Profits with purpose: How organizing for sustainability can benefit the bottom line
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Profits with purpose:
How organizing for sustainability
can benefit the bottom line
Becoming a sustainability leader requires big changes, but the effort is worth it—
in both environmental and economic terms.
Sheila Bonini and Steven Swartz
Sustainability—a term we use to describe the busi- has a material financial impact. The value at stake
ness programs, products, and practices built from sustainability-related issues—from rising
around environmental and social considerations— raw-material prices to new regulations—is substantial.
is often seen as a luxury investment or a public- “Leading on sustainability is driven largely by our
relations device. We think that view is cynical and desire to grow,” one technology executive told us. “The
increasingly untenable. In fact, a growing body of industry changes so rapidly that we need flexibility.”
evidence indicates that sustainability initiatives can
help to create profits and business opportunities. Success requires both a structured program to
improve performance and a sustainability philosophy.
McKinsey recently launched a knowledge collabora- Such efforts often get stuck, especially at the
tion with more than 40 companies to understand business-unit level, when managers have other
their sustainability challenges (see sidebar “How priorities. Moreover, given that less than 5 percent
we did it”). We sought to develop a set of practical of companies do a good job of providing financial
recommendations for companies to capture value incentives or career opportunities for sustainability
from sustainability. In doing so, we found that performance,1 people may not see the pursuit
leading companies pursue sustainability because it of sustainability as a way to a build their career.
Profits with purpose: How organizing for sustainability can benefit the bottom line 5In this article, we discuss the research about We also surveyed and interviewed companies
the economic benefits of sustainability. Then we with successful sustainability programs. Our con-
detail the organizational practices businesses clusion: sustainability programs are not only
need to follow to make this work. Finally, we show strongly correlated with good financial performance
how moving in this direction can create value. but also play a role in creating it.
Sustainability is a long-distance journey; the
evidence is growing that it is one worth taking. According to research by Deutsche Bank, which
evaluated 56 academic studies, companies
Sustainability and value creation with high ratings for environmental, social, and
Over the past 20 years, the idea of corporate sus- governance (ESG) factors have a lower cost of
tainability has become part of mainstream business debt and equity; 89 percent of the studies they
discourse. Companies in many industries issue reviewed show that companies with high ESG
sustainability or corporate-social-responsibility ratings outperform the market in the medium (three
reports; executives everywhere pledge allegiance to five years) and long (five to ten years) term.3
to the idea. Even so, the concept still carries con- The Carbon Disclosure Project found something
siderable baggage. In a recent report for the UN similar. Companies in its Carbon Disclosure Leader-
Global Compact, 84 percent of the 1,000 global CEOs ship Index and Carbon Performance Leadership
surveyed agreed that business “should lead efforts Index, which are included based on disclosure
to define and deliver new goals on global priority and performance on greenhouse-gas (GHG)
issues.” But only a third said “that business is doing emissions, record superior stock-market returns.
enough to address global sustainability challenges.”2 Companies in the Carbon Disclosure Leadership
Index substantially outperformed the FTSE Global
To understand the role of sustainability initiatives 5004 between 2005 and 2012. Companies in the
in business, we looked at academic studies, investor other index also did better.5
strategies, and public data on resource efficiency.
How we did it
To create the factual basis for this Then we interviewed executives Finally, we conducted a sustainability-
article, McKinsey canvassed from 40 companies from various assessment survey, the seventh
the extensive literature on the orga- sectors, including oil and mining, of this kind, of almost 40 companies,
nizational practices and financial sneakers, soup, cosmetics, and tele- exploring why and how companies
effects of corporate-sustainability communications. Research are addressing sustainability and to
initiatives. We also did our own participants were chosen because what extent executives believe
analysis of resource-efficiency and they had outperformed their it can and will affect their companies’
financial-performance data. industry average across financial bottom line. We benchmarked the
and sustainability-performance results of these 340 respondents
metrics. We also interviewed experts against McKinsey’s global-executive-
from universities, nongovernmental survey database of more than
organizations, and the financial sector. 4,000 companies.
