Getting the most out of your sustainability program

Author: Achim Berg, Nils Schlag, and Martin Stuchtey on behalf of McKinsey & Company

Sustainability initiatives won’t create lasting value if they’re poorly managed. Here are four lessons from companies that are doing it right.

Among retailers and consumer-goods manufacturers, commitment to environmental and social objectives can take many forms—whether it’s distributing fair-trade products, reducing materials used in packaging, or ensuring humane working conditions at suppliers’ factories. Unilever, for one, has a detailed Sustainable Living Plan, and among the company’s goals for 2020 is to halve the greenhouse-gas impact of its products over their life cycles. Swedish furniture maker IKEA has installed more than 700,000 solar panels in its buildings worldwide and has committed to own and operate more than 300 wind turbines. British retail group Kingfisher’s sustainability plan, which it calls Net Positive, aims not only to make frugal use of natural resources but also to restore and regenerate the environment—“putting back more than we take out,” as the company says.

These programs can be powerful agents of change, both toward greater alignment between customer and corporate interests and toward a culture of systemwide innovation in products and business models. Yet some skepticism remains as to whether sustainability efforts have any impact on financial performance in the short and medium term. Our recent research provides answers to both of these questions.1In this article, we discuss how companies are creating value from their sustainability programs and what practices enable companies to keep these programs running smoothly and effectively.

How sustainability programs create value

In previous work, our colleagues have outlined the various ways that companies can use sustainability initiatives to manage risk, drive growth, or improve returns on capital (Exhibit 1).2In our latest research, we sought to unearth examples of how companies are actually doing it. We found that companies that built sustainability into their operations saw immediate benefits, which gave them the momentum to do even more.

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