DEEP Insight

Sustainability: Bringing Life to Your Business Premium

A new era is dawning in which social, environmental and economic value creation is bubbling up on the horizon.

This executive dossier includes the following articles:

Integrated Reporting in the Cloud Premium

Two Disruptive Ideas Combined

Eccles, Robert G.; Armbrester, Kyle

Financial reporting for all listed companies is a long established practice, which more recently has been complemented by corporate social responsibility or sustainability reporting. However, the reporting of nonfinancial information related to environmental, social and governance performance remains largely voluntary. Although still an embryonic management practice, the authors believe that “integrated reporting” of a company’s financial and nonfinancial performance into a single document is about to take off, as market and regulatory forces push more companies to adopt this practice. In doing so, companies will face a number of challenges, which the authors say can be efficiently dealt with via cloud computing. The disruptive idea of integrated reporting combined with the disruptive innovation of cloud computing will enable companies to make much more informed decisions about how they are using financial, natural and human resources to meet both financial and nonfinancial performance objectives. The result will be more sustainable company strategies that will contribute to a more sustainable society.

New Tools to Capture the Elusive Green Consumer Premium

Reviving a Revolution

Barcelona, Ricardo G.

Some feel the reason that the green boom of the ’90s failed to realize its full potential was partly due to a lack of understanding of what constituted the “green consumer” in the first place. In this article, the author fleshes out this fragmented picture, using the results of a study of executives from 26 countries to discern their attitudes toward sustainability practices, both at home and at work. The research reveals some surprising differences from previous pictures of green consumers. Among other things, economic pragmatism seems to play a much larger role than pure altruism when it comes to purchasing decisions. Therefore, businesses seeking to exploit altruism to advance their sustainability agendas may need to rethink their approach, and focus on offering tangible value that benefits their stakeholders. The author overlays these findings with “locus of control” – testing how the internal or external orientations of individuals may predispose their behavior. Together these findings yield a constructive framework that combines dispositional factors and economic trade-offs, which will help executives as they seek to integrate sustainability into their procurement practices, while also rethinking their product or service offerings for consumers.

Getting to Grips With Take-Back Laws Premium

What’s Yours Is Mine

Atasu, Atalay; Van Wassenhove, Luk

As diverse environmental legislation is being formulated around the world, companies may find themselves in a “gray zone,” as the authors explain in a new paper on the subject. This presents challenges but also opportunities for companies to clarify operations in four areas: forming a network, rethinking product design, setting up a closed-loop supply chain, and adopting new technologies and business models. The authors believe that individual producer responsibility, based on the share of electronic waste, or e-waste, each party generates for recycling, may bring the greatest long-term advantages. Even better would be to have incentives that extend product life cycles and prevent e-waste to begin with. But the onus is on companies to make this case with policy makers, which requires them to seize hold of the sustainability agenda.

Aligning Governance Interests for the Long Haul Premium

Owners, Boards & Managers

Berrone, Pascual

As many as 93 percent of CEOs surveyed say sustainability is essential to their company's future success. At the same time, they recognize "an implementation gap in meeting their ambition to embed sustainability deep and wide within their organizations". To bridge this gap, there is one factor of overriding importance: a firm's corporate governance model. In this article, the author draws on several pieces of research on United States firms in polluting industries to present ways in which companies can adapt their corporate governance models at three levels: ownership, board of directors and management. Improving one's social and environmental performance depends less on regulatory compliance, he says, than it does on aligning the interests of the firm's owners or managers with the composition and diversity of its board and its approach to executive compensation. Above all, a long-term time horizon and uninterrupted commitment are required to build a more sustainable future for generations to come.

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