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Study Shows Increased Profits for Companies That Embrace Sustainability
MIT Sloan Management Review and The Boston Consulting Group Find That at Least Half of Companies Surveyed Report Rise in Profit After Changing Their Business Model
By: Marketwired .
Feb. 5, 2013 12:01 AM
CAMBRIDGE, MA -- (Marketwire) -- 02/05/13 -- Companies reporting a profit from their sustainability efforts rose 23 percent last year, to 37 percent of the total, according to a new global study by the MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG). The study is being released today in a report titled "The Innovation Bottom Line."
The study, which is based on a survey of 2,600 executives and managers from companies around the world, also found that nearly half of respondents said their companies had changed their business model as a result of sustainability opportunities, a 20 percent jump over the previous year. The report calls these companies that have made business-model innovations "Sustainability-Driven Innovators."
Interestingly, the study found that companies in emerging markets change their business models as a result of sustainability at a far higher rate than those based in North America, which has the lowest rate of sustainability-driven business-model innovation and the fewest business-model innovators.
"Sustainability-Driven Innovators see the opportunity differently than do companies that haven't gleaned sustainability's financial rewards," explained David Kiron, executive editor at MIT SMR and a coauthor of the report. "They don't dwell on it as a cost issue. They focus on how their efforts can increase market share, boost energy efficiency, and build competitive advantage."
Sustainability-Driven Innovators also bring a strong execution focus to their efforts, are much more likely to place customers at the center and work closely with many stakeholders, and drive sustainability objectives through skillful organizational change, Kiron said.
The extent to which a company incorporates sustainability concerns into its business model often correlates with its increase in profit, the study found. For example:
"The research suggests that business-model innovation, top-management support, collaboration with customers, and having a business case are all critical to creating economic value from sustainability activities and decisions," said Knut Haanæs, a BCG partner and coauthor of the report who leads the firm's Strategy practice. "Executives need to view sustainability as both a business necessity and an opportunity. Even moderate changes to company business models can reap significant financial rewards."
In a section called "Hitting the Sustainability Bull's-Eye," the report recommends that executives emulate five practices common to many of the companies that are finding profit in sustainability:
To illustrate how organizations are employing these practices, the report cites numerous company examples, including: AT&T, Campbell Soup Company, Dell, Ecover, Greif, Intel, Kimberly-Clark, Kraft Foods (recently renamed Mondelez International), Marks & Spencer, Nestlé, Patagonia, PepsiCo, Sainsbury, SAP, Sprint, Timberland, UPS, and Zipcar.
For more details on the report's findings and interview transcripts, please visit the Sustainability & Innovation website at http://mitsmr.com/11IWDeO.
To receive a copy of "The Innovation Bottom Line" or arrange an interview with one of the MIT SMR authors, please contact David Kiron at +1 617 253 8071 or email@example.com.
To arrange an interview with one of the BCG authors, please contact Alexandra Corriveau at +1 212 446 3261 or firstname.lastname@example.org.
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