Here is a brief excerpt from a report on another research study sponsored by McKinsey & Company. The results indicate that executives at all levels see an important business role for sustainability. But when it comes to mastering the reputation, execution, and accountability of their sustainability programs, many companies have far to go. The contributors to the development and analysis of this survey include Sheila Bonini, a senior expert in McKinsey’s Silicon Valley office, and Anne-Titia Bové, a specialist in the São Paulo office. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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Company leaders are rallying behind sustainability, and executives overall believe the issue is increasingly important to their companies’ strategy. But as it continues to grow into a core business issue, challenges to capturing its full value lie ahead. These are among the key findings from our most recent McKinsey survey on the topic, which asked respondents about the actions their companies are taking to address environmental, social, or governance issues, the practices they use to manage sustainability, and the value at stake.

One such challenge is reputation management. Year over year, large shares of executives cite reputation as a top reason their companies address sustainability; of the 13 core activities we asked about, they say reputation has the most value potential for their industries. However, many of this year’s respondents say their companies are not pursuing the reputation-building activities that would maximize that financial value.

Comparing companies with the most effective sustainability programs (our sustainability “leaders”) with others in their industries highlights another obstacle: incorporating sustainability into key organizational processes, such as performance management, one area where the leaders report better results than others. Beyond strong performance on processes, the leaders share other characteristics that are keys to a successful sustainability program—among them, aggressive goals (both internal and external), a focused strategy, and broad leadership buy-in.

Sustainability rising

According to executives, sustainability is becoming a more strategic and integral part of their businesses. In past surveys, when asked about their companies’ reasons for pursuing sustainability, respondents most often cited cost cutting or reputation management. Now 43 percent (and the largest share) say their companies seek to align sustainability with their overall business goals, mission, or values2 —up from 30 percent who said so in 2012 (Exhibit 1).

More and more companies are addressing sustainability to align with their business goals.

As sustainability rises in significance, capturing its full value grows more challenging—perhaps because the more that companies prioritize sustainability, the more it needs to be integrated into (and even change) the core business. At companies that are already taking action, respondents most often cite challenges related to execution: the absence of performance incentives and the presence of short-term earnings pressure that’s at odds with the longer-term nature of these issues. Accountability is an increasing concern: 34 percent of executives (compared with 23 percent in 2011) say too few people at their companies are accountable for sustainability. At companies that aren’t pursuing sustainability activities, respondents continue to cite a lack of leadership prioritization as the top challenge to taking action.

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Looking ahead

o Extend the product life cycle. Today, resource constraints are creating unprecedented prices and volatility in natural-resource markets. Yet the results indicate that most companies have not even begun to implement strategies that extend the life of their products and thereby reduce their resource dependence in a significant way. According to our other research,5 there is huge value potential in better design and in the optimization of products for multiple cycles of disassembly and reuse. Forward-looking companies should begin investing in the “circularity” of their products, for the benefit of society and for their bottom line. On materials alone, companies could potentially save more than $1 trillion per year.

o Look to technology. Similarly, technological advances are creating opportunities to drive sustainability solutions. Yet only 36 percent of respondents say their companies are mostly or fully integrating sustainability into their data and analytics work. Companies that want to capture increasing value in a resource-constrained world should spend more time thinking about how to integrate their technological capabilities into their overall sustainability agenda.

o Focus your strategy. As sustainability becomes more central to the business, companies should align internally on what they stand for and what actions they want to take on these issues, whether it’s economic development or changing business practices. Whatever approach companies take, they should develop a strategy with no more than five clear, well-defined priorities—one of the key factors for successful sustainability programs.

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Here’s a direct link to complete article.