Dec 13, 2011

Sustainability is the new thing

The year comes to an end and all kinds of reports are published. Today I will share some of the findings of the report In this report  present various companies scorecards (Unilever, Nike, etc...) regarding their behaviour on environmentally policies, but first I'll share some excerpts from the McKinsey Quarterly article "What really drives value in Corporate Responsibility", which helps to understand why companies invest so much in sustainability policies, and why&how they should invest.

Now that stakeholders—including consumers, investors, and employees—pay increasing attention to the social and environmental footprints of business, corporate-responsibility efforts have moved into uncharted management territory. We see companies reengineering supply chains to make them “greener,” supporting social causes through volunteer programs for employees, or lobbying for human rights in farflung corners of the globe.
(...)Some investments, of course, produce immediate and quantifiable gains, such as those from recycling or from manufacturing processes that save energy. But often, social investments are expected to yield longer-term benefits as engaged consumers step up their purchases, (...)

(...) it is vital that managers avoid creating an impression that such activities are crowding out core business priorities. In fact, some wellmeaning corporate-responsibility activities can actually harm a company’s competitiveness.

Consider an experiment. We had consumers rate their own purchase intentions for computer accessories after learning about a company’s product quality and corporate-responsibility activities. Descriptions of the company as having high product quality had a modest positive effect, but for a company with low product quality, the consumer’s willingness to make a purchase actually decreased. (...)
By following a few basic principles, leaders can increase the likelihood that stakeholders will interpret corporate-responsibility initiatives more accurately and thus more positively. 

Don’t hide market motives 
Stakeholders are remarkably open to the business case for corporate responsibility, as long as initiatives are appropriate given what stakeholders know about the business, and as long as companies
genuinely pursue and achieve the accompanying social value. Companies should understand that they can pursue profitable core business and corporateresponsibility objectives in tandem, without trade-offs.

Serve stakeholders’ true needs.
Consumers are drawn to products that satisfy their needs. Likewise, stakeholders are drawn to companies whose corporateresponsibility activities produce solid benefits, which can be tangible (such as improved health in local communities) or psychological (for instance, volunteer programs that help employees better integrate their work and home lives). Before investing in corporate responsibility, however, managers need to set clear objectives that companies can meet and then, ideally, create programs together with key stakeholder groups.

Test your progress. 
Corporate responsibility acts as a conduit through which companies can demonstrate that they care about their stakeholders. A company should assess its initiatives regularly to ensure that they foster the desired unity between its own goals and those of stakeholders. Calibrating strategy frequently improves the odds that corporate responsibility will create value for all parties.

By the Numbers

  • 136 companies were scored across 16 sectors in the 5th annual Climate Counts company scoring process 
  • Electronics represents the highest scoring sector with an average of 74.8 points among 13 companies
  • 13 companies scored 80 points or above in 2011 compared to 4 in 2010
  • 9 of 13 companies represented in Toys/Children’s equipment scored 12 points or less in 2011, making it the lowest performing sector overall
  • The Furniture sector had the second lowest average scores behind children’s products with 20.3 points
  • 63.9% of companies improved their score from 2010 to 2011
  • 79 companies are striding in 2011 versus 68 in 2010
  • Only 1 of the 20 largest companies scored is still stuck with 11 points – Amazon 
  •  Food Products and Pharmaceuticals had the 2nd and 3rd highest 2011 scoring averages with 67.6 and 67.2 points respectively
Sector leaders
  • Airlines: Delta (56)
  • Apparel/Accessories: Nike (85)
  • Beverages - Beer: Molson Coors (69)
  • Commercial Banks: Bank of America (82)
  • Consumer Shipping: UPS (80)
  • Electronics: Hewlett-Packard (83)
  • Food Products: Unilever (88)
  • Food Services: Starbucks (70)
  • Home and Office Furnishings: Herman Miller
  • and Masco (63)
  • Hotels: Marriott (73)
  • Household Products: L’Oreal (78)
  • Large Appliances: AB Electrolux (80)
  • Internet/Software: Microsoft (68)
  • Media: General Electric (77)*
  • Pharmaceuticals: AstraZeneca (86)
  • Toys & Children’s Equipment: Hasbro (52)
(...)Climate Counts 22-criteria assessment is broken down into four sub-sections:

Review: Is the company taking inventory of their greenhouse gas (GHG) emissions using an industry accepted accounting protocol? (22 possible points)

Reduce: Has the company articulated a strategy for reducing GHG emissions and have they succeeded in achieving actual reductions? (56 possible points)

Policy Stance: Does the company explicitly support the need for comprehensive energy and climate policy or is there evidence they oppose such measures? (10 possible points)

Report: Is the company publicly disclosing information about their sustainability efforts and their progress toward carbon neutrality? (12 possible points)
Why Do Some Sectors Score Better than Others?
Climate Counts builds sector equality into its scoring system by assessing companies on their actions as opposed to the size of their footprint. This is evidenced by the fact that six different industries—Food Products, Pharmaceuticals, Apparel/Accessories, Electronics, Commercial Banks and Large Appliances—are represented in our top 10 companies for 2011.
Some might argue that the airlines sector is disproportionately handicapped by their unique dependence on emissions-heavy jet fuel. As with all sectors scored, however, this magnifies the potential upside of spearheading the shift toward alternative, scalable fuel and energy sources such as biofuels and solar power.

Final Thoughts

As the goalposts of business have shifted to reward sustainability, the reputational costs and operational risks of failing to embrace climate stewardship have encouraged more companies into action. In theory, this is the primary goal of organizations like Climate Counts—to be a catalyst of behavioral change for companies and the consumers who depend on them.
Trends indicate that companies are now adopting strategies to combat climate change, but there is still a big mountain to climb toward carbon neutrality. For starters, we’d like to see better performance in the Policy Stance section of our scorecard which rewards corporations that vocalize support for climate and energy legislation at every layer of government. At a time when future generations have never before depended so heavily on the actions of today, it is no longer acceptable to simply hope for self-policing of greenhouse gas emissions. 

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