Companies urged to use Sustainability to Create Financial Value

Source-Study By the GRI and global management consulting firm A.T. Kearney

Sustainability creates financial value – this is the consensus among 99% of directors on the Boards of over 500 Latin American companies according to a study released by GRI and global management consulting firm A.T. Kearney. The results from the study – the first of its kind in Latin America – provide essential insights into how sustainability is perceived at the top level in a region which sees a growing commitment to sustainability.

Leading Sustainability from the Boardroom: The Latin American Case, analyzed the perspectives of 275 directors to determine how thoroughly Latin American Boards understand sustainability, how deeply convinced they are of their role in its management, where they are in regards to the implementation of such conviction, and what is needed to take firm steps toward it.

“Four out of five directors link sustainability to the corporate strategy and the identification of risks and opportunities, or understand it as an integral part of the economic, social and environmental management of the company,” explained Andrea Pradilla, Director GRI Hispanic America . “Further, three out of four directors go on to request that sustainability is included as a key element of the corporate strategy. This was a very interesting finding for us, showing just how entrenched sustainability has become in the Boardrooms of many companies.”

Most directors stated that the increase of intangible benefits (62%) and the early identification of both risks and alternative ways of achieving goals (59%) as the main means through which such value is created.

Interestingly, despite expressing a comprehensive understanding of the topic and linking it with the business results, only half (44%) say they have a ‘formed opinion’ on sustainability. However, those ‘knowledgeable’ Directors, with a ‘formed opinion’ on sustainability management, perceive tangible benefits for the company beyond reputation and brand value, participate more actively in risk and materiality analysis and value the executives’ management with a longer term vision.

Who should be leading a sustainability strategy and with what focus?

More than half (56%) of directors said the Board should be the body leading sustainability in the long term, while currently sustainability is being led by the executive teams of their companies. Almost half (54%) of the directors believe that the executive teams in their companies do not have a deep enough knowledge of sustainability, or a formed opinion on the subject.

Directors believe that corporate governance and labor practices – which includes workplace safety and gainful employment – have all been addressed with greater depth over the last couple of years by the Boards.

Issues related to the environment, transparency and fighting corruption, in addition to those which focus on procurement and supply chain practices, and product liability and consumer rights, all deserve greater focus going forward, according to the study. In order to strengthen sustainability practices in future, the directors highlighted the following key actions:

• More training for Board members on sustainability topics
• Deeper and more reliable information from the management team
• Greater involvement in the development of materiality analysis

While this study is very encouraging, it has shown that there are still challenges in understanding the tangible benefits of sustainability to the ‘business case’, which hinders its leadership and connection with the corporate strategy. Boards have the responsibility of ensuring long-term value creation in their companies and, in order to achieve that, they must take a proactive role in managing the implementation of sustainability, which will encourage an open debate within the Board to include sustainability at the early stages of the corporate strategy design.

“We hope readers find this candid view on the topic to be beneficial in strengthening the discussion within their own companies and taking actions that result in more profitable and sustainable companies, which are the pillars of our entire economy and future sustainable development,” said Eulalia Sanín Gómez, Partner, A.T. Kearney.

This Articles is a whole extraction of a study carried by GRI and global management consulting firm A.T. Kearney. CSRNZ would want to acknowledge and credit the source and these two-respective organisations for this study. CSRNZ used this study for the benefit of its Zimbabwe partners.