Here is a brief excerpt from the Introduction to the 2012 Sustainability & Innovation Global Executive Study and Research Project, co-sponsored by MIT Sloan Management Review and The Boston Consulting Group. The report was co-authored by David Kiron, Nina Kruschwitz, Knut Haanaes, Martin Reeves and Eugene Goh.

To register as a guest, read the complete Introduction, and/or download the complete article, please click here.

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Since 2010, MIT Sloan Management Review and The Boston Consulting Group have been charting how organizations have tackled sustainability-related challenges — from resource scarcity to customer demands for healthier products — with innovations that create business value. Our 2010 study found Sustainability Embracers, who firmly believe that sustainability is necessary to be competitive. In 2011, we probed the business dimension more deeply and discovered that sustainability had become a permanent element of many company agendas and a source of profit for some.

This year, the trend toward profit continued: Key measures bumped up and showed that sustainability is paying off for a growing number of companies. Overall, the portion of respondents reporting profit from sustainability went up 23%, to 37% of the total.

But perhaps most important: Nearly 50% of companies have changed their business models as a result of sustainability opportunities — a 20% jump over last year. As we will explore in detail, business-model innovation is the crux of sustainability profits. Companies reporting that it adds to their bottom lines leverage these innovations to translate sustainability opportunities and pressures into business value.

A Clear Trajectory

Demands are coming from all sides, creating a systemic imperative and an opportunity to advance sustainability goals. As companies in many industries grapple with costs, they are turning to their supply chains to reduce energy use, simplify packaging, mitigate commodity price risks and meet customer sustainability expectations. Consumers, especially in Europe, are increasingly aware of a product’s sustainability credentials and willing to pay a premium for environmentally sound products and services. Employees’ expectations bring a strong internal pressure. Their growing commitment to sustainability makes the company’s footprint a key element in attracting and retaining talent, especially among younger generations.

The systemic effect of these demands is elevating the sustainability agenda in a wide range of industries. Companies in resource-intensive industries have been grappling with sustainability issues for a number of years. But other industries, from consumer products to software, are also increasing their focus on sustainability. Reinsurers, for example, are adding sustainability risks to the actuarial equation, driving companies to innovate to avert those risks. The global software giant SAP has declared sustainability as its purpose, according to Peter Graf, chief sustainability officer. “We want to be the company that helps manage more than finance and human resources,” he says. “That is why we have started to also help clients optimize energy consumption and natural resource use across their supply chains, ensure the safety of products and reduce the risk of their operations.” UPS is turning to technology suppliers to help reduce emissions and costs from its transportation fleet. “Probably the biggest challenge for us is going to be how quickly manufacturers can develop the technology that we need,” says Scott Wicker, chief sustainability officer.

The sustainability race is a global one. According to our research, companies in developing countries are the most likely to focus on sustainability-related business-model innovation, largely, perhaps, because these regions face significant resource scarcity and population growth challenges. Many global companies have also changed their business models in response to sustainability, pursuing growth in developing markets and leveraging those markets for manufacturing and production. North American companies lag. (See “North American companies lag,” below.) Many of sustainability’s demands have not taken hold in the region nor spurred companies to translate these pressures into profitable initiatives.

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To register as a guest, read the complete Introduction, and/or download the complete article, please click here.

David Kiron is executive editor of MIT Sloan Management Review‘s Big Ideas initiatives. Nina Kruschwitz is MIT Sloan Management Review‘s managing editor and special projects manager. Knut Haanaes is a partner and managing director in the Boston Consulting Group’s Geneva office, as well as head of BCG’s Strategy Practice Area. Martin Reeves is a senior partner and managing director in the Boston Consulting Group’s New York office and leads the BCG Strategy Institute worldwide. Eugene Goh is a principal in the Boston Consulting Group’s Oslo office and a core member of BCG’s sustainability team.