Report decodes “Sustainability DNA” for delivery of value and impact
Global professional services firm Accenture and the World Economic Forum (WEF) announced the release of a new report, Shaping the Sustainable Organization, exploring the connection between sustainability-focused business management practices and value creation. The report indicated a strong link, with companies that embed effective ESG practices generating more than 20% higher profitability on average.
The report also found, however, that while most organizations express intentions towards improving their sustainability profiles, the conversion of this expression into action often lags, either due to a lack of perceived financial benefit, with executives concerned that improvements in ESG are ‘zero-sum,’ indicating a trade-off with profitability, or due to difficulties implementing sustainable business practices. The report cites recent Accenture studies, for example, that found that while 73% of executives identify “becoming a truly sustainable and responsible business” as a top priority, 43% of companies fail to match their ESG rhetoric with results.
In order to distinguish organizations that can effectively transform sustainability intentions into effective stakeholder-centric changes and practices, Accenture and WEF identified a set of 21 management practices, systems and processes that form an organization’s “Sustainability DNA.” The management practices encompass a broad range of categories, from performance & reporting and risk management to environmental & quality standards and executive compensation, and begin with the key elements of responsible leadership, including Shareholder Inclusion, Emotion & Intuition, Mission & Purpose, Technology & Innovation, and Intellect & Insight.
Peter Lacy, Chief Responsibility Officer and Global Sustainability Services lead, Accenture, said:
“The world’s environmental and social challenges are already disrupting business today. But our research with the World Economic Forum found that those who root their organization and leadership DNA in stakeholder-centricity enjoy significantly better sustainability performance and value creation. These pioneers utilize new technologies and ESG data sets to create more sustainable and resilient supply chains, systematically harness the innovative power of diversity, and drive growth by putting stakeholder needs at the heart of products, services and new market opportunities. Those who ignore this moment to position for the future risk being left behind.”
To assess Sustainability DNA, Accenture and WEF created the Sustainable Organization Index (SOI), ranking nearly 4,000 companies on their ESG supporting practices. According to the report, companies in the top quartile of the SOI had EBITDA margins 21% higher than bottom quartile companies (19.6% vs 16.2%), as well as significantly higher total shareholder return and ROIC.
The report advocates a series of steps – Diagnose, Define, Develop – that organizations can take in order to improve their Sustainability DNA, including assessing areas where performance is stronger and where improvement is needed, identifying key interventions needed to meet the organization’s sustainability goals using a variety of different inputs, and building a roadmap based on the organization’s vision for change with a clear set of KPIs to measure success.
Klaus Schwab, Founder and Executive Chairman, World Economic Forum, said:
“By investing in organizational practices that stick, businesses will be better placed to achieve their financial goals while contributing to social welfare and the common good.”
Click here to access the Shaping the Sustainable Organization report.