When the going gets tough
As the credit crunch bites, companies will be digging deeper to find an edge that allows them to stay ahead of the competition. They will also strive to save costs while ensuring their ability to make marketable products or deliver attractive services does not plummet.
Future-proofing is vital to any business. Failing to anticipate coming trends will dent reputations and endanger balance sheets. A recent report by international consultancy Arthur D Little, Sustainable Performance, will give business strategists some food for thought.
The firm’s consultants conclude that most companies’ commitment to sustainability is only skin-deep. Companies know they need to be seen to act ‘green’. But they only do so to satisfy stakeholder and customer demand, and “to fulfil the basic requirements of legislative corporate social responsibility reporting”, the study says.
These drivers have not had the power to challenge the way companies do business. Legislation is often too lax to bring about real change, the report finds. As for customer pressure, most people don’t really know what companies are up to, unless they do something that generates highly visible media coverage.
But a new “powerful force” is emerging. “The international investor community now recognises that those companies that are able to derive value from sustainability will outperform their peers financially in the long run,” according to one of the report authors, Annette Malmberg.
What the combined efforts of policy makers on one side and good-willing customers on the other failed to achieve now seems to be within reach as “the economic interests of shareholders and the drivers of sustainable performance are becoming increasingly aligned”.
There is nothing touchy-feely about this report. It uses hard figures to show that the amount of assets managed by socially responsible investments funds domiciled in Europe grew by more than 40 per cent between 2005 and 2006,
It also shows that, since 2003, companies excelling at carbon reductions – those listed in the E-Capital Partners’ carbon winners equity index – have outperformed by 20 per cent the “traditional” firms exemplified in the Morgan Stanley international capital index.
The EU’s policy makers were agonising over the details of the bloc’s sustainable production and consumption package as ENDS Europe Report went to press. It was due to be released in May but was repeatedly held back by disagreements over the range of products that should be made to comply with minimum environmental standards.
Once the package does emerge, months of wrangling will no doubt follow as EU politicians try to calibrate the carrot and the stick that will make European companies see these measures as a platform for international success rather than a shackle restricting development.
Perhaps we are facing one of those situations where the old saying “sometimes you have to be cruel to be kind” applies best. Fears of competitive disadvantage and unbearable burdens will abound among company leaders and industry lobbyists, especially at a time of economic slowdown.
But an ambitious sustainability package from the European commission could turn out to be the most helpful tool EU policy makers can provide to EU companies to ride the current economic storm and emerge at the other end as true winners.
Nadia Weekes, editor