McKinsey Study on Sustainability

Last month, McKinsey & Co. published a study titled “How companies manage sustainability”.  The survey was conducted in February 2010 and received responses from 1,946 executives representing a wide range of industries.

The fact that the topic of sustainability is significant enough for McKinsey to conduct this analysis is notable.  The study itself is short and it is easy to distill the major themes presented.

Theme 1:  “Sustainability” has no defined definition

… many [companies] have no clear definition of [sustainability]. Overall, 20 percent of executives say their companies don’t. Among those that do, the definition varies: 55 percent define sustainability as the management of issues related to the environment (for example, greenhouse gas emissions, energy efficiency, waste management, green-product development, and water conservation). In addition, 48 percent say it includes the management of governance issues (such as complying with regulations, maintaining ethical practices, and meeting accepted industry standards), and 41 percent say it includes the management of social issues (for instance, working conditions and labor standards). Fifty-six percent of all the respondents define sustainability in two or more ways.

Theme 2:  What gets measured gets managed, or vice versa

[E]xecutives [of proactive companies] … are more aware than executives at other companies of the metrics their companies track. For example, 84 percent of respondents at engaged companies are aware of whether their companies measure their carbon footprint, compared with 40 percent of respondents at less engaged companies. More importantly, among the group that is aware of what’s being tracked, the engaged companies are far more likely to be tracking relevant sustainability indicators such as waste, energy and water use, and labor standards for their suppliers and consumers.

Theme 3:  Implicit in sustainability leadership within the energy industry is risk management

… senior executives in the energy industry take an active approach to managing sustainability, likely because of the potential for regulation and increasing natural-resource constraints. Indeed, 10 percent of energy executives say addressing sustainability is the top priority on their CEOs’ agendas (versus 3 percent overall), and 31 percent say it’s a top-three priority (versus 22 percent overall). Further, energy executives are much likelier than others to be active in seeking opportunities to invest in sustainability (40 percent versus 28 percent), to integrate it into their companies’ business practices (43 percent versus 29 percent), and to shape regulation actively (29 percent versus 16 percent).

Theme 4:  Risk assessment and quantification is severely lacking

only about 35 percent of executives say their companies have quantified the potential impact of environmental and social regulation on their businesses; only 40 percent feel prepared to deal with regulation in the next three to five years and are personally confident about handling climate change issues.

Failure to reach an agreement in the recent Copenhagen UN Climate Change Conference was seen by respondents to this survey as twice as likely to increase uncertainty (30 percent) related to climate change regulation as to decrease it (15 percent); 55 percent say they saw no difference.

Those of us who have been in the EHS risk management/sustainability world for awhile will not find any of this new information.  But McKinsey’s brand behind this may bring valuable C-level credibility to the need to fill the information gaps.


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