Companies in emerging markets tend to grow faster and have higher-than-average margins. John Elkington examines why American companies continue to lag.
By John Elkington
Remember the drunk man stumbling around under the streetlamp? He has lost his car keys. Asked if that is where he lost them, he replies no, he lost them over there in the dark — but this is where the light is.
We need to look beyond existing areas of light, into darker areas emerging with the rise of the new world economic order.
Corporate Rankings: Denmark Leads, U.S. Lags
Enthusiasts for corporate rankings know the same names appear routinely at — or near — the top. So, while I was pleased to see Denmark’s Novo Nordisk top the latest Global 100 Most Sustainable Companies ranking by Canadian magazine Corporate Knights, it seemed another turn of an overly familiar wheel.
Still, the world’s leading supplier of insulin has moved well beyond its still very rare incorporation of triple bottom line principles into its charter. It leads in areas like energy and carbon productivity and pay equity — the last an increasingly sensitive issue.
More fundamentally, Novo Nordisk sees access to essential medicines as a basic human right, selling human insulin to 33 of the world’s poorest countries at no more than 20 percent of the average price it charges in the west.
[LATEST: Novo Nordisk Reports Solid Financial, Social And Environmental Performance In 2011]
The U.S. didn't do too well however, with no American business making it into the top 10. The highest-ranking company was Intel, at No. 18, followed by Agilent (59), Johnson Controls (64), Procter & Gamble (66) and IBM (69).
Of the 22 countries represented by the companies who made it in the ranking, the U.K. led with 16, followed by Japan with 11, and France and the U.S. with eight each.
But for less-well-known champions of sustainability, we need to look elsewhere.
Emerging Market Champions
Interestingly, one of the blizzards of reports published for the latest meeting of the World Economic Forum in Davos was sub-titled The New Sustainability Champions.
Prepared by BCG, the report spotlights 16 emerging market companies, based in countries such as Brazil, Costa Rica, Egypt and Kenya.
The conclusion: These companies "tend to grow faster and have higher-than-average margins for their industries.”
How? Three characteristics stand out.
1. Turning Constraints Into Opportunities
These companies tackle looming natural resource constraints head-on, educate their customers on the need to improve their resource efficiency, and provide ways for poorer people to access their products and services.
2. Embedding Sustainability into Work Culture
When it comes to embedding sustainability, they again adopt three strategies. These organizations define clear aspirations and goals, using them to galvanize the entire organization. They integrate sustainability into operations. (At Costa Rica’s Florida Ice & Farm, 60 percent of the CEO’s salary is now linked to the triple bottom line of “people, planet, and profit”.) And they engage their workforces.
3. Actively Shaping the Business Environment
Finally, they positively influence policies and standards. China’s Broad Group has developed a miniaturized device for measuring air pollution—an increasingly hot issue in the country—that can fit inside a mobile phone. By putting knowledge about air quality into the hands of citizens, they are helping amplify the societal pressures for change.