6 McKinsey on Sustainability & Resource Productivity July 2014Even more intriguing is recent research by three as diverse as food products, specialty chemicals,
economists (two from Harvard and one from the pharmaceuticals, automotive, and semiconductors.
London Business School) suggesting that sustain- In each sector, there were also a small number
ability initiatives can actually help to improve of companies that did particularly well, and these
financial performance. The researchers examined were the ones that had taken their sustainability
two matched groups of 90 companies. The com- strategies the furthest.
panies operated in the same sectors, were of similar
size, and also had similar capital structures, No wonder, then, that investors are increasingly
operating performance, and growth opportunities. comfortable with the idea of putting their money into
The only significant difference: one group had socially responsible investment. In the United
created governance structures related to sustain- States, such investment grew by 486 percent between
ability and made substantive, long-term investments; 1995 and 2012, outpacing the broader universe of
the other group had not. managed US assets, which grew by 376 percent over
the same period.7 In the last three years, socially
According to the authors’ calculations, an investment responsible investment has grown by 22 percent; it
of $1 at the beginning of 1993 in a value-weighted now accounts for more than 11 percent of all assets
portfolio of high-sustainability companies would under management in the United States ($3.74 tril-
have grown to $22.60 by the end of 2010, compared lion). Globally, more than $13 trillion is invested
with $15.40 for the portfolio of low-sustainability in assets under management that incorporate
companies. The high-sustainability companies also ESG metrics.8
did better with respect to return on assets (34 per-
cent) and return on equity (16 percent).6 The authors With trillions of dollars in play, the professionals
conclude that “developing a corporate culture have taken notice. The quality and availability
of sustainability may be a source of competitive of sustainability data has improved, for example,
advantage for a company in the long run.” As careful as mainstream data providers such as Bloomberg,
academics, they note that this research was not MSCI, and Thomson Reuters have begun to
done in laboratory conditions, and therefore they offer sustainability-performance data in much-
cannot claim definitive proof of causality: improved formats.9
“confounding factors might exist.” But they clearly
believe that they are onto something—that it is As a result, investors are able to go well beyond
the sustainability policies themselves that were “negative screening” (not investing in certain kinds
responsible for the better financial performance of companies or industries). This approach was
of the high-sustainability group. inherently limited, and did not lead to higher returns.
Now, investors are more sophisticated; they are
Additionally, there is evidence that being more seeking above-market returns by investing in best-
efficient at using resources is a strong indicator of in-class sustainable companies.
superior financial performance overall. We created
a metric (the amount of energy, water, and waste Osmosis Investment Management, for example,
used in relation to revenue) to analyze the relative assesses companies using a proprietary methodology
resource efficiency of companies within a sector. based on relative resource productivity; it has
On that basis, we found a significant correlation built a portfolio of large companies that has out-
(95 to 99 percent confidence) between resource performed the market over the past eight years.
efficiency and financial performance in sectors Goldman Sachs’s GS Sustain assesses both market
Profits with purpose: How organizing for sustainability can benefit the bottom line 7competitiveness and management quality with the entire value chain, through internal analysis
respect to environmental, social, and governance and consultations with stakeholders, including
performance. Generation Investment Manage- customers, regulators, and nongovernmental orga-
ment uses a global research platform to integrate nizations. This process should enable companies
sustainability into investing, taking into account to identify the sustainability issues with the greatest
key global issues such as climate change and poverty. long-term potential and thus to create a systematic
All three have delivered above-market returns. agenda—not a laundry list of vague desirables.
Applying performance management to After extensive consultations, for example, BASF, the
sustainability global chemical company, put together a “materiality
Although sustainability is usually somewhere on the matrix.” As Exhibit 1 shows, the chart maps the
corporate agenda, there are often problems with importance of 38 sustainability-related issues based
execution, even in the most committed companies. on their importance to BASF and its stakeholders.
