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Corporate sustainability has captured the attention of much of the world over the last few years. Trends suggest that the public is no longer satisfied with corporations that focus solely on short-term profit maximization. A recent study that compares companies that adopted environmental and social policies with companies that didn't, authored by two of the authors of this article and another colleague, provides empirical support for this view. "High sustainability" companies significantly outperformed their counterparts over an 18-year period in terms of both stock market and accounting criteria, such as return on assets and return on equity. They also exhibited lower performance volatility. Currently, organizations that exhibit a broad-based commitment to sustainability on the basis of their original corporate DNA are few and far between. For most companies, becoming sustainable involves a conscious and continuing effort to build long-term value for shareholders by contributing to a sustainable society. The authors studied the organizational models of companies that they refer to as "sustainable" by comparing them with companies that they call "traditional." They focused on two primary questions: (1) How do sustainable companies create the conditions that embed sustainability in the company's strategy and operations, and (2) What are the specific elements of sustainable companies' cultures that differentiate them from those of traditional companies? The authors have developed an identity and cultural model for how to create a sustainable company. While the model is straightforward, implementation is by no means easy, because it is grounded in large-scale change-something that few companies seek out or do well. The first stage involves reframing the company's identity through leadership commitment and external engagement. The second stage involves codifying the new identity through employee engagement and mechanisms of execution. Both are ongoing processes. Once the second stage begins, the two stages reinforce each other. Employee engagement enables even more sophisticated external engagement, since a broader range of employees will be able to effectively engage with outside stakeholders. Mechanisms of execution bind leadership commitment, since these organizational-level attributes continue from one generation of leaders to the next. Similarly, leadership commitment provides a strong motivating force for employee engagement, since employees know that their leaders care about what they are doing. External engagement strengthens the company's mechanisms of execution, since stakeholder pressure challenges the company to constantly improve its quality. The article draws on examples at companies including Dow Chemical, PepsiCo, Natura and Toyota.
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How to Become a
Sustainable Company
SUMMER 2012 VOL.53 NO.4
REPRINT NUMBER 53415
Robert G. Eccles, Kathleen Miller Perkins, and
George Serafeim
Brought to you by
COURTESY OF NOVO NORDISK A/S SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 43
CORPORATE SUSTAINABILITY HAS captured the attention of much of the world over the
last few years. Trends including the growth of nongovernmental organizations and movements such
as Occupy Wall Street suggest that the public is no longer satisfied with corporations that focus solely
on short-term profit maximization. People want corporations to consider broad human needs.
Surveys show that a growing number of companies are taking notice of these shifts and have come
to consider sustainability-related strategies necessary to be competitive.1 One recent study that com-
pared companies that adopted environmental and social policies with companies that didn’t,
authored by two of the authors of this article and another colleague, provides empirical support for
this view. “High sustainability” companies significantly outperformed their counterparts over an 18-
year period in terms of both stock market and accounting criteria, such as return on assets and return
Novo Nordisk A/S,
a global healthcare
company, follows a
business philosophy
based on balancing
financial, social and
environmental con-
siderations.
How to Become a
Sustainable Company
THE LEADING
QUESTION
What
differentiates
sustainable
companies
from tradi-
tional ones?
FINDINGS
Sustainable organi-
zations are effective
at engaging with ex-
ternal stakeholders
and employees.
They have cultures
based on innovation
and trust.
They have a track
record of imple-
menting large-scale
change.
SUSTAINABILITY
Few companies are born with a broad-based commitment
to sustainability. To develop one, companies need leadership
commitment, an ability to engage with multiple stakeholders
along the value chain, widespread employee engagement and
disciplined mechanisms for execution.
BY ROBERT G. ECCLES, KATHLEEN MILLER PERKINS AND GEORGE SERAFEIM
44 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU
SUSTAINABILITY
on equity.2 In terms of stock market returns, the
“high sustainability” companies had an abnormal
stock market performance that was 4.8% higher
than the “low sustainability” companies on a
value-weighted basis. They also exhibited lower per-
formance volatility. It is not surprising, then, that
more and more companies are exploring how envi-
ronmental, social and governance performance can
contribute to financial performance.
