Senior sustainability heads have very little budgetary authority and control over their own initiatives: Verdantix Analyst

Greentech Lead India: 
Corporate sustainability initiatives are likely to grow by less than 10
percent in 2013, according to a new global survey conducted by independent
analyst firm Verdantix. According to the survey only 11 percent of Heads of
Sustainability anticipate increasing spend by more than 10 percent in 2013
compared to 2012.

Greentech Lead recently interacted with Patty Satkiewicz,
industry analyst, Sustainability at Verdantix, to get more details of the
report and understand the difficulties surrounding corporate sustainability
initiatives. Our interaction follows:

Despite the increasing pressure from the community and
the government, most organizations stay away from adopting environmental
sustainability practices. In your report you said corporate spending on
sustainability will grow less than 10 percent in 2013. What according to you is
the reason for the slow adoption of sustainability practices?

When we look corporate attitudes about sustainability, we
see that the vast majority of CEOs view sustainability as long- or medium-term,
non-financial issues.   We interviewed 250 dedicated sustainability
heads at $250 million+ revenue firms across the globe and across 21 industries;
these firms are aware that sustainability challenges exist and most want to see
improvement in their sustainability practices.  But our data show that
only 21 percent of CEOs believe that sustainability has direct financial
impacts on their firm.  It’s tough for sustainability leaders to get the
budgets and buy-in for their projects in a tough economy when the CEO isn’t on
board.  

Sustainability does not bring profitability to companies
though it brings some environmental benefits. Do you expect this to change over
the next few years? Can sustainability practices help improve bottom line of
companies? However, in your report, you said energy, environment and
sustainability issues have impacted the financial performance of some
companies.  Please explain.

When we look at what drives firms to invest in new
projects, we find that 46 percent of sustainability leaders say that cost
reduction aligned with sustainability benefits is a very important factor for
pitching their new programs to their CEO.  The degree to which
implementing sustainability programs drives profit depends on the industry
sector — for example, an energy-intensive industry like utilities is going to
get a greater return on energy management investments than a financial services
firm.  Over half of firms say that improving energy management is a very
important short-term improvement.   Our survey also shows that firms
invest in sustainability to manage corporate reputation risks and to meet
compliance requirements.

Typically, what are the financial sources for companies
— big and small– for sustainability initiatives?

Unlike functional areas like marketing and IT, for
cross-functional programs like sustainability, there is less likely to be a
consolidated enterprise-wide budget.  The budgetary flow down to the
sustainability leader is often matrixed and may come from different departments
like communications, operations, and EH&S.  In our survey, we asked
250 of the most senior sustainability leaders at large firms worldwide to tell
us about their firm’s sustainability budget — how much their firm allocates to sustainability
initiatives, the degree of budgetary control the sustainability leader has over
those initiatives, and how the sustainability leader expects budgets to change
based on the firm’s priorities.  We found, interestingly, that senior
sustainability heads have very little budgetary authority and control over
their own initiatives: depending on the initiative, only 7 percent – 23 percent
of leaders report fully funding the initiative. 

You have mentioned Energy management and EH&S
management as the key areas for improvement in 2013. Could you please explain?

Energy management is a key area for firms because of
potential cost savings.  Environment, health & safety (EH&S)
initiatives are also key areas for improvement because firms continually have
to meet EH&S-related compliance requirements.  Three-quarters of
sustainability leaders surveyed said that they’d use new compliance
requirements as an important or very important lever for securing funding from
their CEO.

What are the major industry segments in the world that
you think should immediately adopt sustainability initiatives? Why?  

Sustainability initiatives are most likely to be
successful when a line can be drawn directly from sustainability initiatives to
profits.  Again, the industries that plan on spending the most in the
future are in energy and basic resources; over 70 percent of those firms expect
budget increases in their next financial year.

Rajani Baburajan

[email protected]