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Should companies invest in sustainability?

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Good times. Bad times.

Corporate Social Responsibility? Sustainability?

Are these ideas and a strategy better left for the good times? Post-financial crisis can a business really afford to “green” itself or think about scarce resources?

Saving on energy costs hits the bottom line. But some sustainability projects add costs. Are they worth it?

Yes. They are.

In the post-financial crisis environment, long-term thinking is as appropriate as ever. Just how are companies who have made an authentic commitment to sustainability doing?

Long-term thinking

In 16 of 18 industries studied, A.T. Kearney found:

Companies recognized as sustainability-focused outperformed their industry peers over both a three and six-month period, and were all protected from value erosion.

Let’s talk results:

  • Over three months, the 99 companies studied outperformed by 10 per cent
  • Over six months, by 15 per cent

Such outperformance in difficult times is remarkable.

Companies were part of the Dow Jones Sustainability Index or the Goldman Sachs Sustain List.

Risk management and sustainability: A partnership

The study suggests that:

Prudent risk management practices often evolve from the same approaches used to develop and execute long-term strategies to avoid disruptive events from occurring due to weak links in the supply chain …

So … Sustainability planning may have a bigger impact on long-term business performance than many think.

Sustain outperformance in bad times

In some sectors of the economy, companies practicing “true” sustainability showed remarkable outperformance:

  • Financial services by 25 per cent
  • Media by 33 per cent
  • Automobiles and parts by 33 per cent

True strategic efforts toward sustainability have shown their worth even during trying times like the financial crisis. While some companies will take a “lip service” approach with purely tactical short-term endeavours geared toward winning awards, the strategic approach toward sustainability will produce concrete dividends even in challenging times.

More importantly, it was the worst of times

It’s not about short-term reputational gains. It’s about long-term gains and avoiding the disasters that short-term thinking so often lead to.

Strategic policies like the United Nations Global Impact, where companies follow:

… universally accepted principles in human rights, labor, environment and anti-corruption … embedded into daily business practices and … applied to supplier codes of conduct, company policies, and compliance procedures for confidential reporting and auditing, among other areas …

… have an effect on the bottom line.

In light of the growing fallout over Wal-Mart’s activities in Mexico, the evaluation of cost and commitment regarding sustainability over the long-term looks highly positive, especially since it outperforms against the average even during the worst of times.

It doesn’t take a rocket scientist to understand the damage to reputation and shareholder value the Wal-Mart allegations will lead to if they’re found to be true.

But reputational damage happens the moment allegations are made, the moment the media picks up the story. Shareholders sell fast. Headlines have immediate impact.

A brand branded with a headline related to bribery, or even supply chain issues, lasts long in the memory.

The best crisis management continues to be avoiding the crisis in the first place. A focus on short-term solutions leads to long-term crises.

Study: Green Winners

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