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Sustainability: what about companies’ agendas?

A recent post by the University of Nevada points out that on the top fortune 500 firms in America, almost all are committed towards sustainability. Replicating such analysis within the Italian context, we found similar results. We focused on the 10 Italian companies that rank on the top fortune 500 global firms. As shown in table 1, 9 of them maintain webpages on sustainability and have published CSR reports during the last decade. Furthermore, 6 of them were found on the last Dow Jones Sustainability Index (DJSI). Additionally, by looking at CSR management network, Soliditas Foundation, Ethics footprint and Accountability rating (i.e., Italian networks of companies that are pushing forward sustainability campaigns), we’ve discovered that almost 180 big and well-known Italian firms are engaged in environmental programs and social initiatives (see table 2).

Apparently, we can provide a positive response to our question: nowadays sustainability represents an hot topic for the business community. Accordingly, a recent McKinsey survey points out that “many companies are actively integrating sustainability principles into their businesses and they are doing so by pursuing goals that go far beyond earlier concern for reputation management”. Specifically, saving energy and reducing waste of operations help companies capture value through return on capital and represent the main motivators for companies investments toward sustainability”. Managing corporate reputation and responding to regulatory constraints appears to be respectively the third and the fourth motivators (see Exhibit 1)

A second interesting finding of the McKinsey survey regards the economic returns of sustainability initiatives. In the report it is clearly stated that: “In our sixth survey of executives on how companies understand and manage issues related to sustainability, this year’s results show that, since last year, larger shares of executives say sustainability programs make a positive contribution to their companies’ short- and long-term value. Specifically, they expect operational and growth-oriented benefits in the area of cutting costs and pursuing opportunities in new markets and products”. Such McKinsey’ findings are aligned with what discovered by the 2011 Accenture survey. The focal points of the Accenture’s report are: (1) sustainability motivators and (2) sustainability benefits. First, “top motivations for sustainability are a genuine concern for the environment and society (cited by 53% of respondents),  reducing energy and material costs (50% of cases) and responding to customer expectations (47%)”. Second, “the benefits resulting from firms’ sustainability initiatives have exceeded executives’ expectation in the 72% of cases”. As stated by Bruno Berthon (Managing Director of Accenture) “the irony is that … who don’t enjoy these benefits are likely the ones who think sustainability is peripheral to their business”.

Hence, it seems that companies are increasingly paying attention to sustainability. The reason for this relates first to the executives’ personal committment to transact a business in a manner expected and viewed by society as being fair and responsible, even though not legally required. However, a large part of investments are undertaken in order to increase operations’ efficiency and achieve cost benefits. A relevant role is also played by market forces: firm reputation is still at the center and the customers concerns of sustainability exerts a significant effect on firms behaviors. Finally, regulatory pressures appears to be less critical in explaining companies posture towards environmental and social issues: many business leaders would like more government incentives to encourage them to act (e.g., 2011 Accenture survey).

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