Currently, organizations that exhibit a broad-
based commitment to sustainability on the basis of
their original corporate DNA are few and far be-
tween. An exception is Novo Nordisk A/S, a global
healthcare company created in 1989 through a
merger of two Danish companies. For decades, it
has followed a business philosophy based on bal-
ancing financial, social and environmental
considerations. Novo Nordisk managers use the
values framework to drive their day-to-day deci-
sions and make difficult choices, and the
company provides financial and nonfinancial in-
formation and data in one report.
For most companies, however, becoming sus-
tainable involves a conscious and continuing effort
to build long-term value for shareholders by con-
tributing to a sustainable society. To illuminate how
the transformation occurs and how a sustainable
strategy can be formulated and executed, we studied
the organizational models of companies that we
refer to as “sustainable” by comparing them with
companies that we call “traditional.(See “About the
Research.”) We focused on two primar y questions:
1. How does a sustainable company create the con-
ditions that embed sustainability in the
company’s strategy and operations?
2. What are the specific elements of sustainable
companies’ cultures that differentiate them from
those of traditional companies?
Based on our research, we have developed an iden-
tity and cultural model for how to create a sustainable
company. While the model is straightforward, imple-
mentation is by no means easy, because it is
grounded in large-scale change — something that
few companies seek out or do well. The first stage
involves reframing the company’s identity through
leadership commitment and external engagement.
The second stage involves codifying the new iden-
tity through employee engagement and mechanisms
of execution. Both are ongoing processes.
Once the second stage begins, the two stages re-
inforce each other. Employee engagement enables
even more sophisticated external engagement be-
cause a broader range of employees will be able to
effectively engage with outside stakeholders. Mech-
anisms of execution bind leadership commitment,
since these organizational-level attributes continue
from one generation of leaders to the next. Simi-
larly, leadership commitment provides a strong
motivating force for employee engagement because
employees know that their leaders care about what
they are doing. External engagement strengthens
the company’s mechanisms of execution, since
stakeholder pressure challenges the company to
constantly improve its quality.
Companies with an established organizational
culture that includes strong capabilities for change, a
commitment to innovation and high levels of trust
have a significant advantage. When these elements
are missing, becoming a sustainable company is
more difficult. Nevertheless, by moving through the
two stages, the necessary cultural characteristics are
likely to coalesce. And, if companies begin with a
strong cultural foundation based on trust and inno-
vation — all too rare in most companies — we have
found that those characteristics will only strengthen
over time. In contrast to the vast majority of tradi-
tional companies, sustainable companies are willing
and able to engage in the kind of ongoing transfor-
mational change that is required as social
expectations evolve. They aggressively create new
processes, products and business models that im-
prove enviro nmental, social and govern an ce
performance — all of which conspire to boost finan-
cial performance through cost savings, new revenues,
brand enhancement and better risk management.
Finally, employees in sustainable companies have a
high level of trust in each other, which allows them
to take the necessary risks to innovate and change
their behaviors to support sustainability.
Stage One: Reframing the
Company’s Identity
Reframing the company’s identity is composed of
two elements: leadership commitment and exter-
nal engagement. While these elements are closely
linked, one can drive the other or they can occur si-
SLOANREVIEW.MIT.EDU SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 45
multaneously. To gain commitment, leaders must
engage with groups outside of their organizational
boundaries, such as investors and NGOs that repre-
sent civil society. Effective external engagement
cannot happen without strong commitment from
the leadership team. By engaging the two elements,
a company can begin to fashion a new identity as a
sustainable enterprise.
Leadership Commitment When leadership com-
mitment drives the process, it usually comes from
the personal resolution of a CEO to create a more
sustainable company. In general, top-level execu-
tives have the ability to create an enterprise-wide
vision and the clout to see that it is realized. With-
out this commitment, becoming a sustainable
company is a “nonstarter.
Our data show that the leaders of sustainable
companies differ from leaders of traditional compa-
nies in several ways. First, the top-level leaders of
sustainable companies are perceived as taking a long-
term view when making decisions. They have an
unmistakable direction in mind and know that their
sustainability goals will not be achieved overnight. In
pursuing their visions, they are more willing than
leaders of traditional companies to tolerate risk.
Leaders at 72% of the sustainable companies are will-
ing to take measured risks in pursuit of sustainability,
in contrast to 40% at traditional companies. More-
over, sustainable companies are more likely to be
knowledgeable of the issues pertaining to sustainabil-
ity (90% vs. 60% of the traditional companies) and
have a clearer business case for pursuing sustainable
goals (83% vs. 30% at traditional companies). The
strong business case communicated from the top en-
ables the company to incorporate sustainability into
the core of its business. As a result, sustainable com-
pany leaders integrate sustainability considerations
into basic business decisions such as operating bud-
gets and capital investments (95% vs. 30% at
traditional companies).