To find and deliver real strategic opportunities, (Other companies use similar matrixes.) Such
leaders should consider applying four organizational exercises help companies to recognize the most
practices. These principles aren’t new—they are important issues early and then integrate them into
associated with performance management, in management.
particular—but they are not often used to address
sustainability challenges. Once the priorities are identified—having no more
than three to five is best—the next step is to
Identify issues and set priorities develop a fact base from which to create a detailed
Two-thirds of companies in a representative sample financial and sustainability analysis. Siemens,
from the S&P 500 have more than 10 different for example, identified one priority as helping cus-
sustainability focus topics, and some have more tomers to reduce their carbon impact and has
than 30. That’s too many: it’s hard to imagine created an environmental portfolio of green products
how a sustainability agenda with this many focus and services, including energy efficiency, renew-
areas can break through and get the necessary able energy, and environmental technology. In 2013,
buy-in to be successful. While there are several these generated revenues of €32.3 billion and
areas that companies need to comply with, saved 377 million metric tons of carbon emissions.
it’s better to concentrate on a few strategic themes.
Coca-Cola, for example, has set for itself a strategy Set goals
it calls “me, we, the world,” which encompasses After completing the initial analysis, translate
its approach to improving personal health and this information into external goals that can be dis-
wellness, the communities in which it operates, and tilled into business metrics. These goals should
the environment. Within this strategy, the com- be specific, ambitious, and measurable against an
pany reports making material, tangible progress on established baseline, such as GHG emissions; they
metrics related to three specific areas of focus: should also have a long-term orientation (five years
“well-being, women, and water.” The company does or more) and be integrated into business strategy.
not ignore other issues such as climate change And their intent should be unmistakable. One
and packaging, but it has made it clear that this is company stated as a goal: “Reduce the impact of our
where it wants to lead. packaging on the environment.”
To develop a clear set of priorities, it is important Getting more specific is even better. (Reduce how
to start by analyzing what matters most along much? By when? Compared to what?) Here is a
8 McKinsey on Sustainability & Resource Productivity July 2014SRP 2014
Sustainability
Exhibit 1 of 3
Exhibit 1 One company maps its sustainability priorities.
Extremely
high Energy consumption/
Occupational health/safety efficiency
Renewable sources of energy Water pollution
Pollution opportunities from
Life-cycle thinking in value chain
Rating by external stakeholders
technologies/products
Water scarcity Resource scarcity
Waste
Human rights Climate change/ Sustainable production
global warming Agricultural practices
Risk of technologies/products Trust/ Compliance
Public health/safety reputation Regulatory environment
Product stewardship
Biodiversity loss Renewable bio-based materials
Land-use change Sustainability valuation Emerging markets
Consumer education Corporate governance Partnering/multistakeholder collaboration
Rebound effect Employability
Labor/social-policy rights
Socially responsible environment Population growth/urbanization
Security Malnutrition
Poverty Sufficiency/postgrowth economics
Gender diversity/ Political shifts/dynamics
equal opportunities
High
Extremely
high
Rating by BASF
Source: Company website
stronger approach, from a sustainability leader: promotes accountability. An analysis of companies
“Reduce 2005 carbon dioxide emissions by half that are part of the Carbon Disclosure Project found
by 2015.” It is important to build internal support that those that set external goals did better on
to meet these goals. Our analysis found that the cutting emissions—and also had better financial
companies that excelled at meeting sustainability returns on such investments. Stronger goals,
goals made sure they involved the business leaders then, seem to encourage innovation; people may
responsible for implementing them from the feel more motivated to find ways to meet them.
start. One global manufacturer we interviewed Lack of goals is a sustainability killer: “what gets
announced in 2010 that it would reduce GHG measured gets managed” is as true of sustainability
emissions and energy consumption by 20 percent. as it is of any other business function. And yet it
To do so, it set up energy assessments and energy- is not happening. We estimate that only one in five
management plans, established global programs to S&P 500 companies sets quantified, long-term
optimize procurement and building standards, and sustainability goals; half do not have any.
began to use renewable energy where possible.
