Our second State of Responsible Business report shows that corporate social responsibility has been boosted by the Paris Agreement but sustainability is far from business as usual
After the historic events of 2015 – from the highs of the Sustainable Development Goals (SDGs) and the outcome from the COP21 summit in Paris, to the lows of the Volkswagen emissions scandal – there has never been more of an imperative for global brands to take stock of their contributions to sustainable development. Ethical Corporation’s second annual State of Responsible Business report attempts to do just that.
This year’s report tracks the progress that has been made since our first survey, conducted last year to paint a comprehensive picture of how sustainability is being practised by a wide range of organisations and stakeholders around the world.
Our second survey, conducted earlier this year, received responses from more than 2,000 members of our corporate social responsibility community, with respondents from a range of businesses, NGOs, government and academic backgrounds. They answered a series of questions concerning the meaning of sustainability to their organisations, the way sustainability is organised throughout their businesses, and their verdict on some of the most important talking points around responsible business practice.
From theory to practice
The main lesson that can be taken from this year’s State of Responsible Business report is that the value of incorporating responsible business practice and sustainability into all sides of the business is increasingly recognised, accepted, and acted upon. Those first two points – recognition and acceptance of the business case for sustainability – shouldn’t come as too much of a surprise: as our results show, there are very few people left in the world of corporate responsibility and sustainability who remain unsold on the idea. What is especially welcome, though, is the finding that a growing number of businesses are indicating that they are moving beyond the theory and putting business responsibility into practice, and with commendable success.
Among respondents who work in companies, 71% say that their CEO is convinced of the value of sustainability – three percentage points higher than in our 2015 survey – and only 7% say this wasn’t the case (the remaining 22% were unsure). An even higher proportion, 86%, say sustainability is increasingly becoming an important part of their companies’ overall business strategy, although this does represent a three percentage point fall from last year.
Asked to what extent sustainability has been embedded across the entire business, 51% of corporate respondents say sustainability is driving revenue for their business, and 70% say it is driving savings. Furthermore, 78.5% say that their corporate sustainability strategy is having an impact on internal structures, departmental organisation and responsibilities, an increase of more than 5 points from our 2015 report.
This impact is most keenly felt in the marketing and communications, and supply chain and procurement departments, with 74% claiming that their sustainability strategy directly affects these departments. However, when asked if they felt confident they were accurately measuring the impact and return-on-investment of their sustainability activities, fewer than half of our corporate respondents agreed, suggesting that businesses have yet to establish foolproof ways of determining exactly how, where and why sustainability is transforming the way the entire business operates.
Two questions gauged whether respondents believe their business is getting the most out of sustainability, and while there has been a shift in the right direction from last year, there is great scope for improvement in the future. Just over half (51%) now say that sustainability activity is integrated tightly enough into their broader business strategy (up from 42%), while 31% claim that their company is leveraging the potential of sustainability as fully as possible (up from 21%).
For businesses to go further on sustainability, they will be looking closely at the issues that present the greatest opportunities. Our survey asked respondents to identify areas that hold the greatest potential for 2016, and over the next five years. Using sustainability as a source of competitive advantage was the single biggest opportunity area, identified by 22% for the year ahead and 34% over the next five years. Other topics cited included the act of embedding sustainability throughout the business, harnessing the potential of sustainable innovation, creating a culture of sustainability and communicating success in sustainable projects.
For corporate sustainability teams to make the most of these opportunities and hit their targets, though, they will need all the resources and backing they can get. We asked our respondents about their sustainability teams’ budget outlooks for the year ahead: 14% of corporate respondents told us that their company has an annual sustainability budget in excess of $1m, with 8% having a budget of $2.5m or more. However, only 29% say they expect their sustainability budget to increase over 2016, while 32% expected it to either shrink or remain static (39% either didn’t know or declined to say). This is down slightly from last year, when 33% expected their budgets to rise through 2015.
However, the rises were expected to be higher this year, with 50% of respondents saying their team was in line for an increase in excess of 5% (up from 43% in 2015), and more than 4% saying their department was due to receive an increase of more than 100%, compared with none last year.
One of the core underlying factors behind many of the issues studied throughout our survey – from CEO engagement to budget allocation and the overall influence of sustainability on the rest of the business – has been the way in which major global events have put sustainability in the spotlight. The COP21 climate change summit in Paris last December, which resulted in the landmark Paris Agreement, and the launch of the SDGs have been two of the most important events, and in this year’s survey we asked a few specific questions to track the impact that they have had on corporate sustainability teams.
All in all, 46% of corporate respondents told us that their organisation would be engaging in the SDGs, with 36% saying they wouldn’t and 18% unsure. Out of those that said they would be engaging in the goals as a whole, 63% said they would engage specifically in SDG goal 13 (climate action) while other high priorities included goal 8 (decent work and economic growth), attracting 52% engagement; goal 12 (responsible consumption and production), with 51% engagement; and goal 9 (industry, innovation and infrastructure), with 49% engagement.
Asked to judge the success of the COP21 summit, there was a mixed reception, with just under half (44% of all respondents and 49% of corporate respondents) agreeing that the summit managed to deliver an agreement that will truly tackle the risk posed by climate change, and around 30% saying they disagreed. Respondents from Europe and North America were the least likely to give the agreement a positive assessment, while those from Asia, Africa and Latin America were more prepared to give the Paris deal the thumbs-up.
Impact of Paris
We also asked our respondents an open-ended question about how the Paris agreement would impact their roles as sustainability professionals. For many, the context and certainty that an official Paris Agreement brings will help increase the number of opportunities for them and their sustainability teams, as businesses compete and collaborate to bring about low-carbon innovation. Respondents also cited the role that the Paris summit played in boosting awareness of climate change among key stakeholder groups, including among CEOs who would subsequently be more likely to be engaged in sustainability, both as an issue and as a core side of the business they lead. However, some respondents suggest that the deal will have little bearing on their organisation’s sustainability and climate-related activities, either because they are committed to these initiatives already or because the scope of their company’s ambition goes far beyond that written into the Paris Agreement.
The responses from the State of Responsible Business 2016 report back up and build on those that we received last year. Organisations and businesses are increasingly seeing the value of being both responsible and sustainable in the way that they conduct business, and this is feeding into a greater and more positive influence by sustainability teams on the central strategy of the business. However, while corporate social responsibility and sustainability are increasingly ingrained in mainstream business, there is also plenty of evidence to suggest that there’s a long way to go yet. A majority of corporate respondents say they are still struggling to accurately measure the ROI of sustainability activities, or to make full use of the opportunities presented by sustainability, while there is still room for improvement on areas such as communication channels between corporate social responsibility and sustainability teams and their CEOs, marketing and communications teams, and indeed their customers.
Nevertheless, there has unquestionably been progress on a number of critical issues, and the key now will be to see if these positive trends continue in the months and years ahead.COP21 emissions climate change innovation Paris Agreement