Thursday, November 3, 2011

From Fashionable to Foundational

imageSustainability has been slowly gaining traction. This may be the year when it becomes mainstream theme for a majority of companies. While most companies adopted sustainability as a tool to enhance their corporate brand, a lot of them have discovered that it can also affect their bottom-lines. The sustainability seems to be going mainstream within the corporate culture and is being adopted as a business strategy to drive Growth, Return on Capital, and even Risk Management. That is the message from a recent survey from McKinsey Quarterly.

Some of the major takeaways from the survey:

  • Corporations are thinking of sustainability beyond the corporate image. In fact the survey shows that the top two reasons for adopting sustainable approaches to business now focus on reducing energy and waste from their operations. In response to the areas where companies are taking action, 63% of the respondents chose reducing energy, followed by 61% who chose reducing waste, compared to only 51% choosing “managing corporate reputation for sustainability”. This is of huge significance for supply chain executives, since supply chain processes control significant portions of operations for most industries.
  • Corporations have also integrated the sustainability themes across several processes in their businesses. These processes vary from mission and values to budgeting and employee engagements. Number of the respondents who said that their companies have integrated sustainability into the following areas: Operations 58%, Strategic Planning 57%, and Supply Chain Management 41%.

McKinsey also assesses the impact of sustainability activities on growth, return on capital, and risk management, claiming that opportunities in these areas vary by the type of industry. For example, businesses in the energy sector may find more opportunities to leverage sustainability activities to impact growth and risk management; while for the retail industry, the opportunities primarily lie in increasing the return on capital with some impact on managing risk. This follows logic: For example the energy sector is generally seen more damaging to the environment and therefore, any changes in their portfolio to add more sustainable energy sources are certain to open more opportunities for growth in the future. For retail, the message is simple as well – there are cost-savings to be achieved by managing their energy footprint largely by optimizing their distribution network and operations while simultaneously reducing business risk by creating a more environmentally friendly brand.

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© Vivek Sehgal, 2011, All Rights Reserved.

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