Show the money
Setting ambitious external goals motivates the Almost half (48 percent) of survey participants
organization, forces resources to be allocated, and said that the pressure of short-term earnings
Profits with purpose: How organizing for sustainability can benefit the bottom line 9performance is at odds with sustainability initia- Making the business case for sustainability
tives. A constructive response is to make the case might sound obvious, but apparently it isn’t. Most
that sustainability can pay for itself—and more. companies do not communicate the financial
performance of sustainability; only a quarter said
Senior leaders will give sustainability lip service, that the financial benefits of these efforts were
not capital, if they do not see financial benefits. well understood.
“Sustainability metrics can seem like random
numbers and don’t do much,” one chemical-industry Sustainability initiatives can be challenging to
executive told us. “For our businesses, sustain- measure because savings or returns may be divided
ability efforts have to compete directly with other across different parts of the business, and some
demands, which means that financial impact benefits, such as an improved reputation, are indirect.
is key.” This needs to be done rigorously, reinforced It is important, then, not only to quantify what
with fully costed financial data, and delivered can be quantified but also to communicate other
in the language of business. kinds of value. For example, an initiative might
improve the perception that important stakeholders,
Alcoa, a US-based global metals company, incor- such as consumer groups, nongovernmental orga-
porates sustainability into how it does business— nizations, or regulators, have of the company. This
and how it talks about the company to stakeholders. can help to build consumer loyalty, nurture
In one investor presentation, for example, it relationships, and inform policy discussions.10
detailed how its supply-chain simplification sharply
lowered labor and energy costs as well as cut Create accountability
GHG emissions, but it was the financial effects that The top reason that respondents gave for their
took front and center. companies’ failure to capture the full value of sustain-
ability is the lack of incentives to do so, whether
To emphasize that sustainability is a business positive or negative. According to the UN Global
issue, boards should review goals at every meeting. Compact, only 1 in 12 companies links executive
For each project, specific executives should be remuneration to sustainability performance; 1 in
accountable for costs and effectiveness. This is, of 7 rewards suppliers for good sustainability
course, much easier said than done. At Intel, for performance. Among the executives we surveyed,
example, although business leaders were interested 38 percent named lack of incentives and 37 per-
in saving water, they saw little financial justifi- cent named short-term earnings pressure for poor
cation to do so: water was cheap. Advocates of the results; about a third said the lack of key perfor-
initiative were able to calculate that the full cost mance indicators and not enough people being held
of water, including infrastructure and treatment, accountable were problems.
was much higher than the initial estimates. Saving
water, they argued, could therefore create value In this area, a number of companies exhibit good
in new and unexpected ways. On that basis, Intel practices from which others can learn, such as
went ahead with a major conservation effort. tracking data and reporting indicators, including
The company now has a finance analyst who con- carbon emissions, energy use, water use and waste,
centrates on computing the financial value of and recycling. Even these companies, however,
sustainability efforts. are still working on integrating sustainability-
10 McKinsey on Sustainability & Resource Productivity July 2014performance indicators into individual incentives; something similar. It tracks and quantifies progress
the only area where most have managed this is with in ten areas, including water, energy, packaging,
regard to worker safety. and human rights, using its own sustainability-
assessment matrix. The idea is for MillerCoors to
Adidas shows one useful approach. The sporting- understand its performance, in quantitative terms,
goods company breaks down its long-term goals into in areas that are often difficult to quantify.
SRP 2014
shorter-term milestones. Its suppliers, for example,
Sustainability
are given strategic targets three to five years How sustainability can create value
Exhibit 2 of 3
ahead, as well as more immediate goals to encourage All the companies we interviewed are pursuing
them to focus. The beer company MillerCoors does sustainability agendas, and most are making
Exhibit 2 Companies are pursuing sustainability in a way that creates value.