Equally important, leaders of sustainable compa-
ni es dem ons trate person al com mit men t to
sustainability that inspires others throughout the or-
ganization (83% vs. 50% at traditional companies).
As a result, more employees in sustainable companies
view sustainable strategies as essential to the compa-
ny’s success (80% vs. 20% for traditional companies).
Surprisingly, our survey data show that leaders
of traditional companies are more likely to be seen
as having clear visions for sustainability than are
leaders of sustainable companies (5% vs. 20% at
traditional companies). One possible explanation
for this finding surfaced in our follow-up field in-
terviews: Leaders of sustainable companies often
set aspirational goals and seek transformational
change where the starting and end points are not
necessarily known in full. For example, Interface
Inc., the world’s largest carpet company, based in
Atlanta, Georgia, set a long-term corporate goal of
having a net zero environmental impact.3 Dow
Chemical, for its part, a global leader in specialty
chemicals, has committed itself to achieving at least
ABOUT THE RESEARCH
This study is part of a large research program on “Innovating for Sustainabil-
ity.” The purpose of this research is to understand how companies can better
integrate sustainability into the core of their strategy and operations. This pro-
gram is equally focused on understanding how institutional investors can
integrate sustainability into their investment decisions. In both cases, we are
using a broad range of research methodologies, including case studies, in-
depth field research, survey research, archival research and empirical
analysis.i Throughout 2010 and 2011, we conducted more than 200 inter-
views in more than 60 companies to explore how sustainable companies
were innovating for the development and execution of sustainable strategies.
We also developed some 20 in-depth teaching case studies and worked with
a number of companies to help them develop more sustainable strategies.
Based on this work, we began to detect some intriguing patterns related to
leadership and organizational elements.
We then tested for these patterns with a survey. First, we examined the
sustainability performance on both environmental and social factors for 3,000+
companies worldwide for 2009, with data provided by Thomson Reuters’
ASSET4. We isolated the top 20% and the bottom 20% of companies in terms
of environmental and social performance. Then we imposed an additional filter,
isolating companies from the top group based on whether they integrate social
and environmental metrics and narrative with their financial reporting, and iso-
lating companies from the bottom group based on those that do not integrate
social and environmental metrics and narrative with their financial reporting. We
identified 58 companies with very good sustainability performance and com-
munication (which we refer to as the sustainable companies) and 108 with poor
sustainability and communication (which we refer to as the traditional compa-
nies). We invited both sets of companies to participate in an online survey
examining organizational and cultural factors related to sustainable strategy; 28
companies, or 17%, responded. Of these, 18 companies met our criteria as
sustainable and 10 companies were classified as traditional.
We used a 68-item assessment instrument developed by Miller Consul-
tants, of Louisville, Kentucky, to look at organizational leadership, organizational
systems and climate, change readiness, internal and external stakeholders, and
disclosure issues. The results were validated through interviews with experts
in the relevant domains. The instrument was developed based on our prelimi-
nary research and tested through a pilot that compared the responses of
representatives from leading sustainable companies with responses from a
control group of companies.
46 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU
SUSTAINABILITY
three breakthroughs by year 2015 that will signifi-
cantly help solve world problems.4 Sustainable
companies also recognize that transformational
change requires taking on a large number of
smaller-scale change initiatives.
Leaders of traditional companies, by contrast,
are more likely to be committed only to smaller-
scale change (sometimes referred to as transitional
change), where the beginning and end states are
clearly known. Examples of a transitional change
could include moving from an energy system based
on fossil fuel to a system based on a renewable
source of energy or implementing a redesigned
process that will reduce waste. These goals are more
precise and clearly defined than some of the more
expansive ones.
External Engagement Companies that thrive
with a sustainable strategy realize the importance of
reaching beyond their own internal boundaries to a
variety of external stakeholders. In their book Green
to Gold, Daniel C. Esty and Andrew S. Winston iden-
tified at least 20 stakeholder groups that are likely to
wield a degree of power over companies with regard
to their sustainability performance.5 When external
engagement drives the initiation of the process in
this stage, it is usually catalyzed by a dramatic event
or series of events. The experience of a crisis often
pushes leaders to do some serious soul-searching.
