Financial Performance: An Integral Piece of the Sustainability Pie

Environmental responsibility is only one piece of the sustainability pie. When sustainable development emerged in the public consciousness after the 1987 publication of Our Common Future — a document that helped lay the groundwork for global environmental milestones including the 1992 Earth Summit, the adoption of Agenda 21, the Rio Declaration and the creation of the Commission on Sustainable Development — economic and social concerns were considered as integral as environmental concerns in the emerging model of sustainable development.

While the value of environmental sustainability is not to be diminished, in any discussion of the relationship between sustainability and profit, it is fundamental to remember that financial sustainability and growth is an intrinsic element of the sustainable development paradigm.

It would be foolhardy for any business to downplay the role of sustainable practices or to expect that the increasing popularity of sustainable development is simply a trend that will pass or fade as the next fad emerges, or as turbulent economic conditions make it more difficult for business to invest in what the uninitiated might describe as “frivolous” initiatives.

Sustainable development has only grown in popularity in the last two decades, namely since Paul Hawken's seminal works, The Ecology of Commerce (1993) and Natural Capitalism: Creating the Next Industrial Revolution (1999), helped business leaders comprehend their role as the most powerful force to reverse the degradative effects of the industrial age.

In the past 2 years — counterintuitively enough, after the onset of the late-2000s global recession — the popularity of sustainability initiatives has reached a fever pitch.

A 2009 consumer survey conducted by Cone, a Boston-based strategy and communications firm, confirmed that an increasing customer demand for sustainable products persisted throughout the recession, with 44 percent of respondents indicating their preference for sustainable products hadn't been affected by global economic conditions, and a full third indicating they were more likely to invest in sustainable products than they were previously.

CEOS PURSUING SUSTAINABILITY

This trend toward sustainability extended from end users to the very top of the corporate ladder at large corporations around the world. A study released in June, “A New Era of Sustainability: UN Global Compact-Accenture CEO Study 2010,” and based on the findings of a survey of 766 CEOs from all corners of the globe, confirmed the economic downturn also generated the same unexpected effect: rather than tightening the purse strings in the recession's heights, CEOs opted instead to pursue sustainability initiatives with renewed vigor. An alarming 80 percent of respondents suggested the global recession had increased the importance of corporate sustainability and 81 percent already had integrated sustainable development into their core business strategy and operations, an increase of 50 percent since a similar question was posed in 2007.

Most importantly, the study showed an overwhelming majority of CEOs — 93 percent — indicated that sustainability would be critical to the future success of their business. “CEOs believe that, within a decade, a tipping point could be reached that fully meshes sustainability with core business — its capabilities, processes and systems, and throughout global supply chains and subsidiaries,” the study noted.

This trend was mirrored on an operational level according to a contemporaneous poll of nearly 700 supply chain executives across a variety of sectors by eyefortransport (EFT), a logistics and transportation information and services company. The survey, which evaluated key drivers for return on investment (ROI), showed the No. 1 driver — improving customer relations — didn't budge from its top spot in the 2009 and 2010 surveys. However, “A significant change in the market was highlighted by ROI jumping from ninth place in the 2009 survey to second place in 2010 as a key driver for shippers to invest in sustainable supply chain initiatives,” according to the report. Entirely outside of the moral imperative associated with adopting sustainable systems, professionals increasingly acknowledge the essential benefit of sustainable development lies in cost savings and financial rewards, according to the study.

In short, consumers, CEOs and supply chain experts overwhelmingly acknowledge that, far from a trend, the movement towards sustainable business infrastructure and practices is not going anywhere — except up. Further, business leaders acknowledge sustainability strategies directly are linked to financial performance.