Going green is good for the bottom line according to a new report on global corporate sustainable practices. Environmental, social, and governance goals do not compromise returns. As a result of sustainable efforts, 44% of companies have widened their profits.
Corporatesustainability has seen an increase in recent years. Mars, L&Or, and P& Gamble have made progress towards their aggressive goals of using 100% recyclable, or compostable packaging by the year 2025.
The largest beer brand in North America will eliminate plastic rings from its packaging, thanks to an $85 million investment by the company.
Wendy Woods has been with Boston consulting Group for more than 26 years and says she has seen a major shift in the way companies think about doing good.
Woods oversaw a report on what she and her team dubbed "total societal impact", a replacement for the lens of maximizing. The report showed that companies that implemented plans that would boostTSI are growing more than those that aren't. It is changing the way major corporations and investors understand their role in society, and how occasionally supporting a charity or releasing a warm and fuzzy ad campaign is not going to cut it anymore.
Total societal impact allows us to get to a different place where we are saying that this is not just about business being a checkbook, this is about business finding ways to do better capitalism and to do their job of creating shareholder value.
Woods explained that in the past, CEOs could be offered a way to make ingredient-sourced more sustainable through better relationships with farmers and understand that it had a societal benefit, but not see any reason to do a campaign that would likely not reach its full potential until their term as chief executive. The same types of executives now have material that convinces them that they are wrong.
The research found that in consumer packaged goods, gross margins were higher for companies that were the top performers in socially responsible sourcing than for the median performers.
Woods said that companies like Mondel and Mars Inc. have taken this advice and developed plans around sustainable practices, and that banks can do things like offer lower-priced mortgages to customers who implement green standards in their homes.
Woods said that not all of the socially conscious initiatives have to be those that stretch beyond a typical CEO's tenure. One-third of the food produced in the world is wasted each year, according to a study by the Boston Consulting Group. Woods said that an executive of a food company could see that a food-waste reduction program would have a social benefit and that it could lower expenses and boost the public image of the business. It doesn't need 10 years for implementation. It is something a CEO could easily explain to investors.
Woods said that investors are also aware of the benefits of the initiatives. According to a report by the Boston Consulting Group, $23 trillion of assets under management around the world were in funds focused on environmental, social, and governance criteria in the first quarter of this year. At the World Economic Forum in January, Woods moderated a panel of socially-conscious investors and an audience member asked if focusing on ESG would be a dismissal of fiduciary duty. Woods said that all four people on the panel said if you aren't doing this, you're ignoring your fiduciary duty because you're putting too much risk into the business.
The article was written by Richard Feloni.
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