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#BusinessCase: How Companies Are Redefining the Source of Business Value

Image credit: Smithfield Foods

According to a new Pure Strategies study, several billion was earned in 2015 from the sustainability efforts of 153 survey respondents, signaling a new way of defining sources of business value. Taking inspiration from sustainability’s positive performance, companies should position their programs to generate the greatest business benefits and to measure and celebrate the gains.

Sources of top gains

Smithfield Foods believes “that financial stability and sustainability go hand in hand. Our sustainability strategies help us improve our company’s performance.” The company started tracking cost savings in operations in 2004 and found gains of $18 million in the first year. Since then, the company has saved more than $581 million.

They are not alone, with 45 percent of survey respondents earning more than $1 million in 2015 from manufacturing cost savings. This was one of the most commonly reported benefits in the survey. The gains are typically derived from resource efficiency and productivity projects. Smithfield showed that operational byproducts alone provided $11.5 million in value in 2015 from recycling cardboard to selling bacon grease and capturing biogas. Such operational gains are the easiest to measure and connect to business value, thus 79 percent of the sample indicated that they are already or starting to measure this value.  

In 2015, Nielsen found brands that demonstrated a commitment to sustainability grew more than 4 percent globally, while those without grew less than 1 percent, highlighting the link between doing good and business reward. The respondents in the Pure Strategies survey echoed this with 43 percent of the sample reporting that they achieved a sales boost of at least $1 million because of their sustainability efforts in 2015, although nearly the same number of firms is not yet tracking this benefit.

Reputation and brand enhancement may seem harder to measure and to connect to sustainability, but Smithfield notes that their sustainability efforts such as animal care performance “can influence our reputation and the relationships we have with customers and consumers.” This boost to reputation was another top gain for the survey respondents’ sustainability efforts.

Nielsen suggested that this benefit is linked to trust, which can come from a variety of sources from sustainable products to responsible corporate practices. The respondents in the Pure Strategies survey reported that resource efficiency and productivity efforts delivered the greatest value for reputation and brand enhancement, but other efforts are expected to deliver similar value soon, such as responsible chemicals management.

Linking sustainability investment and benefit gained

Sustainability budgets continue to grow. Just over 80 percent of the sample is expecting an increase in budget. Companies that report earning the most from sustainability plan to increase their budgets the most. This suggests a link between sustainability program investment and business benefit gained, reinforcing the importance of tracking the business, environmental, and social value from sustainability programs.

The most valuable program approaches identified from the survey were product innovation, design, and development, activating a sustainability purpose in the business, and sustainable sourcing. This aligns with past studies that pointed to integrating sustainability into the core of the business as key. The adidas Group states that, “over the last five years we have seen significant progress in integrating sustainability thinking and acting into our core business practices.” Their success has been achieved by “embedding social and environmental standards in policies and procedures that steer our day-to-day business processes.”

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adidas is addressing strategic areas in sustainability that have a significant impact on the company’s business, such as the company’s effort to develop cutting-edge sustainable materials and source all of its cotton sustainably. In 2015, 43 percent of its cotton was grown according to the Better Cotton Initiative standard, ensuring less water and pesticide use and better working conditions for farmers, while retaining a high-quality product and reducing supply chain risks.

There may still be holdouts who think that sustainability is a cost to the business, providing less than typical returns on investment. But an increasing number of companies are proving that the opposite is true - sustainability efforts are delivering deep and broad business benefits. These range from the cost savings generated through resource efficiency and productivity to risk mitigation from sustainable chemicals management. While every sustainability project isn’t expected to yield earnings, there is a strong case for significant gains across the program. The key is to track the value and ensure the program optimizes that value by integrating sustainability into core business functions. 

Cheryl Baldwin, Ph.D. is a Vice President of Consulting for Pure Strategies where she partners with corporate clients to develop and execute strategies to improve sustainability performance across food, home and personal care, and cosmetics industries.  Cheryl also… [Read more about Cheryl Baldwin]

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