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Sustainability. It's the leadership frontier.Document Transcript
LEADERSHIP SUSTAINABILITY reputation building demands both oper- plemented, and the issues they highlight ational excellence and compelling story are understood by all stakeholders. telling. So, we set out to measure the Sustainability Leaders excel at meeting these standards ESG standing of 100 prominent compa- fully and transparently, even those that nies, in a way that compares real with may not seem relevant. BMW has qual- It’s the leadership frontier. perceived performance. ity and thoroughness in sustainability The ratings of actual performance were reporting. Its top ranking for seven years provided by CRD Analytics, supplier of running in the Dow Jones Sustainability data for the NASDAQ Sustainability Index. Index is testimony to its leadership. The by James Cerruti For the perception ratings, we conducted story is told eloquently, with reporting our own survey to obtain the views of broken into three focus areas: product T HE CRITERIA THAT define leadership have evolved—from the core constituencies who are most attentive to sustainability performance. The perception survey concentrated on responsibility (97 percent product recycla- bility designed in); environmental protection (identifying measures for protection atexcellence in R&D and new product devel- investment professionals, purchasing/ early stages of investment), and societyopment, to operational excellence, process supply management professionals, and (road safety, education, and health).reengineering, core competencies, and graduating university students. 4. Sustainability is integrated intoinnovation. Today the framing of lead- By comparing companies on these the brand and client value propositions.ership is shifting again—to a concept two dimensions, we identi- IBM decided early to inte-that encompasses the best practices fied several true Leaders grate sustainability into itsfrom all the antecedents: sustainability. who scored high in both brand and customer value This is not surprising, given the actual and perceived sustain- propositions. It used itsintense competition for resources. ability performance. These Smarter Planet theme to The move towards sustainability is leadership teams excel in communicate how IBMnot simply the pursuit of a worthy cause, both the operational and helps clients enhance theirnor mollifying the concerns of a particular communications dimensions performance in ways thatNGO or shareholder group. Rather, it is of sustainability. Other foster sustainability. Recentrecognition that those who can make effi- companies may excel on IBM ads focus on outcomescient and responsible use of natural one dimension or the other, and social benefit, ratherresources and human capital are more like- but not both (Promoters had than products and services.ly to be the destination of choice for talent high perception/low scores, while 5. Operational initiatives and relatedand investment. It is a virtuous circle: Challengers trailed in perception but communications are focused on careful-the organization does well by doing good. did well in performance). Laggards, ly selected themes tied to the core of the More leaders recognize that organi- trailed on both dimensions. business. Complementary communicationszational reputation, defined by both to key stakeholder groups are used todeeds and rhetoric, is a key measure of Five Shared Traits get the word out. Cisco Systems con-competitiveness—and sustainability is Five traits were shared by Leaders: centrates on demonstrating leadershipa key criteria for judging the quality of 1. Sustainability is an integral part of on two issues, closely linked to its busi-companies and their leaders among business strategy (not just a compliance ness and brand. Socially, Cisco is focusedinvestors, supply chain partners, and issue). Nestlé has focused its strategy on education—helping people world-talented young people entering the around “creating shared value,” which wide develop and use IT skills. Theworkforce. These stakeholders are combines adherence to key operating environmental theme is Energy-wise—influenced to a greater degree than principles and achievement of targeted helping customers reduce greenhousecustomers, for whom purchase deci- societal improvements in the commu- emissions and create smart buildings.sions are focused more on features, nities. Nestlé found ways to collaboratebenefits, and value than on a compa- with local leaders to improve nutrition, Embrace Sustainabilityny’s long-term sustainability. water quality, and rural development. Top companies have embraced sus- The concept of sustainability extends Success in such efforts is seen as crucial tainability reporting and practices—andbeyond environmental impact. Today, to Nestlé’s future success and integral to not merely a reporting exercise, thoughsustainability assessments include business strategy and corporate reputation. full and transparent disclosure is essen-environmental and social practices and 2. Responsibility is taken for the tial. Rather, they have integrated sustain-related governance (ESG). Accepted impact of internal operations, and of ability themes into their corporate stories,ESG benchmarks such as the Global associated entities such as supply chain mission, vision and values and in manyReporting Initiative (GRI) standards partners. ABB takes responsibility in cases, directly into their brand and cus-are emerging to assist those who seek three areas: 1) raising environmental per- tomer value propositions. They know thatsustainability leadership. However, lead- formance/lowering impacts; 2) improving sustainability encompasses social and gov-ers wonder where to focus invest- management of health, safety, social, envi- ernance factors as well as the environment.ments or how to integrate sustainability ronmental and security risks; and 3) Companies that display leadershipinto strategy and brand communications. improving sustainability performance in its in this emerging field are positioned to supply chain and acquired companies. excel. They’re taking the high ground byExamining Sustainability The ABB Supplier Code of Conduct building sustainability into the business This year we conducted a global study (SCC) defines standards for companies and by informing others of their efforts. LEto shed light on how well firms at the wishing to sell to ABB and requires James Cerruti is the author of the Sustainability Leadershiptop of major industries are responding suppliers to be responsible for the sus- Report; measuring perception vs. reality. To download theto the new leadership challenge. The tainability performance of subcontractors. report, visit www.sustainabilityleadershipreport.com.premise is that best-practice corporate 3. GRI standards for reporting are im- ACTION: Integrate your sustainability initiatives.L e a d e r s h i p E x c e l l e n c e D e c e m b e r 2 0 1 1 11