Although some companies stonewall and dig into
their traditional models, others see a crisis as an op-
portunity for self-examination. They begin to
realize the benefits of learning about the concerns
and expectations of key stakeholders. In turn, this
affects the company’s license to operate and thereby
creates value for both stakeholders and sharehold-
ers. Once this realization hits home, the company
begins to reach out beyond its own institutional
boundaries to learn, collaborate and communicate.
Sustainable companies learn from the outside.
In doing so, they are far more likely to encourage
their employees to assimilate knowledge from
sources external to their company than are tradi-
tional companies (72% vs. 20% at traditional
companies). According to Bruce Bremer, former
manager of facility engineering for Toyota Engi-
neering & Manufacturing North America, Toyota
encourages employees to work with external peer
groups. “To build a culture of innovation, we have
to drive out narrow thinking and learn continu-
ously. When I worked with a group of my peers
from other global companies, I started to see things
from a much different light.6
Sustainable companies collaborate with other
companies and organizations to advance their
goals. For example, in 2011, Dow Chemical formed
an alliance with The Nature Conservancy. TNC’s
collaborative work is focused on assisting compa-
nies, including Dow, to re co gnize, value and
incorporate nature into global business goals, deci-
sions and strategies.7 At times, sustainable
companies have gone so far as to partner with com-
petitors to seek solutions to their challenges, and
they actively support their supply chains. Some of
the most critical stakeholder relationships occur
within a company’s supply chain, reflecting the re-
ality that companies cannot achieve their
sustainability objectives without widespread sup-
po rt and cooper ation . One of the stron gest
differences between the sustainable and traditional
companies in our data is that sustainable compa-
nies encourage their supply chain s to adopt
sustainable strategies (83% vs. 20% for traditional
companies). Many of them work closely with their
suppliers to support these efforts. PepsiCo, for ex-
ample, invites its suppliers to an annual gathering
where they share best practices and discuss prog-
ress on sustainability. These gatherings reduce the
natural tension between suppliers and customers.
According to David Walker, senior director of bev-
erage produ ctivity at PepsiCo, an imp ro ve d
working relationship unlocks the potential to max-
imize sustainability in the supply chain. For
example, PepsiCo and its suppliers share best prac-
tices on energy reduction, create common metrics
to track progress and engage in joint planning ses-
sions to ensure that ideas are executed.8
The actions of sustainable companies are ac-
companied by clear and consistent messages to
stakeholders (90% of sustainable vs. 30% of tradi-
tional companies say that their messaging to
external stakeholders is consistent and clear).
Transparency is a critical asset, and sustainable
companies achieve it by communicating their tar-
gets broadly and by reporting honestly and widely
on their progress toward meeting those targets.
SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 47COURTESY OF ANHEUSER-BUSCH INBEV
They do not change their core messages on a whim,
nor do they engage in spin or “green-washing.” In-
stead, they talk about “the warts” as well as their
successes. Natura Cosméticos S.A., a Brazilian cos-
metics and fragrances company, exemplifies this
approach. In its annual integrated report, Natura
does not try to hide the commitments that it failed
to achieve in footnotes, as many companies do
with negative information. On the contrary, it dis-
cusses the commitments that were not achieved in
the prior year and the renewed commitments in
the beginning of the annual report.9 Rodolfo Gut-
tilla, Natura’s director of corporate affairs,
maintains that transparency in reporting facilitates
a better dialogue between the company and its
stakeholders: “Through the reports, stakeholders
are able to see what others are doing; they can see
how their interests are being integrated into the
management of the company, and they can begin to
understand the interconnections that exist between
actions and impacts all along the value chain.10
Stage Two: Codifying
the New Identity
The first stage — reframing the company’s overall
identity based on leadership commitment and ex-
ternal engagement is a necessar y, but not a
sufficient condition for becoming a sustainable
company. The second stage involves building inter-
nal support for the new identity through employee
engagement and mechanisms for execution, two
elements that are closely intertwined. Of course,
leadership commitment and external engagement
don’t end: They are embedded in and drive the cod-
ification of the company’s new identity. In essence,
the first stage continues into the second stage, and
once both stages are in process, they reinforce each
other. Together, they then create a culture support-
ive of sustainability, as described below.
