Social Responsibility

In an interview that is part of SMR’s ongoing series on the business of sustainability, MIT’s Ernest Moniz, the director of the MIT Energy Initiative, explains why blending big-company culture with entrepreneurial innovation is the challenge that leaders must learn to meet. According to Moniz, large energy companies are the ones that have the capacity in terms of resources to scale up new technologies to impact climate change in a relatively short period of time. But to do so they need to be both “big and nimble.” “The number one overarching issue, which does pose business opportunity, business risk, and a need to rethink business models, is carbon constraints,” says Moniz. “As you know, 85 percent of our energy is fossil fuel. Fossil fuel equals carbon. Controlling carbon goes to the very core of the way we currently supply energy.” There are multiple strategies for dealing with innovation in a carbon-constrained world, including mergers and acquisitions, and investments in research. But the innovation culture is not natural to energy companies; until now they have been rewarded for reliability, not innovation. Cultivating an open mind, dealing with uncertainty, and balancing competing requirements necessary for innovation ultimately comes down to the judgment of senior executives.

Sustainability initiatives have three stages, each requiring differing organizational capabilities.

Supply chain managers can impact sustainability in areas such as packaging and transportation.

MIT Sloan Management Review's first annual Business of Sustainability survey revealed much about what executives are thinking and doing about sustainability-driven concerns right now--as well as what's impeding their attempts both to capture opportunities and defend against threats. The most widely credited leading thinkers at the sustainability and management intersection, though, wanted to explore something else: the ways that many fundamental management and strategy practices will be transformed by the pressures that sustainability issues are already bringing to bear. This article identifies eight significant ways that current management expectations and practices will be affected by growing societal and economic understanding about sustainability. Among them: how labor productivity can be dramatically increased by sustainably designed workplaces; how companies "bump into" sustainability-related choices, even when they don't look for them; how a company's sustainability profile will become a proxy for the organization's overall management quality; how innovation results are improved by pursuit of sustainability-related outcomes; how sustainability efforts within an organization lead to more productive collaboration across typical organizational silos; and how transparency and trustworthiness will become increasingly consequential to competitive success.

When it comes to tapping into the passions of employees, the opportunities and threats that sustainability presents are two sides of the same coin.

As sustainability-related pressures change the competitive landscape, what kinds of capabilities and characteristics will that landscape demand of companies that aim to thrive? Here's what Business of Sustainability Survey respondents and sustainability thought leaders say.

In 1994, when Interface Inc.’s founder and CEO Ray Anderson began to think about his legacy, it made him uneasy. Deep down, Anderson realized that the business model of the commercial carpet manufacturing company he had founded 20 years before was based on “digging up the earth and turning petroleum and other materials into polluting products that ended up in landfills” — not something he wanted his grandchildren and great-grandchildren to remember him by. So at age 60 Anderson broke with the old model and began anew. Standing up to naysayers (whose ranks included associates, suppliers and Wall Street analysts), he set out to transform Interface from a traditional business built on consumption and waste to one whose focus — that is, beyond profitable growth — would be zero waste and restoring the earth. Since the start of the journey, Anderson and his associates have confronted technical barriers that no one could have anticipated. But inch by inch, kilowatt-hour by kilowatt-hour, recycled pound of carpet by recycled pound of carpet, Anderson’s vision has moved closer to reality. In addition to becoming increasingly efficient in its energy and materials usage — for example, 89% of Interface’s global electricity and 28% of its total energy come from renewable sources — Interface prides itself on its ability to turn an increasingly large percentage of its carpet into new product. It is also proud of the influence its sustainability efforts are having on other companies. This article presents a timeline showing how Anderson’s “mental model” changed and how he and his company moved along the road to sustainability.

In 2009, the business concerns with sustainability intersected with an urgent global economic crisis.

Many companies are taking the first incremental steps toward sustainability, such as energy conservation and recycling. That's a good start — but going further can yield significant competitive advantage.

Sustainability is the buzzword du jour, but how do you actually go about achieving it? Well, it’s clear there isn’t a one-size-fits-all strategy. Look at five companies, and you will see five different paths, each particular to a specific company’s market and problems. Take Nike Inc., whose brand is synonymous with cutting-edge design. Redesigning the athletic shoe to cut down on material became a core element of its approach to reducing waste. But what works for Nike might not exactly work for a company like start-up electric vehicle supplier Better PLC, LLC, which is rolling out electric car recharging stations. How does it pursue sustainability? By identifying the countries most receptive to its cutting-edge idea. General Electric Co. takes yet another approach, seeing sustainability not only as a cost-savings measure within the company (cut energy use, and emissions and costs go down) but also as a solution to sell to other companies–hence, its $17 billion ecomagination unit. Mining giant Rio Tinto, in turn, looks at it through a social lens, while Wal-Mart Stores Inc. sees sustainability as a challenge to revamp the practices of its more than 100,000 suppliers. In short, sustainability is less a target than an approach, which is why it is continually being refined. As companies ramp up understanding, they also push the envelope of what can be accomplished. Though it takes investment and commitment, the rewards are seen in cost savings, new products, customer engagement and employee commitment. In this way, sustainability becomes a competitive advantage.