The Elusive "Business Case for Sustainability"

07/03/2017 11:24 am ET
paul bica

Sustainability is hard to quantify financially. By definition it is long term, responding to non-financial stakeholder concerns and creating intangible benefits like reputation or risk mitigation that never show up on a Bloomberg terminal. But if you’re trying to show the value of integrating sustainability into your strategy, you’ve probably been asked to develop a business case for it.

Work done in collaboration with MIT Sloan Management Review and the Boston Consulting Group shows that companies with a business case are more likely to profit from sustainability, which is great, but only a quarter of them say they have one. The elusive business case for sustainability has stopped many enthusiastic sustainability executives in their tracks. Multidimensional sustainability value is just hard to fit into a discounted cashflow analysis.

Interestingly, though, interviews we conducted this year with sustainability executives pointed to something new and surprising. Even though it is hard to measure, investors are now realizing that sustainability performance feeds the long-term bottom line. And that’s causing managers to question traditional business case thinking. So instead spending time building a perfect business case, many are pursuing business model innovation experimentation, taking a page from Silicon Vally start-ups. It is through experimentation and innovation, not spreadsheet projections, that viable sustainable business models emerge.

The difficulty many established companies have in finding a “business case for sustainability” may point to an inconvenient truth. That is that, in a sustainable future, some companies, and even some industries, may not survive. That sustainability may kill your business may be shocking, but companies disappear all the time from much less. Estimates are that publicly traded companies in the U.S. have a 1-in-3 chance of disappearing in the next 5 years. It’s a broad-based phenomenon: Most types of businesses in most industries run the risk of dying younger. Sustainability is just adding additional pressure to this trend. The way out, of course, is innovation and transforming your company before you are washed away.

This post is the fifth in a series of eight, representing key findings from a collaborative research report between MIT Sloan Management Review and the Boston Consulting Group.

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