As with Stage One, individual elements can
drive the other elements or they can occur simulta-
neously. Execution mechanisms serve as a platform
for engaging employees. At the same time, execu-
tion mechanisms require strong suppor t from
employees. Regardless of which element drives the
other, Stage Two is about making the company’s
newly framed identity a reality. While grassroots
actions can impact Stage Two, unless these activi-
ties are supported by leadership commitment and
external engagement, they will remain local initia-
tives that fall short of creating a new identity.
Employee Engagement Because sustainable
strategy execution requires behavioral change by
individuals, the personal engagement of employees
is crucial. For people to change their behavior, they
have to believe it is worth it. They have to under-
stand and believe in the reasons for the change and
recognize what they need to do to contribute to it.
We define employee engagement as actions a com-
pany takes to secure the interest and attention of
employees in their sustainability efforts. Engaged
employees are emotionally connected to their work
and to their workplace. As a result, they tend to be
more productive and more willing to engage in dis-
cretionary efforts to achieve company goals.
Sustainable companies are much more likely
than traditional ones to have a clear strategy for en-
gaging employees (72% vs. 30% of traditional
companies). They shift the engagement from local,
disconnected initiatives to company-wide efforts.
In order for the engagement strategy to be clear and
effective, the business case developed during the
first stage must be firmly in place, and leaders must
understand and appreciate the role of the employ-
ees. Sustainable companies implement their
engagement strategy by (1) communicating the
impact that the employees’ contributions will have
on the company, (2) articulating the connection
between each employee’s work and the sustainabil-
ity goals and (3) enabling cross-functional
communication and idea exchange. Anheuser-
Anheuser-Busch
InBev has incorporated
sustainability-related
goals into individual
employee goals.
48 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU
SUSTAINABILITY
Busch InB ev, the world’s largest brewer, has
incorporated sustainability-related goals into indi-
vidual employee goals from senior leadership on
down to line management for several years. The
company believes that its employees think more
creatively and work more collaboratively because
they feel personally invested in the company’s sus-
tainability efforts and share important goals. Such
actions not only extend the impact of the leaders’
messages but also spread lessons learned from local
initiatives to the company as a whole.
Mechanisms for Execution The CEO often initi-
ates the codification of the new behavior by driving
the change through organization-wide mecha-
nisms and by promoting employee engagement.
Our study found that some of the most pro-
nounced differences between sustainable and
traditional companies are the presence of mecha-
nisms for execution and how they are used.
Sustainable companies are far more likely to have
enterprise-wide management systems for execut-
ing sustainable strategies (83% vs. 20% for
traditional companies). These systems consist of
structured frameworks of practices and proce-
dures that enable the organization to execute in a
consistent and lasting manner. Since specific sus-
tainability objectives often involve trade-offs, an
enterprise-wide approach allows for a portfolio
perspective to achieve the desired balance among
actions and outcomes.
Among the enterprise-wide management systems
companies use are processes that connect sustainabil-
it y to cor porate strate gy, wit h direct ties to
performance evaluation and compensation (66% vs.
10% for traditional companies). Sustainable compa-
nies also incorporate sustainability metrics into the
capital budgeting process, develop solid valuation
processes that take externalities into account, set clear
targets for sustainability objectives and establish tar-
geted programs linking the objectives to business
results (90% vs. 10% for traditional companies).
IBM, for example, embeds sustainability strategies
and practices into its global environmental manage-
ment systems, and recently it has begun requiring its
suppliers to adopt these systems. Sustainable compa-
nies are far more likely than traditional ones to have
established accountability processes that measure re-
sults and ensure that the objectives are met. Even so,
finding appropriate metrics and tools for measure-
ment continues to challenge sustainable and
traditional companies alike.
Many of the current methods used to track the
impacts of sustainability-related efforts are inade-
quate for measuring consistent, complete and precise
data. For example, although some companies at-
tempt to use standard tools such as Six Sigma and
performance scorecards to assess the impact of initia-
tives connected to sustainable strategies, even these
tools fall short in providing the robust valuation
methodologies needed to clearly measure and link
sustainable strategies to business results.11 Many tra-
ditional metrics do not measure the aspects of
sustainability that are material to the specific com-
pany or measure sustainability across the entire value
chain. Since traditional measures are subject to a va-
riety of caveats, Dow developed its own innovation
metrics for its 2015 Sustainability Goals. The com-
pany developed a proprietary Sustainable Chemistry
Index to comprehensively measure critical aspects of
sustainability for its products and business units
across the value chain; it also developed a specific set
of criteria and metrics to measure its achievement of
Breakthroughs to World Challenges.12
Despite the challenges, the sustainable compa-
nies we looked at indicated that they are pressing
forward and trying out new metrics. Rather than
letting the metrics challenges stall their progress,
sustainable companies are actively addressing the
issues creatively.