Guide investment/divestment Develop sustainability-related Build a better understanding
decisions at portfolio products/technologies to fill of sustainability-related
level based on sustainability needs of customers/company opportunities in new market
(R&D function) segments/geographies
and develop strategies to
capture them
Innovation and
new products
Composition
of business New markets
Improve revenue
portfolios
through increased
share and/or
Mitigate risks and Growth price premiums by
capture opportunities marketing sus-
from regulation Regulatory Green sales tainability attributes
management and marketing
Reduce reputation Improve resource
risks and get Risk Returns on management and
credit for your actions management capital reduce environmental
(eg, through impact across value
Reputation Sustainable chain to reduce costs
proper stakeholder
management value chains and improve
management)
products’ value
Manage risk of propositions
Operational Sustainable
operational disruptions
risk operations Reduce operating
(from resource
management costs through
scarcity, climate-
change impact, or improved internal
community risks) resource manage-
ment (eg, water,
waste, energy,
carbon, employee
engagement)
Source: Sheila Bonini and Stephan Görner, “The business of sustainability: McKinsey Global Survey results,” Oct 2011, mckinsey.com
Profits with purpose: How organizing for sustainability can benefit the bottom line 11aggressive public commitments. Is this just green prices or changes in demand, that create material
window dressing? Our analysis says no. Companies risks to the business—or opportunities.
are addressing important environmental and
social issues in a way that creates value. In previous Manage risk
work, we outlined how leading companies use More than 90 percent could point to a specific
sustainability initiatives across each of the areas event or “trigger” that got them started, such as
shown in Exhibit 2 to manage risk and to improve consumer pressure or a jump in the price of
growth and returns on capital.11 In this research, commodities. More than half cited long-term risks
we sought to understand how successful companies to their business: 26 percent mentioned miti-
did it. What these interviews demonstrated is gating reputational risk, and 15 percent each said
that companies that built sustainability into their avoiding regulatory problems and eliminating
operations saw immediate benefits, and that gave operational risks.
them the momentum to do even more, creating the
conditions for long-term success. Two candy giants, for example, are looking to
guarantee future supplies of cocoa, an essential
These leaders told us that they pursue sustainability ingredient in chocolate, in part by improving
because they believe it has a material financial the sustainability of their suppliers. Mars is helping
effect. The value at stake from sustainability issues smallholder cocoa farmers in the Cote d’Ivoire
can be2014
SRP as high as 25 to 70 percent of earnings to increase their productivity by providing access
Sustainabilitytaxes, depreciation, and amortiza-
before interest, to improved planting materials, fertilizers, and
tion (Exhibit
Exhibit 3 of3).
3 Sustainability leaders can and training. It is also investing in research that will
do change their business models to respond to major help increase the quality and performance of
discontinuities, such as higher natural-resource cocoa plants. Hershey’s sends out experts to teach
Exhibit 3 Our research shows that the value at stake from sustainability challenges
is substantial.
Impact Examples Potential impact, % of EBITDA1
Regulation/ Restricted license to operate
reputation 70
Reputational damage based on perceived misuse
of resources
Rising operating Raw-material costs driven up by supply/demand
costs 60
True cost of water or carbon reflected in prices
Supply-chain Production delay or cancellation due to lack of access
disruption 25
Especially significant for “local” resources—
water, power
1Earnings before interest, taxes, depreciation, and amortization.
12 McKinsey on Sustainability & Resource Productivity July 2014Introducing the circular economy
Martin Stuchtey and Helga Vanthournout
In the traditional linear economy, inputs as well for photocopiers, power savings in materials alone could
go in and waste comes out. The tools, mobile phones, and passenger top $1 trillion a year. We believe that
circular-economy model, by contrast, cars. More and more industries are companies that adopt circular-
is based on reusing resources, regen- discovering that taking back products economy principles will outcompete
erating natural capital, and decoupling can reduce costs and strengthen other actors in a world where scarce
resource use from growth. We have customer relationships. Doing so, how- resources expose companies to
devoted considerable attention to ever, requires a fundamental shift in high costs and unforeseeable risks.
