© 2018 by Daniel Anthes

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Why corporate sustainability is steadily gaining traction

Corporate sustainability, or the ability of businesses to deliver longterm value in financial, social, environmental and ethical terms, is increasingly leaving the companies' darker corners of neglected strategies and operations. In fact, professionals and corporate leaders more than ever see the potential in terms of creating sustainable shareholder value and embracing opportunities against the background of current megatrends, such as global warming, natural resource scarcity or demographic change.

 

In this context I've talked to Jane Okun Bomba, Senior Vice President of Sustainability at IHS Inc., a worldwide leading business consultancy and information services company headquartered in Englewood/Colorado, USA. With 8,000+ employees in more than 30 countries IHS is providing businesses and governments all around the world with information, analytics and expertise in virtual every industry - whether it be Energy, Automotive, Chemicals or Maritime & Trade.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daniel Anthes: Dear Ms. Okun Bomba, global megatrends such as climate change, rapid urbanization and resource scarcity, as well as concomitant social pressure make governments and business worldwide increasingly realize that sustainability is crucial to ensure long-term prosperity. How would you judge the development of the importance of sustainability in general and corporate sustainability in particular?    

 

Jane Okun Bomba: I think that Sustainability is accelerating at an exponential pace. More organizations and individuals are embracing it and even demanding good sustainability practices. Companies are requiring suppliers in their supply chain to be sustainable, customers are demanding that the companies with which they do business to adopt sustainable practices, employees are demanding that their employers are good corporate citizens, NGOs are bringing visibility to important issues globally and calling for change to alter the current course, and governments are bringing more and more regulation to advance global sustainability. Just ten years ago, a company that talked about what they were doing with regard their Sustainability efforts was a rare company. Today, it is an absolute business imperative.

 

Anthes: There are two sides of the same coin – many companies understand their CSR activities as corporation’s donations to a charitable program or participation in disaster-relief efforts. However, the fundamental intention of CSR is not about how to spend money, but rather how to make money in a sustainable and responsible manner, isn’t it?

 

Okun Bomba: Yes, at the highest level, I believe that’s true. If one takes a broad perspective, Corporate Responsibility is about making decisions that ensure a company’s long-term, profitable (sustainable) existence well into the future. Two of the most important components to ensuring this longevity are operational effectiveness and risk management. If a company cannot effectively and efficiently operate – starting with establishing a solid strategy and having the processes in place to constantly evaluate the efficacy of that strategy and make necessary adjustments as circumstances change - it simply won't survive on the market. In addition, a good company is nimble with investment prioritization and pushes investment into long-term growth areas. Attracting, hiring, training and developing and retaining top talent is also critical. Corporate Sustainability is also very much about identifying and mitigating risks in the business, and these risks could be economic, environmental or social in nature; they are all equally important. Obviously, the quicker major risks are identified, managed and/or mitigated, the less likely those risks are to harm the business. The final comment is that it is also important for companies to engage healthily in their communities to ensure the longevity of the communities. A weak community is not capable of sustaining a robust pipeline of customers or of future employees; both of which are critical to the long-term viability of commercial enterprise. 

 

Anthes: With more and more companies engaging at the sustainability frontline, reporting of those activities (in fact environmental, social and governance performance) continues to improve globally. For instance, the EU just recently passed a law mandating public disclosure of key non-financial information for all European-based, publicly-listed companies with more than 500 employees. What progress is being made globally in terms of sustainability reporting?

 

Okun Bomba: The pace of change and of improvement has quickened recently. This is being driven both by companies themselves (who are publishing CSR reports, building websites, and participating in assessments at ever growing rates) and by external forces such as regulatory agencies, NGOs, customers, etc. I think that this pattern will absolutely continue.

 

Anthes: How would you interpret geographic differences regarding the importance of CSR, e.g. that Chinese companies seek to become some of the world’s most reputable and pre-eminent brands and view CSR as a critical part of their transformation?

 

Okun Bomba: Different parts of the world have definitely embraced Sustainability at different paces, with the countries of Europe probably being some of the most advanced. When considering the differences in the various regions of the world, it’s important to appreciate the differences in culture and political climate that affect how much support Sustainability is given. There certainly is a positive PR benefit from a focus on Sustainability and we’ve seen many of examples of companies who have made big investment in improving their reputation through improvement in human rights, focus on the environment, supporting communities and employees, etc. In many ways, improvement in Sustainability measures brings a level of legitimacy to a business and bolsters reputation. In addition, we’ve seen some of the players in financial markets make a push to get companies even more involved in driving progress – for example, the stock exchange in China, as well as bourses in Taiwan and Malaysia, now require listed companies to publish some type of CSR report. Interestingly, South Africa notably continues to lead the way as the first emerging market as well as the first stock exchange globally to introduce a sustainability index measuring companies on indicators related to environmental, social and governance, or "ESG" practices, since 2012. But many are sure to follow.

 

Anthes: What are the leading companies (role models) worldwide considering their approach to sustainability?

 

Okun Bomba: Leading companies see Corporate Sustainability not as a separate initiative or project, but rather as an ingrained part of the corporate culture itself. Sustainability gets embedded as part of the corporate strategy and is fully integrated into the way a company does business. For leading companies, CSR is not thought of as a separate effort; it’s just part of how the company is run, its culture and how it interacts with the world around it.

 

Anthes: ...like?

 

Okun Bomba: We’ve seen some wonderful examples of companies taking the initiative to drive significant progress. A U.S.-based conglomerate has tasked its HR department with integrating sustainability into its culture through hiring practices, training, and employee well-being programs.  One large beverage company focused on reducing water usage and identified the need for 3rd party evaluation of its water management practices, while another disclosed climate change, water scarcity and public health issues as core sustainability challenges in their financial filings, providing a significant increase in transparency about their business. And we continue to see companies set goals for employees and suppliers alike to hit certain sustainability-related goals.

 

Anthes: Looking ahead in 2015, big events are already casting their shadows before – new Sustainable Developments Goals (SDGs) to be signed off in New York in September, as well as a new climate agreement to be agreed upon in Paris three months later. How much importance would you ascribe to the private sector in terms of contributing to a considerable outcome?

 

Okun Bomba: If we are to have far-reaching success, progress cannot be driven by just one constituency. So, it is critical that the private sector is a big contributor and is a leader in driving progress. But they can’t do it alone and very much need governments, non-profits, and individuals as well in order for us to have full and comprehensive success. There are already many examples of multiple parties affecting a particular trend or outcome. Fuel efficiency in vehicles is a case where customer demand, NGO advocacy, and governmental regulation all compelled vehicle manufacturers to drive the innovation that would result in more fuel-efficient vehicles. And we continue to see this dynamic play out in many sectors, industries and geographies.

 

Anthes: At IHS, what is your understanding of corporate sustainability and which measure does your company take?

 

Okun Bomba: At IHS, we are four years into our Corporate Sustainability effort. From the very start, our goal was to deeply embed Sustainability into the way we think and the way we act; to make it part of the fabric of our culture.  We set very clear goals about how we would measure our progress and assess our level of success, and we took a very broad perspective, using an expansive definition of the area. And because we are a very shareholder-focused company, we chose to use the Sustainable Asset Management (RobecoSAM) corporate assessment as a measurement tool.  

 

Anthes: Ms. Okun Bomba, thank you very much for the interview.

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