A Supportive Organizational Culture
Over time, the codification of a sustainable compa-
ny’s new identity will reinforce, or even establish, a
culture based on change capabilities, trust and in-
novation. Leadership commitment and external
engagement are necessary for transformational
change. Employee engagement fosters trust and in-
novation, and mechanisms for execution ensure
that change happens as innovations diffuse
throughout the organization. In turn, a culture
supportive of sustainability will increase the effec-
tiveness of leadership comm it ment, external
engagement, employee engagement and mecha-
nisms for execution. (See “The Role of Corporate
Culture in Sustainability.”)
SLOANREVIEW.MIT.EDU SUMMER 2012 MIT SLOAN MANAGEMENT REVIEW 49
Change Capabilities A common cultural element
that enables the process is the change readiness of
the culture.13 Our data show strong differences be-
tween the sustainable and the traditional companies
on this variable: Some 90% of the sustainable com-
panies report having a strong track record of
implementing large-scale change successfully, com-
pared to 50% for the traditional companies. This
difference is critical. As we have noted, unlike more
transitional change, where the beginning and end
points are clearly defined from the outset, transfor-
mational change may start with a clear direction but
lack exact beginning and end points.
Transformational change can take years or even
decades to accomplish. Particularly when it is di-
rected toward a concept that is still being developed,
it is not possible to have a clear blueprint to follow.
Not surprisingly, the pattern for sustainable com-
panies has been not to start with a precise plan but
to head in a direction, tolerate risk and make ad-
justments en route. Of course, transformational
change also depends on a large number of smaller,
incremental changes, which must be effectively ex-
ecuted in order for the transformational change to
be successful. In fact, 90% of the sustainable com-
panies report having a strong track record of
implementing incremental changes successfully,
compared to 70% of the traditional companies.
Companies with developed capabilities for trans-
formational and incremental change may be able to
move more quickly; those lacking the cultural ca-
pabilities will inevitably proceed in a more halting
fashion and are more likely to need help.
Innovation For sustainable companies, innovation
is a core cultural capability. To improve financial
performance along relevant environmental, social
and governance dimensions, sustainable compa-
nies tend to focus on innovations in processes,
products and business models. A commitment to
sustainability becomes a “forcing function” for in-
novation. Both employee engagement and external
engagement are important sources of new ideas
that become the basis for value-creating innova-
tions. The innovations build on and contribute to
the organization’s existing capabilities for innova-
tion — a process sustainable companies encourage
by rewarding innovation. Moreover, they vigor-
ously promote and facilitate learning, broad
thinking and creativity.
Sustainable companies use a variety of ap-
proaches to incorporate continuous learning into
their cultures. For example, they employ processes
that help people across the enterprise to learn from
each other. Innovation is most likely to occur in or-
ganizations where lateral communication is enabled
and people with different frames of reference can
come together to share ideas. Rather than suppress-
ing conflict, sustainable companies tend to
encourage the airing of diverse points of view. They
appreciate that, when handled well, enterprise-wide
conversations tend to create understanding across
the organization. In addition to leading to synergy
and innovation, these conversations also build trust.
Trust Having the conviction that people can be
taken at their word and that they will do their best
to deliver on commitments and promises is the
bedrock of success. Creating a sustainable company
requires trust on the part of every employee. With-
out trust, employees are reluctant to take the risks
that innovation requires, and they are reluctant to
engage. Trust is the difference between listening
and believing. It permits people to act in new ways
that truly contribute to the development of a sus-
tainable company.
Sustainable companies foster trust by (1) dem-
onstrating that they value the contributions of
THE ROLE OF CORPORATE CULTURE
IN SUSTAINABILITY
Employee engagement fosters trust and innovation, and mechanisms for
execution ensure that change happens as innovations diffuse throughout
the organization. A culture supportive of sustainability will increase the
effectiveness of leadership commitment, external engagement, employee
engagement and mechanisms for execution.
