August 6th, 2010 | 6:00 am

Three Measures of Accountability Key to Sustainability Initiatives Moving Forward, Say CEOs

filed under Corporate Sustainability

iStock_000006954519XSmallBy Melissa J. Anderson (New York City)

In June, Accenture released “the largest CEO-based study on sustainability of its kind to date,” based on more than 100 in-depth interviews with world business leaders and an online survey of 766 UN Global Compact member CEOs.

The study, entitled “A New Era of Sustainability,” [PDF] reveals the attitudes toward sustainability held by top leadership in a variety of sectors, including “automotive, communications, consumer goods and services, energy, financial services, metals & mining and utilities.”

Said Peter Lacy, UNGC-Accenture CEO Study Project Lead 2010 and Managing Director, Accenture Sustainability Services, Europe, Africa, Middle East and Latin America:

“We hope that this study provides a rich, authentic and evidence-based platform to understand CEO views on the progress, challenges and implications of the journey toward a new era of sustainability.”

Sustainability Embedded Within Corporate Culture and Strategic Planning

One of the most surprising findings revealed by the study was the speed with which sustainability has become viewed as a major business imperative. According to the report, in 2007, the last time the study was performed, “sustainability was just emerging on the periphery of business issues, an increasing concern that was beginning to reshape the rules of competition.”

Today, the report continues, sustainability is “top of mind.”

Sustainability, the CEOs said, will play a major role in shaping in their businesses moving forward. According to the report:

“Eighty-one percent of CEOs—compared to just 50 percent in 2007—stated that sustainability issues are now fully embedded into the strategy and operations of their company. For example, we saw cases of companies beginning to integrate sustainability issues into their executive compensation packages, as well as design and innovation functions, more than in 2007.”

Accountability Key

But the CEOs face challenges in leading their companies toward a more sustainable future – from customers, shareholders, and investors. And the challenges all boil down to accountability.

First of all, coming out of the global economic slump, consumers have continued to be mistrustful of corporations. As Kaspar Villiger, Chairman of UBS AG, said: “We have lost trust, and we need to regain it with a culture of responsible behavior.”

Companies need to figure out how to regain the trust of the customer and clients they serve.

Second, shareholders, say the CEOs, have been slow to get in board. One Goldman Sachs leader said:

“We need to realize that analysts bring with them an education rooted within the green borders of Excel. But we are talking about externalities that very often are not linked directly to line items. CEOs need to be able to link these to cash flow and the balance sheet.”

The CEOs also felt that investors were not interested in less quantifiable social benefits of sustainability – only the bottom line.

Edemir Pinto, CEO of São Paulo stock exchange BM&FBOVESPA, suggested that CEOs must work harder to communicate the value of sustainability initiatives to investors. He said:

“CEOs may complain that investors do not value their sustainability activities properly, but they need to tell investors what they are doing: If they don’t communicate regularly, investors cannot incorporate these issues into their models.”

How can companies effectively embed sustainability into their strategic plans, building trust with consumers while garnering the support of shareholders and investors? The report suggests that accountability reporting can help corporations build a case for themselves regarding sustainability.

Producing metrics-based justifications for sustainability efforts can prove to mistrustful consumers that the company is actually doing the good work it claims to, while the numbers can also help sway the results-focused style of shareholders and investors. In fact, some of the CEOs who took part in the survey presented innovative solutions to the problem of quantifying sustainability efforts.

“There should be a focus on integrated reporting of CSR and financial results, which could bring about an alignment of sustainability with economic performance,” said Fulvio Conti, Enel S.p.A.

The report notes PepsiCo CEO Indra Nooyi’s suggested business model for corporate responsibility:

“Full Business Value = (Profit + loss) – (Positive + negative impact on society).”

Additionally, besides noting sustainability success as part of company-wide performance reports, Accenture’s study suggests that sustainability success be tied to pay packages for individuals within firms.

The report says:

“Embedding sustainability into the performance and remuneration packages of top executives and management was seen by many CEOs as perhaps one of the most effective means of ensuring more active management and monitoring of sustainability impacts. ‘People have a habit of doing what you pay them to do,’ one business leader told us.”

This will provide another layer of accountability to sustainability initiatives moving forward, and hopefully overcome some of the wariness regarding the implementation of these CEOs’ visions of sustainability for their companies.

This article originally appeared on our new corporate citizenship website, Evolved Employer. Evolved Employer provides news and analysis for business leaders on corporate sustainability, corporate social responsibility (CSR), diversity, corporate philanthropy, and employee wellbeing. The site aims to provide best practices and ideas that will help senior executives lead their companies in the 21st century in a way that is profitable, yet sustainable, in all aspects of the word.

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