strategies for Today’s Transfor- broad-based employee engagement and disciplined mational Leaders” (San Francisco: Jossey-Bass Pfeiffer, mechanisms for execution, a new identity can 2001): 98-102. emerge: that of a sustainable company. i. For more information, see: www.facebook.com/ innovatingforsustainability. Robert G. Eccles is a professor of management prac- tice at Harvard Business School. Kathleen Miller Reprint 53415. Perkins is president of Miller Consultants Inc., an or- Copyright © Massachusetts Institute of Technology, 2012. ganizational consulting firm in Louisville, Kentucky. All rights reserved.50 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU

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How to become a sustainable company

by Guilherme A. Witte Cruz Machado on Jul 20, 2012

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