Creates and Amplifies
Reinforces
Corporate
Identity
Corporate
Culture
Stage 1:
Reframing
Identity
Stage 2:
Codifying
New Identity
Innovation
Tru s t
Capacity for
Tra n sf o rma tio nal
Change
50 MIT SLOAN MANAGEMENT REVIEW SUMMER 2012 SLOANREVIEW.MIT.EDU
SUSTAINABILITY
employees, (2) consciously aligning their actions
with their values, (3) honoring their commitments
and (4) basing decisions on what is good for share-
holder s and for the broa de r concerns of the
organization and society. Leaders of sustainable
companies understand the value that results when
people within the company know that they can
count on the integrity, competency, intentions and
reliability of their leaders and coworkers. Trust
grows when people perceive that they are part of a
collective effort to deliver value to stakeholders in a
way that contributes to the betterment of their
world. Work becomes more meaningful, and peo-
ple become more engaged and productive.
Fostering trust effectively allows a team produc-
tion approa ch, where the effor ts of multiple
stakeholders are crucial for the company’s success,
to everyday operations in which employees are
willing to make company-specific investments
without fear that their efforts will not be recog-
nized and rewarded. By enabling and encouraging
these investments, the company cultivates the
foundation for a competitive advantage in the mar-
ketplace: enga ge d employees who are able to
cooperate in order to drive corporate performance.
Starting the Journey
to Sustainability
Today companies must choose whether to start the
journey to become sustainable or to adhere to the
more traditional model. Although each company
must make that choice for itself, we believe that
changing social and investor expectations will only
increase the pressure on companies to adopt the sus-
tainable model. Doing so requires unswerving
leadership commitment, without which the journey
cannot begin. In reframing its identity, the company
must learn to engage openly with external stake-
holders. Maintaining transparency without recourse
to defensive strategies is integral to a sustainable
strategy. As this strategy is implemented through
broad-based employee engagement and disciplined
mechanisms for execution, a new identity can
emerge: that of a sustainable company.
Robert G. Eccles is a pro fessor of manage ment pr ac-
tice at Harvard Business School. Kathleen Miller
Perkins is presi dent of Mi ller Co nsultant s Inc., an or-
ganizational consulting firm in Louisville, Kentucky.
George Serafeim is an assistant professor of business
administration at Harvard Business School. Comment
on this article at http://sloanreview.mit.edu/x/53415, or
contact the authors at smrfeedback@mit.edu.
REFERENCES
1. For more information, see D. Kiron, N. Kruschwitz, K.
Haanaes and I. von Streng Velken, “Sustainability Nears a
Tipping Point,” MIT Sloan Management Review 53, no.2
(winter 2012): 69-74.
2. R.G. Eccles, I. Ioannou and G. Serafeim, “The Impact of
a Corporate Culture of Sustainability on Corporate Behav-
ior and Performance,” working paper 17950, National
Bureau of Economic Research Working Paper Series,
Cambridge, Massachusetts, March 2012, www.nber.org/
papers/w17950.
3. M.W. Tof fel, R. G. Eccles and C. Taylor, “ Inte rface-
RAISE: Sustainability Consulting,” Harvard Business
School case no. 611-069 (Boston: Harvard Business
School Publishing, 2011).
4. R.G. Eccles, G. Serafeim and S.X. Li, “Dow Chemical:
Innovating for Sustainability,” Harvard Business School
case no. 112-064 (Boston: Harvard Business School Pub-
lishing, 2012).
5. D.C. Esty and A.S. Winston, “Green to Gold: How
Smart Companies Use Environmental Strategy to Inno-
vate, Create Value, and Build Competitive Advantage”
(New Haven: Yale University Press, 2006).
6. Interview with Bruce Bremer, Dec. 10, 2011.
7. For more informat ion, se e: www.nat ure.or g/aboutu s/
workingwithcompanies/companies-we-work-with/dow/
index.htm and http://my.nature.org/gifts/?src=CPC.AWG.
CE2.AG2.CC2.CL2.MT3.KW754&gclid=CMOZ5f3h9a8C
FQrf4Aod1nqREg.
8. Intervi ew with Da vid Wal ker, s enio r director of bever-
age productivity, PepsiCo, May 9, 2012.
9. For more information, see “Natura Report 2010,”
Natura Brasil, http://natura.infoinvest.com.br/enu/3766/
GRI_INGLES_COMPLETO_impressao.pdf.
