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Corporate Social Responsibility
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2.12.2008 - 12:00pm ET
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Companies with Buoyant Share Prices are More Proactive on Corporate Sustainability Issues
Benefits of introducing socially and environmentally responsible policies “outweigh the costs”
But the majority say their firms are still performing poorly on sustainability
(CSRwire) February 12, 2008 - Global companies that have delivered strong share price
growth over the past three years are more proactive on corporate
sustainability issues than those that have seen their share price stagnate
or decline, according to a major new research report from the Economist
Intelligence Unit.
The report, which is sponsored by A.T. Kearney, Bank of America,
ExxonMobil, Jones Lang LaSalle, Orange, PricewaterhouseCoopers, SAP and
SunGard, illustrates the growing importance of corporate sustainability in
enabling companies to compete and to attract customers. The research is
based on a global survey of 1,254 senior business executives, including
more than 300 CEOs.
The survey does not claim that the adoption of sustainable practices
causes companies' share prices to rise. It could be that companies with a
strong financial performance simply have more resources to devote to
sustainability. What the findings do show, however, is that it is possible
to take a proactive position on social and environmental issues while still
delivering robust financial growth. Indeed, companies in the survey that
saw their share price rise by at least 50% in the last three years (share
price climbers) place a greater importance on social and environmental
goals than companies with share prices that have declined by more than 10%
(share price losers). Social and environmental goals include improving
environmental and human rights in supply chains, where 40% of share price
climbers rank this as an important priority versus 18% of share price
losers; reducing greenhouse gases (38% to 24%); and developing products
which address social and environmental problems (49% to 35%). Share price
climbers also put a greater emphasis on social and environmental
considerations at board level.
Overall, the majority of global businesses do not seem to be performing
particularly well when it comes to implementing sustainability policies or
programmes. Out of a list of 16 sustainable policies, which encompassed
issues ranging from energy consumption and carbon emissions to diversity
and governance, companies polled for this report had implemented an
average of just five. Many executives also rated the quality of their
company's sustainability efforts as poor—with only a smaller number
saying that they are doing well.
"The results of this research show that most companies are still working
out what sustainability means for their business, and how to implement
it," says Robin Bew, Editorial Director of the Economist Intelligence
Unit. "At a basic level, a lack of consensus on what the topic encompasses
results in an absence of relevant targets."
Other key findings from the research include:
Business leaders are open to more regulation on social and
environmental issues. Executives responding to our surveys are often
opposed to increased regulation. Not here. Forty percent of those in our
survey believe additional regulation is necessary to tackle social and
environmental challenges. Another 50% say that voluntary action is
generally more effective, but that additional regulation may be required
in some areas. But this openness to new rules is combined with the desire
for clearer guidance about what government expects from business. Only 10%
of executives in the survey say more regulation in this area is likely to
harm economic growth.
Communication, then the environment, are top corporate priorities
on sustainability. Given a list of 10 specific objectives relating to
sustainability, companies placed the highest priority overall on
communicating their firm's sustainability performance to investors and
stakeholders (61% selected this as "leading" or "major" priority).
Environmental issues took the next three spots overall: improving their
environmental footprint through waste reduction and use of recycled
materials (57%); improving energy efficiency across global operations
(52%); and developing products that address sustainability issues
(51%).
The supply chain is the weakest link. Extending sustainability
policy to suppliers is the area where companies gave themselves the worst
marks: about one-fifth say their companies have performed poorly in
setting stronger supplier standards on both environmental and human rights
issues. About the same proportion have only implemented supplier controls
in the last five years.
Sustainability reporting needs more work. Although companies
rate their performance on communication highly, efforts regarding formal
reporting are less advanced. Only 22% of executives say their firms have
formal Triple Bottom Line reporting, although a further 40% say they will
adopt it within five years
Sustainability does pay. Most executives (57%) say that the
benefits of pursuing sustainable practices outweigh the costs, although
eight out of 10 expect any boost to profits to be small. Specifically,
sustainable practices can help reduce costs (particularly energy
expenditure), open up new markets and improve the company's reputation.
Part of this involves a shift away from defensive behaviour towards more
active exploration of the opportunities sustainability can
present—so-called "sustainability 2.0".
Other highlights within the full 52-page report include ten lessons for
corporate leaders on sustainability—and an overview of how businesses
are making sustainability pay.
Doing good: Business and the sustainability challenge
is available, free of charge, at:
www.eiu.com/sponsor/sustainability
About the research
Doing good: Business and the sustainability challenge is an
Economist Intelligence Unit research programme. Lead sponsors include A.
T. Kearney, Bank of America, Orange, Jones Lang LaSalle,
PricewaterhouseCoopers and SAP, along with supporting sponsors ExxonMobil
and SunGard.
The report's findings are primarily based on a wide-ranging global survey,
conducted by the Economist Intelligence Unit in September and October 2007.
A total of 1,254 executives participated in the survey. Half of all
respondents were from the C-suite. About 27% of respondents were based in
Asia, 33% in western and eastern Europe, 33% in North and Latin America,
and 7% in the Middle East and Africa. A range of company sizes were
represented: 47% of firms has at least US$500m in revenue, with 22%
recording revenue of at least US$5bn. To supplement the survey, the
Economist Intelligence Unit also conducted 28 in-depth interviews with
CEOs, sustainability chiefs and other leading experts.
The Economist Intelligence Unit bears sole responsibility for the content
of this report. Our editorial team executed the online survey, conducted
the interviews and wrote the report. The findings and views expressed in
this report do not necessarily reflect the views of the sponsors.
Press enquiries:
Economist Intelligence Unit
Joanne McKenna, Press Liaison
joannemckenna@eiu.com / +44
(0)20 7576 8188
To arrange an interview with any of the report's sponsors, please refer
to the full list of contact details in the Appendix.
About the Economist Intelligence Unit
The Economist Intelligence Unit is the business information arm of The
Economist Group, publisher of The Economist. Through our global network of
700 analysts, we continuously assess and forecast political, economic and
business conditions in nearly 200 countries. As the world's leading
provider of country intelligence, we help executives make better business
decisions by providing timely, reliable and impartial analysis on
worldwide market trends and business strategies.
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