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Sustainability is increasingly being seen as a source—even a primary source—of revenue and business growth for companies intent on becoming high-performance businesses.
New research from Accenture looks at how leading companies see this link between sustainability and commercial success.
Sustainability is becoming integral to the way to do business. Many companies are demonstrating that by placing the stewardship of the environment and society at the center of their strategies and operations, they are better placed to manage or improve their reputation, comply with regulations and reduce costs. Perhaps more interesting is the fast-emerging trend of sustainability being seen as a source—even the source—of revenue and business growth.
Among the explanations for this trend is the permanent constraint on resources combined with the impact of the emissions debate, which are helping to establish a platform for entirely new products and services, such as distributed renewable energy or electric vehicles. Meanwhile, in many emerging markets, there is a growing recognition that alternative, more sustainable processes and materials are required to avoid choking off growth prospects in a range of industrial sectors. And the current weak economic growth in many mature economies today is resulting in an urgent need to identify new sources of growth and the consequent search for new sustainable product and services categories.
Accenture commissioned a survey of 250 senior executives in eight markets around the world to explore the relationship between sustainable business and commercial growth. The survey covered the United States, Japan, Germany, France and the United Kingdom, as well as China, Brazil and India.
Forty-four percent of total respondents say that sustainability is critical to their businesses, and that figure rises to 64 percent in emerging markets.
Seventy-eight percent of respondents say that sustainability is vital to the future growth of their businesses. The only region where this percentage slips below 70 percent is Japan (63 percent), while it rises to 91 percent in emerging markets.
Customer demand is now seen as the primary driver of investment in sustainable initiatives.
Nearly twice as many respondents say their sustainability investment primarily aids growth than those who say it drives cost cutting (41 percent to 22 percent).
Forty-nine percent say that margins are lower on sustainable products and services.
Customers are not willing to pay more for sustainable products and services, according to 47 percent of respondents.
However, 60 percent of respondents do charge a premium for such products and services. These premiums are, on average, 19 percent.
Just over half (56 percent) agreed that it was more expensive to be a sustainable business.
Based on the research data, Accenture draws the following broad conclusions:
Sustainability is not only seen as of significant importance to businesses, but as vital to their growth. And their investments in sustainability are now more driven by market demand than by needs to comply with regulations or reduce energy costs.
Businesses do, however, see their current commitments to sustainability carrying a greater cost, resulting in lower margins. This may be one of the reasons why many companies are charging premiums despite their awareness that consumers are not willing to pay higher prices for sustainable products and services.
Many companies say they cannot keep up with demand for sustainable products and services. This fact coupled with the lower margins that companies currently experience on sustainable products and services suggest that companies need to improve their operational capabilities to meet growing demand more effectively and more profitably.
The survey shows that most companies are fully committed to sustainability as a source of growth. However, companies need to make the transition from today’s approaches to sustainability towards genuine mass consumption of sustainable products and services. That means stimulating demand more effectively and improving their operational ability to supply sustainable products and services.
Accenture suggests the following steps to help businesses improve their ability to match demand profitably while scaling consumer adoption:
Invest in capabilities such as analytics to improve understanding and anticipation of fast-changing consumer expectations.
Build social media-based platforms to engage with consumers and to develop and test innovations with them.
Review operational and supply chain capabilities to identify opportunities for more optimal production and delivery of sustainable goods and services.
This will require new forms of collaboration within and between organizations, as well as across sectors and supply chains. The new ecosystem of multiple suppliers, retailers, service providers and manufacturers will help aggregate efforts and drive larger scale production and delivery. It will also result in a more resilient and flexible supply chains that drive down costs and improve responsiveness.
May 22, 2012
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