Study Shows Increased Profits for Companies That Embrace Sustainability

Study Shows Increased Profits for Companies That Embrace Sustainability 
MIT Sloan Management Review and The Boston Consulting Group Find That
at Least Half of Companies Surveyed Report Rise in Profit After
Changing Their Business Model 
CAMBRIDGE, MA -- (Marketwire) -- 02/05/13 --  Companies reporting a
profit from their sustainability efforts rose 23 percent last year,
to 37 percent of the total, according to a new global study by the
MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group
(BCG). The study is being released today in a report titled "The
Innovation Bottom Line." 
The study, which is based on a survey of 2,600 executives and
managers from companies around the world, also found that nearly half
of respondents said their companies had changed their business model
as a result of sustainability opportunities, a 20 percent jump over
the previous year. The report calls these companies that have made
business-model innovations "Sustainability-Driven Innovators." 
Interestingly, the study found that companies in emerging markets
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," explained David Kiron, executive editor at MIT SMR and a
coauthor 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."  
Sustainability-Driven Innovators also bring a strong execution focus
to their efforts, are much more likely to place customers at the
center and work closely with many stakeholders, and drive
sustainability objectives through skillful organizational change,
Kiron said. 
The extent to which a company incorporates sustainability concerns
into its business model often correlates with its increase in profit,
the study found. For example:  


 
--  50 percent of survey respondents who had changed three or four
    business model elements said they profited from their sustainability
    activities, compared wit
h only 37 percent of those who had changed
    only one element of their business model.
    
    
--  When innovations to both target segments and value-chain processes
    were among the three or four business-model changes, the percentage of
    respondents who said sustainability added profits climbed from 50
    percent to nearly 60 percent.
    
    
--  More than 60 percent of respondents at companies that had changed
    their business model and had sustainability as a permanent fixture on
    their management agenda said they have added profit from
    sustainability.
    
    
--  Companies that profit from sustainability are almost 200 percent more
    likely to develop sustainability business cases. The business case is
    often integral to the company's overall strategy.

  
"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," said Knut Haanaes, a BCG partner and
coauthor of the report who leads the firm's Strategy practice.
"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 of the companies that are finding profit in sustainability:  


 
--  Be prepared to change business models
--  Lead from the top, and integrate the effort
--  Measure and track sustainability goals and performance
--  Understand how customers think about sustainability and what they are
    willing to pay for in connection with sustainable products or services
--  Collaborate with individuals, customers, businesses, and groups beyond
    the boundaries of the organization

  
To illustrate how organizations are employing these practices, the
report cites numerous company examples, including: AT&T, Campbell
Soup Company, Dell, Ecover, Greif, Intel, Kimberly-Clark, Kraft Foods
(recently renamed Mondelez International), Marks & Spencer, Nestle,
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 at
http://mitsmr.com/11IWDeO. 
To receive a copy of "The Innovation Bottom Line" or arrange an
interview with one of the MIT SMR authors, please contact David Kiron
at +1 617 253 8071 or dkiron@mit.edu.  
To arrange an interview with one of the BCG authors, please contact
Alexandra Corriveau at +1 212 446 3261 or
corriveau.alexandra@bcg.com. 
About the Research Methodology
 For the fourth year, MIT Sloan
Management Review, in partnership with The Boston Consulting Group
(BCG), conducted a global survey, to which more than 4,000 executives
and managers responded. The report's analysis is based on a smaller
subsample of 2,600 respondents from commercial enterprises, with
respondents from academic, governmental, and nonprofit organizations
excluded. A wide variety of industries are represented. The sample
was drawn from a number of sources, including MIT alumni, MIT Sloan
Management Review subscribers, BCG clients, and other interested
parties. In addition to the survey results, the authors interviewed
practitioners and experts from a number of industries and disciplines
to understand the practical issues facing organizations today.  
About the Sustainability & Innovation project
 MIT SMR's
Sustainability & Innovation project is an exploration, in partnership
with BCG, of how sustainability pressures are transforming the ways
we all work, live, and compete. S&I's research, reporting, and
community help managers to better understand the new forces that will
affect their organizations, to navigate through the overwhelming mass
of information about sustainability, and to fend off the threats and
capitalize on the opportunities that sustainability issues present. 
About MIT Sloan Management Review
 MIT Sloan Management Review leads
the discourse among academic researchers, business executives, and
other influential thought leaders about advances in management
practice that are transforming how people lead and innovate. MIT SMR
disseminates new management research and innovative ideas so that
thoughtful executives can capitalize on the opportunities generated
by rapid organizational, technological, and societal change.  
About The Boston Consulting Group
 The Boston Consulting Group (BCG)
is a global management consulting firm and the world's leading
advisor on business strategy. We partner with clients from the
private, public, and not-for-profit sectors in all regions to
identify their highest-value opportunities, address their most
critical challenges, and transform their enterprises. Our customized
approach combines deep insight into the dynamics of companies and
markets with close collaboration at all levels of the client
organization. This ensures that our clients achieve sustainable
competitive advantage, build more capable organizations, and secure
lasting results. Founded in 1963, BCG is a private compan
y with 78
offices in 43 countries. For more information, please visit bcg.com. 
About bcgperspectives.com
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thinking from BCG experts as well as from CEOs, academics, and other
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The Boston Consulting Group
Alexandra Corriveau
Media Relations Manager, The Americas 
Tel +1 212 446 3261
Fax +1 212 446 2801
corriveau.alexandra@bcg.com 
 
 
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