the circular economy; we believe it has thinking—seeing consumers as users
tremendous potential for companies, and offering them performance, The real payoff will come only when
for economies, and for the environment. not products.1 multiple players from many sectors
come together to figure out how to
The process begins with design, This development is well under way. reconceive manufacturing processes
specifically by making a distinction Car-sharing services are an example; and the flows of products and
between a product’s consumable they sell mobility, not vehicles, materials. Capitalizing on these oppor-
and durable components. In the cir- and each car has multiple users, not tunities will require new ways of
cular economy, consumables a single owner. Philips, the Dutch working. But the benefits, to both busi-
are designed so that they can safely manufacturer, offers another example. ness and the environment, are well
reenter the biosphere; one way Noticing that major customers were worth the costs.
to do this is to use pure materials that reluctant to make large investments in
can be easily separated and “cas- light of the financial crisis and the 1 For more, see Thomas Fleming and Markus
caded” to the next use. H&M, the rapid shifts in technology, the com- Zils, “Toward a circular economy: Philips
CEO Frans van Houten,” McKinsey Quarterly,
global apparel retailer, for example, pany began to offer lighting as a
February 2014, mckinsey.com.
collects old clothes and works service, not a product. “Customers
with I:CO, a reverse-logistics provider, only pay us for the light, and we
Martin Stuchtey is a director in
to sort them. The clothes are then take care of the technology risk and McKinsey’s Munich office, and Helga
sold into the secondhand-apparel investment,” explains CEO Frans Vanthournout is a specialist in the
market or substituted for virgin van Houten. Geneva office.
materials in other products, and the
remaining textiles become fuel to Toward a new industrial
produce electricity. revolution
Why should businesses move toward
For durable components, such as a circular-economy model? First,
metals, the preferred options are reuse, because global economic pressures,
remanufacturing, or refurbishment. such as rising resource prices and
Such practices have long been the a fast-growing global consuming class,
norm for engines and building equip- are changing the status quo. Second,
ment but are now becoming common because it’s good for business. The
Profits with purpose: How organizing for sustainability can benefit the bottom line 13best-practice farming methods; its CocoaLink companies started by improving natural-resource
mobile-phone service offers advice and market infor- management. In fact, 97 percent of the research
mation. Hershey’s is also addressing child labor participants were taking action on energy efficiency,
and school-attendance rates through local initiatives. 91 percent on waste, and 85 percent on water.
Both companies aim to have their entire cocoa
supply sustainably sourced by 2020. For example, Bayer, the German health and agri-
culture company, developed a resource-efficiency
Take advantage of new business opportunities check to improve operations by using by-products
Almost half of those interviewed (44 percent) and reducing wastewater. The company expects the
mentioned business and growth opportunities as process to save more than $10 million a year, and
a reason to get started on sustainability. A this is not unusual; 79 percent of Fortune 500 com-
number of different business models that embed panies reporting to the Carbon Disclosure Project
sustainability are emerging. Electric utilities, had higher returns on their carbon investments than
for example, are working on ways to make money their overall portfolio. Paradoxically, taking such
by helping consumers cut their energy use. actions may be easier to do in companies that have
been slow to embrace sustainability. There are
Sustainability also offers an interesting way almost certainly “quick wins” ripe for the picking
to scope out product innovations that use fewer that can bring tangible results and create momen-
resources or that meet specific social needs. tum to do more.
