Big Business On The Sustainability Offensive

by Harsha Yadav

Source: Ethical Corporation

There is a growing trend for big companies to use sustainable concepts as core business drivers

For decades, many companies have typically responded to sustainability challenges by pursuing incremental operational improvements. But we are beginning to see an interesting new trend – businesses using sustainability as a tactic for long-term offense, rather than just short-term defence.

Despite the uncertain economic outlook, leading international companies across diverse sectors are investing heavily in sustainable products and services. Others are making cross-industry partnerships to develop next generation products such as the elusive mass market electric car.

Some are even enhancing their business models through mergers and acquisitions that seek to address, and capitalise on, sustainability trends.

The big challenges

What is driving this marked shift in approach? In our view, it is not just a focus on marketing or corporate social responsibility or even the need to manage costs and improve efficiency. Instead, leading companies are demonstrating a growing belief that their future profit and growth will be tied to how effectively they respond to looming global challenges including resource scarcity, population growth, and climate change.

These challenges are very real. Feeding a global population of nine billion people in 2050 will require a doubling of present food supply, unless we find ways to boost farmers’ production and reduce food waste.

Demand for freshwater is expected to grow by 25% in developing countries and 18% in the developed world by 2025. Meanwhile, the impacts of climate change are becoming more vivid – as exemplified by droughts in parts of the southern US and massive flooding in Bangkok.

For companies directly involved in agribusiness or that are dependent on a steady water supply, these resource trends are hitting uncomfortably close to home.

Business response

So how exactly are companies responding?

Investing in innovative and more resource efficient products is the most mature of the new strategies on display, and already paying off for first movers, such as:

  • Procter & Gamble, the consumer goods giant, which generated $40bn from sales of a slew of self-defined “sustainable innovation products”, such as cold water laundry detergents, between July 2007 and June 2011 .
  • Philips, the Dutch healthcare, lifestyle and lighting company,which already generates 30% of total revenues from green products, and is doubling R&D investment in such product innovation to €2bn by 2015.
  • Kingfisher, the European home improvement group, whose revenue from independently verified eco products reached £1.1bn in 2010-11, representing 10.5% of its total retail sales.

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