Recently, the Babson Social Innovation Lab issued a report entitled Project ROI – Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability. The report provides additional supportive documentation that corporate responsibility and sustainability best practices can generate significant financial returns and bottom line benefits. In their report, corporate responsibility has a broad and inclusive definition. It embraces several terms and concepts including “sustainability;” “environmental, social, and governance;” “corporate responsibility;” and “corporate social responsibility.” In essence, corporate responsibility refers to an organization’s or enterprise’s capabilities to:
- Reduce its “corporate footprint” through positive economic, social, environmental, and governance impact.
- Expand its “corporate handprint” through a variety of sustainability best practices that are developed to improve social, environmental, economic, and governance impact in a harmonious unified approach.
- Improve corporate responsibility performance and reporting through transparent disclosure and accountability with employees, shareholders, and stakeholders.
What then are some key “corporate responsibility” and sustainability best practices that companies and enterprises can pursue and achieve improved performance? Are there potential target values that can be attributed to the use of these best practices?
The Babson Lab reviewed several major corporations and their corporate responsibility best practices, including Pirelli Tire, CVS Health, Lockheed Martin, Unilever, and IBM. These corporations are industry leaders and represent a variety of business and market sectors.
The potential targets for improved financial performance for large publicly traded companies include:
- Reducing systemic risks by 5% and protecting as much as 10% of the company’s value by ensuring the enterprise’s license to operate in various countries and community locations. Addressing sustainability risks is a key overall strategy including: environmental, social, community, financial, legal, supply chain, and other risk factors. Ensuring sustainability and environmentally preferred purchasing policies are in place also improves risk profiles.
- Improving customer satisfaction by up to 10%. A key strategy is to engage customers, employees, suppliers, and stakeholders in various corporate responsibility activities wherever possible. Acting as a corporate citizen with other local organizations in addressing systemic community issues is a significant first step.
- Increasing revenues and price premiums by over 10% and improving corporate responsibility and brand recognition and value by up to 10%. One key sustainability strategy is to ensure that products and services meet sustainability standards and certifications. Another strategy is to use Life Cycle Analysis and Design for the Environment protocols for product development, along with sustainable manufacturing processes. Employing sustainability and green purchasing policies across the supply chain is another key strategy. Open and transparent reporting of sustainability progress and performance helps support brand loyalty.
- Reducing company staff turnover by over 25%; increasing employee productivity by up to 15%; and increasing employee engagement by up to 10%. Providing sustainability skillset and leadership training is a critical success factor. Having top management directly engaged in corporate responsibility activities provides internal visibility and program support. Tying volunteer and donations to company social responsibility and citizenship roles enables the company to broaden its influence on community development for the areas where they operate.
Even though these opportunities were developed for large publicly traded companies, the same sustainability value opportunities hold true for small to medium size enterprises as well. Those companies in the furniture, automotive, food, and construction industries may have already begun to see these strategies being employed within their sustainable supply chain management programs.
Source: Project ROI – Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability, Babson Social Innovation Lab
Norman Christopher is Director, Office of Sustainability Practices, Grand Valley State University and Author of Sustainability Demystified