Redesigning products and services around sus-
tainability can drastically increase profits or An emphasis on sustainability can also reveal
reduce costs (see sidebar “Introducing the circular opportunities for process innovations. It is not
economy”). Unilever, for example, changed the uncommon for companies to complain that
shape of a deodorant to use less plastic and created different units do not collaborate well. By its cross-
a concentrated laundry product that sharply functional nature, sustainability brings different
reduces the use of water—innovations they might divisions together and provides a common motiva-
not have found had they not been thinking tion; the result can be new, profitable ideas.
about sustainability. DuPont, a diversified science Lockheed Martin, for example, wanted to reduce
company, began its sustainability operations wood waste from packing crates. But as it started
more than 20 years ago as a matter of risk reduction, on this one modest initiative, it found other
but these have turned into a major profit center. production improvements that reduced overhead
Since 2011, the company has invested $879 million and resulted in more than $7.5 million in savings
in R&D for products with quantifiable environ- from a $240,000 investment. Many of the companies
mental benefits. DuPont has recorded $2 billion interviewed had similar innovation stories but
in annual revenue from products that reduce often did not measure the results or attribute them
GHG emissions and an additional $11.8 billion in to sustainability. That may help to explain why
revenues from nondepletable resources. there is still skepticism about whether sustainability
is worth it.
Improve returns on capital
Whether the trigger for commitment to sustain-
ability was risk management or growth, most
14 McKinsey on Sustainability & Resource Productivity July 2014To succeed, sustainability efforts need to be an orga- 7 2012 Report on Sustainable and Responsible Investing Trends
nizational priority, with clear support from in the United States, US SIF Foundation, Forum for Sustainable
and Responsible Investment, 2012, ussif.org.
leadership. This is not easy. Fewer than half of the 8 2012 Sustainable Investment Review, Global Sustainable
leaders with whom we spoke thought they had a Investment Alliance, 2013, gsi-alliance.org.
9 For example, to track environmental, social, and governance
sustainability philosophy that permeates their day-
(ESG) factors, Bloomberg has an ESG valuation tool, MSCI
to-day operations, even though their companies
has the ESG Impact Monitor, and Thomson Reuters offers
considered sustainability one of their top priorities. Quantitative Analytics.
10Sheila Bonini, Timothy M. Koller, and Philip H. Mirvis,
Chief sustainability officers have an important role “Valuing social responsibility programs,” McKinsey Quarterly,
July 2009, mckinsey.com.
to play in this regard. Although they often do not 11Sheila Bonini and Stephan Görner, “The business of
have the authority to dictate the agenda, they can sustainability: Putting it into practice,” October 2011,
influence it. This means translating the promise mckinsey.com.
of sustainability into value propositions that make
sense to different parts of the company. This The authors wish to thank Anne-Titia Bové, Hauke
Engel, Rich Powell, Fraser Thompson, and Liz Williams
takes time and effort. But there is no alternative: for
for their contributions to this article.
sustainability to spread, business units need to
own their part of the agenda.
Sheila Bonini is a senior expert in McKinsey’s
sustainability and resource productivity practice and
Becoming a sustainability leader can pay off, but is based in the Silicon Valley office; Steven Swartz
it is not easy. “It’s a perception issue,” one executive is a principal in the Southern California office.
told us. “We need to show that it makes good
business sense to get over the hurdle.” Fair enough— Copyright © 2014 McKinsey & Company.
and the evidence is building that for the best com- All rights reserved.
panies, this standard is within reach.
1 In February 2014, McKinsey surveyed 3,344 executives about
their companies’ sustainability activities. The respondents
represented the full range of regions, industries, company sizes,
tenures, and functional specialties.
2 The UN Global Compact–Accenture CEO Study on
Sustainability 2013: Architects of a Better World, Accenture and
United Nations Global Compact, 2013, unglobalcompact.org.
3 Mark Fulton et al., Sustainable Investing: Establishing Long-
Term Value and Performance, DB Climate Change Advisors,
Deutsche Bank Group, 2012, dbadvisors.com.
4 FTSE Global Equity Index Series, as of January 1, 2013.
5 Sector insights: what is driving climate change action in the
world’s largest companies—Global 500 Climate Change Report
2013, Carbon Disclosure Project, 2013, cdp.net.
6 Robert G. Eccles, Ioannis Ioannou, and George Serafeim, “The
impact of a corporate culture of sustainability on corporate
behavior and performance,” Harvard Business School working
paper, HBS Working Knowledge, Number 12-035, November
2011, hbs.edu.
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