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Companies with Buoyant Share Prices are More Proactive on Corporate Sustainability Issues

Submitted by: Economist Intelligence Unit

Categories: Sustainability, Research, Reports & Publications

Posted: Feb 12, 2008 – 11:00 AM EST

 

Benefits of introducing socially and environmentally responsible policies “outweigh the costs”But the majority say their firms are still performing poorly on sustainability

Feb. 12 /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.

  • For more information, please contact:

    Andrew Robertson Edelman (London)
    Phone: +44 (0)20 7344 1513
    Phone 2: +44 (0)7811 341 945

     

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