When you listen to CEOs like Paul Polman of Unilever or Jeff Immelt of GE you think CEOs really get it when it comes to sustainability. You get a similar feeling from reading surveys that check with CEOs how they feel about risks and opportunities generated by sustainability trends. Yet, it doesn’t really mean you see the whole picture. Actually, you get a very biased picture, at least according to the latest PwC Annual Global CEO Survey, which shows that sustainability is still far from being on the radar of most CEOs worldwide.
This interesting survey is based on 1,258 interviews that were conducted with CEOs in 60 countries between September and December 2011. It’s global, spread across a range of industries and not focused on sustainability or climate change, making it a reliable resource on the real state of sustainability among CEOs. The results, as I mentioned, are not very encouraging, at least not to those who feel sustainability challenges should be taken more seriously by companies.
To demonstrate the absence of sustainability from this report, here are three of its key findings and the places where sustainability is missing.
Resilience to global disruptions and regional risks – when you see such a headline you expect the discussion to include resource scarcity, climate change risks, ecological decline and other social and environmental factors that increase the vulnerability of the business sector. Well, not in this report. Interestingly, the list of potential threats that CEOs are mostly concerned about hardly includes any sustainability related risks. The only risk that can be considered connected in some way to sustainability is ‘energy costs’, which is mentioned in 4 out of 6 global regions – in 3 regions it is the last issue on the CEOs list and in Asia Pacific it reached the 8th place out of 10.
I would recommend all the interviewed CEOs to take a look at KPMG’s latest report, Expect the Unexpected: Building Business Value in a Changing World. There they can find a wider range of risks posed by the sustainability forces (or megaforces as the report calls them), such as physical risks (damage to physical assets from climate change related weather events), competitive risks (exposure to price volatility of key input commodities), regulatory risks (Airlines know something about it), reputational risk (Apple knows something about it), litigation risks and social risks (increasing incidence of conflicts over scarce resources).
The talent challenge – According to the report, finding and keeping the right talent remains a top concern for CEOs: Only 30 percent said they are “very confident” they will have access to the talent needed to execute their company’s strategy, and 43 percent believe that it has become more difficult to hire workers in their industry. One in four CEOs said they were unable to pursue a market opportunity or have had to cancel or delay a strategic initiative because of talent challenges. One in three is concerned that skills shortages will impact their company’s ability to innovate effectively.
Sustainability is often considered as an important differentiator in attracting talent to companies. A 2009 global survey of CFOs found for example that 52 percent viewed their company’s CSR efforts as a way of attracting, motivating and retaining talented employees (Maybe the CEOs should talk more with their CFOs..)
Another research report by the Society for Human Resource Management, BSR and Aurosooryareached similar conclusions, showing that businesses with sustainable practices are often able to attract top-tier talent while keeping turnover rates low. In all it looks like the talent challenge should be much less of a challenge for companies that embrace sustainability. Those of the CEOs who still doubt it are welcome to check it with Paul Polman.
Growth opportunities – According to the CEOs, the best strategic growth opportunities in the next 12 months will come from increasing share in existing markets and from developing new products and services, both cited by nearly one-third of respondents. New market penetration, 18 percent, and joint ventures and alliances, 10 percent, trailed as growth strategies. The emerging markets remain a vital growth opportunity for CEOs – 59 percent agreed that growing markets were more important to their companies’ futures than more developed economies.
Sustainability represents not only risks but also significant opportunities for business. Take for example, urbanization, an opportunity that is relevant especially for emerging economies – according to the KPMG report, the growth in urban population to almost 5 billion people by 2030 creates opportunities for companies that can provide innovative ways to boost eco-efficiency, mitigate climate change, improve transit, alleviate poverty and reduce ecological footprints in areas of high residential and employment density.
This is just one of many ways that the sustainability related challenges can create opportunities for companies. It’s true that developing new products and services, which CEOs seem to prioritize, can also mean creating sustainable solutions, but there’s a difference between developing products that by accident are also sustainable and focusing on sustainable solutions as a strategy. It’s quite clear that those CEOs that will embrace the latter will probably perform better than their peers. The only question is how much time it will take them to figure it out. According to PwC report, it will take a while.
Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.