Wednesday, July 30, 2014

McKinsey Survey on Sustainability

In the Insights and Publications area of their website this month, McKinsey & Company reported the results of their survey of over 2,900 global corporate leaders (down from 3,847 in 2012) on the topic of sustainability. See: 

A key conclusion was that “many companies have far to go” before they can master the reputation, execution, and accountability of their sustainability programs. Less than half of the respondents (43 percent) stated that their companies sought to “align sustainability with their overall business goals, mission, or values.” That represented the largest share of respondents, but an increase from 30 percent in 2012. Thirty-six percent of CEOs stated that sustainability was a top priority compared to 32 percent of all other respondents.

A closer look at the underlying details raises some concerns.  McKinsey inquired about 13 core sustainability activities from which executives could select their priorities.  The field of sustainability includes four domains: ecology, economics, politics and culture in which human interaction with the environment can be synergistic and productive, rather than wasteful and destructive.

McKinsey said executives stated that specific sustainability priorities in 2011, 2o12, and 2013 for their companies were as follows:

       reducing energy use in operations (64 percent),
       reducing waste (63 percent), and
       managing their corporate reputations for sustainability (59 percent).

“…among these activities, reputation management has the highest value-creation potential for their industries over the next five years.”  Reputation management includes communicating with customers/consumers and external shareholders/stakeholders about their sustainability activities.

In other words, companies primarily are concerned about how their sustainability efforts are being perceived by their constituencies.  They view sustainability on a par with marketing, advertising, and public relations presenting their companies as “good citizens” in the battles and debates about environmental impacts.

Is this really what we want from our economic and business leaders? Does this suggest that CEOs/executives are more interested in the appearances of their work in sustainability rather than their actual performance metrics and accomplishments? McKinsey at least included “execution and accountability” among the core competencies to be tracked and monitored, but CEOs/executives opted for the more ephemeral “reputation” impact.

Using the example of companies in the extractive industry sectors, McKinsey stated that companies focused on three “reputation-building actions:”

local community investments,
external reporting, and
employee volunteering.

None of these relate to substantive measures WITHIN corporations. Local community investments provide positive PR for companies for work conducted outside of the company walls, often by public entities. External reporting means that companies are not presenting transparent documentation or action reports about their own actions and measurable results. Employee volunteering is companies riding the backs of well-intended workers.  Where are the measurable accountabilities of companies themselves?

Sustainability has many potential economic activities that are far more important and measurable than “reputation management.”  These are suggestive:

         Recycling
         Reduce packaging
         Re-utilize materials
         Alternative energy sources
         Pollution reduction
         Water conservation
         Prevention of adverse environmental impacts

The core requirement of sustainability should be reminiscent of the guide to those enjoying our National Parks: enter only with your eyes and your camera, take out only your memories, leave only your footprints. Your reputation as a global citizen will take care of itself.

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