Five Characteristics of Sustainable Companies

By Leslie Brokaw | MIT Sloan Management Review

What differentiates sustainable companies from traditional ones?

In “How to Become a Sustainable Company,” an article that will appear in the Summer 2012 issue of MIT Sloan Management Review and is available now as a special preview, authors Robert G. Eccles, Kathleen Miller Perkins and George Serafeim conducted more than 200 interviews in more than 60 companies to explore how sustainable companies were innovating.

“Currently, organizations that exhibit a broad-based commitment to sustainability on the basis of their original corporate DNA are few and far between,” the authors write.

Instead, most companies become sustainable through conscious and deliberate efforts. To show how the transformation occurs, the authors studied organizational models of both “sustainable” and “traditional” companies.For most companies, becoming sustainable involves a conscious and continuing effort to build long-term value for shareholders.

Among the findings:

  • Top-level leaders of sustainable companies are perceived as taking a long-term view when making decisions.
  • Leaders at 72% of the sustainable companies are willing to take measured risks in pursuit of sustainability, in contrast to 40% at traditional companies.
  • 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 traditional companies (72% vs. 20% at traditional companies).
  • Sustainable companies encourage their supply chains to adopt sustainable strategies (83% vs. 20% for traditional companies).
  • Sustainable companies 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 targeted programs linking the objectives to business results (90% vs. 10% for traditional companies).