Sustainable business practice not only help the environment, but also the bottom line.

Future Business Council review of:  The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance, Eccles, R., Ioannou, I., and Serafeim, G. 2012. Harvard Business School Working Paper.

A recent study undertaken at the Harvard Business School found that embedding sustainable business practices into an organisation not only helps society and the environment, but also the bottom line.

In analysing and comparing ‘high sustainability’ companies who have incorporated concern for environmental and social impacts and linked performance outcomes to success in these areas with ‘low sustainability’ firms; those that haven’t, Eccles et al. (2012) found that embedding sustainable policies into a company’s business model may be a source of competitive advantage in the long-run.

Analysis showed that the observed high sustainability companies with institutionalized socially and environmental responsible practices outperformed low sustainability companies in stock market returns over the duration of the 18-year study, and exhibited lower volatility whilst doing so.

High sustainability companies also had a more engaged workforce, better relationships with stakeholders, a more secure license to operate, more loyal and satisfied customers, greater transparency and a better ability to innovate.

The results of this study continue to undermine the long-held neoclassical belief that sustainability practices are a cost to businesses. Companies can adopt environmentally and socially responsible policies without sacrificing shareholder wealth creation, and in doing so, can better position themselves for success in the future.

Download the paper
  • Build long-term relationships with key stakeholders through the incorporation of social and environmental issues in your strategy and business model.
  • Create channels for feedback from their stakeholders to flow directly to the board and other key departments within the organisation.
  • Embrace a long-term focus on creating value and make the necessary strategic investments to ensure future profitability.
  • Measure, monitor and audit employee and supplier performance to ensure adherence to standards and organisational goals.
  • Create formal responsibility around sustainability to the board of directors; align senior executive incentives with environmental, social, and external (i.e., customer) perception performance metrics, in addition to financial metrics.
  • Be transparent in external reporting about environmental and social impacts to improve managerial accountability to shareholders and other stakeholders.

Analysis by James O’Donnell & Tom Quinn, Future Business Council, 2016.

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