10. R. G. Ec cle s, G. Se raf eim a nd J . He ffer nan , “Na tur a Cos -
méticos, S.A.Harvard Business School case no. 9-412-052
(Boston: Harvard Business School Publishing, 2011).
11. D.A. Lub in and D.C . Esty, “ The Susta inabil ity Imper a-
tive,” Harvard Business Review (May 2010): 1-9.
12. Interview with Mark Weick, director of sustainability
programs and enterprise risk management, Dow Chemi-
cal Co., May 8, 2012.
13. D. Anderson and L.A. Anderson “Beyond Change
Management: Advanced Strategies for Today’s Transfor-
mational Leaders” (San Francisco: Jossey-Bass Pfeiffer,
2001): 98-102.
i. For more informat ion, se e: www.fac ebook. com/
innovatingforsustainability.
Reprint 53415.
Copyright © Massachusetts Institute of Technology, 2012.
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Dow Chemical is one of the few major American industrial corporations that was founded in the late 19th century that is still in existence. From its origins producing bromine out of the brine underneath Midland, Michigan, the company has evolved from a diversified commodity chemical company to an advanced materials company whose products and services can make its clients more sustainable. During the 1960s and 1970s the company received a series of external shocks in the form of negative public opinion for some of its activities. These challenged the company's perception as being a "good company" and made it realize it needed to more proactively seek outside perspectives on how the company was viewed and what it should do. This led to the formation of the Corporate Environmental Advisory Council in 1992 which was renamed the Sustainability External Advisory Council (SEAC) in 2008. With substantial input from the SEAC, the company set two ambitious sets of ten-year goals: 1996-2005 and 2006-2015 and was largely successful in meeting them or on the way to doing so. In 2011, Neil Hawkins, Vice President of Sustainability and EH&S (Environmental, Health and safety) is trying to decide what the content and format of the next ten-year goals should be to ensure the company's viability on its 200th birthday. Should they be incremental goals like the ones for 2005 or ambitious stretch targets like the ones for 2015? Or should they be broad statements of principles that encourage innovating for sustainability throughout the company? A further challenge facing the company that it was rapidly globalizing with a large portion of its workforce outside its Midland, Michigan headquarters, making it even more difficult to preserve a common culture and commitment to sustainability.Learning Objective: This case illustrates how ambitious commitments to sustainability can be a driving force to major and minor innovation. It also illustrates the importance of stakeholder engagement for both sustainability and innovation.
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InterfaceRAISE is a sustainability management consulting firm created to leverage the capabilities of its parent company Interface Inc., a carpet manufacturer recognized as a global leader in corporate environmental sustainability. This case illustrates the challenges of turning an internal capability into a client‐facing revenue stream. This is made especially difficult by the fact that the parent company is a manufacturing firm and InterfaceRAISE is a professional service firm (consulting). InterfaceRAISE is not being staffed by a traditional consulting firm model, relying instead on the part‐time availability of employees in the parent company. At the time of the case, InterfaceRAISE was grappling to identify the appropriate business model for the type of consulting firm it wants to be, to determine what its client portfolio should look like, and to set its pricing structure. InterfaceRAISE needed to decide how to accelerate its growth while better achieving its three objectives: improving its clients' sustainability performance, enhancing its parent company's brand image and sales, and increasing operating profits.Learning Objective:To expose students to the opportunities and challenges of creating a consulting business based on selling a manufacturing company's environmental and operational capabilities developed through years of learning how to improve environmental performance. To highlight the strategy of offsetting one firm's environmental impacts by reducing the environmental impacts of other firms, and contrasting this with the carbon offset market. To explore the differences in operational strategies between manufacturing and consulting companies, and the implications on investment, R&D, marketing, and human resources policies. To illustrate the different types of business models that exist for consulting firms and how these affect decisions about client selection and client portfolio.
  • R G Eccles
  • G Serafeim
  • J Heffernan
R.G. Eccles, G. Serafeim and J. Heffernan, "Natura Cosméticos, S.A." Harvard Business School case no. 9-412-052 (Boston: Harvard Business School Publishing, 2011).
Beyond Change Management: Advanced Strategies for Today's Transformational Leaders
  • D Anderson
  • L A Anderson
D. Anderson and L.A. Anderson " Beyond Change Management: Advanced Strategies for Today's Transformational Leaders " (San Francisco: Jossey-Bass Pfeiffer, 2001): 98-102.