Corporate sustainability strategy increases profitability, improves employee morale and attracts new customers according to KPMG report

May 4th, 2011 by KPMG

(click on report cover to go to KPMG Corporate Sustainability report download page)

Companies which have implemented corporate sustainability strategies have enjoyed a broad range of important benefits according to latest research by KPMG. The report, titled ‘Corporate Sustainability: a progress report’, has also highlighted that finance and cost are the biggest challenges companies face when implementing sustainable practices.

Vincent Neate, European Head of Climate Change and Sustainability at KPMG, commented that “while most of the companies we spoke to implemented sustainability strategies for brand reputation enhancement and compliance reasons, those companies have also benefitted from increased profitability; new and better quality products and services and improved employee morale.

It is certainly positive to see that all of the UK respondents – and the majority of the 400 global companies we spoke to – either have a sustainability plan in place or are in the process of developing one but there are still barriers to progress. Short term finance issues and cost are the two major problems companies face in the current economic climate and a lack of measurability via benchmarking means it is still difficult for companies to show how their sustainable initiatives affect the bottom line.”

Key findings from the report:

  • At nearly 40%, the main business driver for implementing sustainability practices is brand reputation enhancement (regulatory compliance is the second biggest factor);
  • The biggest benefits of sustainability strategies are – in first place at 32% – attracting and retaining customers; in second place at 31.5% – increased profitability and in third place (at 25%) better quality products or services;
  • The largest barrier to further progress in achieving sustainability goals is different short term financial priorities (such as business survival) at nearly 40%, followed by risk of raising costs compared with competitors (at 36%);
  • Measurability is a major challenge with 76% of companies specifying the lack of meaningful benchmarks.

Neate went on to say “in a tough economic environment, it is crucial that the progress that has been made in engaging the business community in sustainable practices is not stilted through lack of measurability. We are already seeing innovation: task forces within the Global Reporting Initiative (GRI) and the International Integrated Reporting Committee (IIRC) are developing common standards for measurement and benchmarking and technology exchange. With 43% of respondents saying that addressing sustainability issues has proved a major source of new innovation and a large number pointing to important boosts in profitability, efficiency and staff morale, it is important that the financial link is clear.”

Two-thirds of those polled believe that a new set of rules is either very important or critical, and there is widespread support for tougher international regulations if these would reduce the complexity and cost of complying with widely differing national and state rules.

Yvo de Boer, Special Global Adviser for KPMG’s Climate Change and Sustainability practice and the former Executive Secretary of the United Nations Framework Convention on Climate Change asserts that the upcoming climate change talks in Durban, South Africa from 28 November to 9 December 2011 must result in approvals that will enable the creation of new market-based methods to help businesses meet sustainability targets.

“We must work to empower the private sector to make an impact on sustainability goals, but to do so, requires leadership in the private sector, and strong support from governments. This is vital if we are to mobilize the very large private financial flows necessary to bring climate goals within reach,” Mr. de Boer said.

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Corporate Sustainability: a progress report is a KPMG research paper, conducted in co-operation with the Economist Intelligence Unit. Its initial conclusions were previewed at the climate change talks in Cancun, Mexico at the end of 2010.

The full report is being released to mark the establishment of a KPMG Global Centre of Excellence in climate change and sustainability in Amstelveen, the Netherlands.

The report reviews the importance of sustainability within business today and executive attitudes towards this issue.

For the purposes of this report, corporate sustainability is defined as: “adopting business strategies that meet the needs of the enterprise and its stakeholders today while sustaining the resources, both human and natural, which will be needed in the future.”

The report is based on a global survey of 378 senior executives, encompassing a range of industries, and evenly split between the US and Canada, Asia-Pacific and Europe, with a smaller representation from the Middle East, Africa, and Latin America. Organisations of all sizes were represented: 40% of respondents worked for firms with revenues of at least US$1bn, whereas 47% were from firms with revenues of US$500m or less.

The respondent base was very senior: 26% were CEOs, presidents or managing directors of their firms; half represented the C-suite or board; and all respondents were in a management position. The survey was conducted in October 2010.

To complement this, and provide specific context, the Economist Intelligence Unit conducted extensive desk research and in-depth interviews with numerous corporate sustainability executives and experts.

 

 

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