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Quantify Business Value for Sustainability
The UN Global Compact-Accenture CEO Study on Sustainability states that sustainability must lead to business value. Sometimes the rewards tied with sustainability are hard to quantify. While they may reduce risk, sometimes the benefits are not seen right away, especially if they have not been measured.
The report states that only 57 percent of CEOs could set out in detail their strategies for seizing the opportunities presented by sustainability over the next five years. It is also startling to learn that only 38 percent were able to accurately quantify the business value of their companies' sustainability initiatives.
The question I would ask of the 1,000+ top executives is, “What criteria are you managing your business to?”
Measurement is one of the key seven steps outlined earlier to the UN's sustainability, under “Value and Performance.” Measurement is crucial in improving the efficiency and effectiveness of any business.
Also, if companies have management system structures in place to international standards (ISO – International Organization for Standardization), which most of the large international companies do, then they are required to not only identify risks in their processes, but also establish, monitor, measure, and evaluate business objectives and targets (initiatives) throughout the organization to improve.
One flaw I see is that ISO's management systems do not outline or emphasize the need to tie management system processes, including objectives, to the financial bottom line and this is where the CEOs' and CFOs' focus is.
My years of auditing major corporations have shown me that many companies are working on many projects; however, they do not have systems in place for central tracking of what projects are being done, by whom, and when, and the costs associated with the organization's bottom line.
Companies need integrated management systems tied to financials in order to be in control of all departments; this tracks their controls and measurements for all processes for sustainability.
Another flaw I have seen is that the CEOs and CFOs have limited understanding of what the International Standards requirements are for their registered managements systems.
Factors Driving CEOs on Sustainability
The factors in order of priority that currently drive CEOs to take action on sustainability issues according to the report are as follows:
• Brand, trust, and reputation: 69 percent
• Potential for revenue growth/cost reduction: 49 percent
• Consumer/customer demand: 47 percent
• Personal motivation: 41 percent
• Employee engagement and recruitment: 38 percent
• Governmental/regulatory environment: 27 percent
• Impact of development gaps on business (e.g., water, food, poverty, infrastructure): 15 percent
• Pressure from investors/shareholders: 12 percent
• Other: 3 percent
It is interesting to note that investors are not a critical driver for companies to take action on sustainability. CEOs may need to communicate better with investors about how sustainability initiatives are aligned to their strategy, financial performance, and valuation. A study will be done in 2014 on investors and asset managers who represent nearly $35 trillion in assets and will be available at accenture.com/ungcstudy.
Another study will be done by Accenture and the Global Compact, partnering with Havas, to understand what drives consumer preferences and behaviors on sustainability, which will be available in 2014.
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