How 50 Sustainability Leaders Outperform their Peers, Financially

Accenture, did a study recently on how sustainability leaders are doing to generate shareholders’ value in their report ‘Driving Value from Integrated Sustainability.’ They looked at the business performance and sustainability performance of 275 of Fortune 1,000 global companies, which has previously identified by the co. in their previous study.

Basically, the study confirmed what sustainability geeks already know. That when sustainability is integrated (or embedded) to business strategy, it pays off.

For those companies “sustainability at a minimum has no negative impact on a company’s financial performance.” In fact, the companies that are performing better on sustainability tend to perform better in shareholder returns.

Take a look at how the sustainable companies perform, especially the top 50 sustainability leaders.

3_to_5_years_shareholders_return_by_sustainability_leadership

  • The top 50 – outperformed the bottom 50 companies in three-year total return to shareholders by 16 percentage points. They outperformed the middle group of 50 average sustainability peers by 6 percentage points. It is important to point out that all companies experienced a significant decline in shareholders return during the past 3 years. However, the declines in returns for the sustainability leaders were markedly less pronounced.
  • Outperformed their bottom and middle 50 peers in five-year shareholder returns by an even impressive margin – 38 and 21 percentage points, respectively.

           [via Accenture]

Furthermore, companies that adopt sustainable business practices tend to focus on the implementation of the 4 value drivers in sustainability instead of focusing on the quantitative side (growth, profitability, positioning for the future, longevity and consistency). The results, for these companies sustainability actually overlaps with high performance.

The four value drivers in sustainability are: growth, cost reductions, better risk management and enhanced reputation. The examples below is a mash up between sustainability and high business performance.

#1. Growth.

Companies in the study took advantage of tailoring their products and services to meet the needs and preferences of their environmentally conscious customers. For example, JP Morgan launched a social sector fund unit to support microfinance and social enterprise organizations.

#2. Cost reductions.

The gist: when companies reducing costs, the cost savings translate to higher margins. Computer giant company HP consolidates 85 of its data centers to just 6 locations in the U.S. Cost savings for this move: up to 350 million kilowatt hours and energy cost savings up to $30 million.

#3. Better risk management.

Iberdola, one of the leading private utilies in the world based in Spain, “is increasing profitability by incrementally shifting its total energy production toward cleaner technologies.” From 2006 to 2007, net sales on renewables up 37 percent from 695 million euros to 953 million euros.

#4. Enhanced reputation.

Companies that ‘walk-to-walk’ with their sustainability tend to influence brand loyalty among customers, receive better perception from regulators, investors and shareholders. For Johnson Controls, the effort to go green generates new customers that benefits their bottom line.

Want more details? Check out the ‘Driving Value from Integrated Sustainability’ report over at Accenture site.

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Author: Dewita

Co-founder Ecotwist Labs.

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