The percentage of companies reporting a profit from their sustainability efforts rose 23 percent last year, to 37 percent, according to the most recent global study by the MIT Sloan Management Review (MIT SMR) and the Boston Consulting Group (BCG). The study, “The Innovation Bottom Line,” was released today on the MIT SMR website.
The fourth annual study, which is based on a survey of 2,600 executives and managers from companies around the world, also revealed that nearly half of the companies surveyed changed their business models as a result of sustainability opportunities — marking a 20 percent rise from the previous year. The report calls these companies "Sustainability-Driven Innovators."
A company’s sustainability efforts refer to incorporating sustainability thinking into all its areas of discipline — supply chain, marketing, finance and product development — as well as devising new business models and strategy grounded in sustainability. The study found that companies in emerging markets — nations in the process of rapid growth and industrialization — change their business models as a result of sustainability at a far higher rate than those based in North America, which has the lowest rate of sustainability-driven, business-model innovation and the fewest business-model innovators.
"Sustainability-Driven Innovators see the opportunity differently than do companies that haven't gleaned sustainability's financial rewards," explains David Kiron, executive editor at MIT SMR and a co-author of the report. "They don't dwell on it as a cost issue. They focus on how their efforts can increase market share, boost energy efficiency, and build competitive advantage."
Kiron says Sustainability-Driven Innovators also bring a strong execution focus to their business efforts, drive sustainability objectives through organizational change, and are more likely to place customers at the center of business and work closely with many stakeholders.
The extent to which a company incorporates sustainability concerns into its business model often correlates with its increase in profit, the survey found. For example, 50 percent of respondents said they profited by changing three or four business model elements to reflect more sustainable practices, while 60 percent said they profited by including sustainability as a permanent fixture in their management agenda.
"The research suggests that business-model innovation, top-management support, collaboration with customers, and having a business case are all critical to creating economic value from sustainability activities and decisions," says Knut Haanæs, a BCG partner who leads the firm's strategy practice and co-author of the report. "Executives need to view sustainability as both a business necessity and an opportunity. Even moderate changes to company business models can reap significant financial rewards."
In a section called "Hitting the Sustainability Bull's-Eye," the report recommends that executives emulate five practices common to many companies that are finding profit in sustainability: be prepared to change business models; lead from the top and integrate the sustainability efforts; measure and track sustainability goals and performance; understand how much customers will pay for sustainability efforts; and collaborate with external individuals, customers, businesses and groups.
To illustrate how organizations are employing these practices, the report cites numerous company examples, including: AT&T, Campbell Soup Co., Dell, Ecover, Greif, Intel, Kimberly-Clark, Kraft Foods (Mondelez International), Marks & Spencer, Nestlé, Patagonia, PepsiCo, Sainsbury, SAP, Sprint, Timberland, UPS and Zipcar.
For more details on the report's findings and interview transcripts, please visit the Sustainability & Innovation website.
To receive a copy of the report or arrange an interview with one of the authors, please contact David Kiron at 617-253-8071 or dkiron@mit.edu.
To arrange an interview with one of the BCG authors, please contact Alexandra Corriveau at 212-446-3261 or corriveau.alexandra@bcg.com.
The fourth annual study, which is based on a survey of 2,600 executives and managers from companies around the world, also revealed that nearly half of the companies surveyed changed their business models as a result of sustainability opportunities — marking a 20 percent rise from the previous year. The report calls these companies "Sustainability-Driven Innovators."
A company’s sustainability efforts refer to incorporating sustainability thinking into all its areas of discipline — supply chain, marketing, finance and product development — as well as devising new business models and strategy grounded in sustainability. The study found that companies in emerging markets — nations in the process of rapid growth and industrialization — change their business models as a result of sustainability at a far higher rate than those based in North America, which has the lowest rate of sustainability-driven, business-model innovation and the fewest business-model innovators.
"Sustainability-Driven Innovators see the opportunity differently than do companies that haven't gleaned sustainability's financial rewards," explains David Kiron, executive editor at MIT SMR and a co-author of the report. "They don't dwell on it as a cost issue. They focus on how their efforts can increase market share, boost energy efficiency, and build competitive advantage."
Kiron says Sustainability-Driven Innovators also bring a strong execution focus to their business efforts, drive sustainability objectives through organizational change, and are more likely to place customers at the center of business and work closely with many stakeholders.
The extent to which a company incorporates sustainability concerns into its business model often correlates with its increase in profit, the survey found. For example, 50 percent of respondents said they profited by changing three or four business model elements to reflect more sustainable practices, while 60 percent said they profited by including sustainability as a permanent fixture in their management agenda.
"The research suggests that business-model innovation, top-management support, collaboration with customers, and having a business case are all critical to creating economic value from sustainability activities and decisions," says Knut Haanæs, a BCG partner who leads the firm's strategy practice and co-author of the report. "Executives need to view sustainability as both a business necessity and an opportunity. Even moderate changes to company business models can reap significant financial rewards."
In a section called "Hitting the Sustainability Bull's-Eye," the report recommends that executives emulate five practices common to many companies that are finding profit in sustainability: be prepared to change business models; lead from the top and integrate the sustainability efforts; measure and track sustainability goals and performance; understand how much customers will pay for sustainability efforts; and collaborate with external individuals, customers, businesses and groups.
To illustrate how organizations are employing these practices, the report cites numerous company examples, including: AT&T, Campbell Soup Co., Dell, Ecover, Greif, Intel, Kimberly-Clark, Kraft Foods (Mondelez International), Marks & Spencer, Nestlé, Patagonia, PepsiCo, Sainsbury, SAP, Sprint, Timberland, UPS and Zipcar.
For more details on the report's findings and interview transcripts, please visit the Sustainability & Innovation website.
To receive a copy of the report or arrange an interview with one of the authors, please contact David Kiron at 617-253-8071 or dkiron@mit.edu.
To arrange an interview with one of the BCG authors, please contact Alexandra Corriveau at 212-446-3261 or corriveau.alexandra@bcg.com.
