Amid widening recognition of how environmental issues such as climate change create business opportunities and risks, results from a McKinsey Global Survey1 show that companies that generate value from their sustainability programs follow a distinctive set of management practices. Survey respondents say these companies are more likely than others to make sustainability a strategic priority and to set out specific aspirations and targets. Responses also suggest that value-creating companies are more likely than others to make sustainability an element of their corporate culture and train employees on how to integrate sustainability into their work.
Survey results indicate that value-creating companies are more apt to engage customers and business partners in their sustainability agendas. Compared with those at other companies, more respondents from value-creating companies say they collaborate with customers and suppliers on addressing sustainability issues, adjust product portfolios to be more sustainable, and account for sustainability factors when selecting and evaluating suppliers. Respondents from value creators are also more likely than others to report that sustainability issues inform how their company manages its facilities and its transportation networks.
Looking five years ahead, about two in five respondents to our survey say they expect their companies to generate value from sustainability. Understanding the distinctive practices of today’s value-creating companies could help others find a way to join their ranks.
The survey results highlight practices more widely followed by companies that are creating value from sustainability than by companies that aren’t. (To explore survey results on how companies in industries and regions are applying these distinctive practices, please see our interactive below.) Experience also suggests that companies with effective sustainability programs tend to plan and manage these programs with the same discipline and commitment that they apply to other business initiatives. Here are a few directional considerations that executives might use to focus their companies’ sustainability efforts and derive more value from them:
- Approach sustainability issues as business opportunities. Leading companies develop business cases for their sustainability programs based on the value that they stand to create (or protect) through their handling of sustainability issues. They set tangible, concrete aspirations for their sustainability programs and convert those aspirations into quantitative performance targets, which reflect their competitive position, their consumers’ expectations, and their investors’ demands.
- Build organization-wide accountability for results. Product-focused business units, functions such as supply-chain management, and geographic departments are the parts of a company that ordinarily generate most of its sustainability impacts. And unlike the central sustainability team, these departments also have the authority to change day-to-day operations. Recognizing this, savvy executives assign responsibility for sustainability initiatives to heads of functions and divisions and give them related performance targets. In this way, executives can hold senior managers to account for the company’s sustainability achievements.
- Seek impact through collaboration. While companies can do a lot on their own to improve their sustainability performance, some face challenges that span industries or regions. The problem of plastic waste, for example, bedevils the entire chemicals industry, not just one company. To address these systemic difficulties, companies might form coalitions with industry peers and work together on setting new standards, promoting technological innovation, or advocating for policy shifts. Since value chains produce the majority of the typical company’s environmental impact, most companies will also benefit from working closely with their value-chain partners.