Become A Member Benefits and Ordering Competitive Advantage

By Steve Schueth

“There’s no alternative to sustainable development. Even so, many companies are convinced that the more environment-friendly they become, the more the effort will erode their competitiveness.” So begins the hard copy version of a September 2009 Harvard Business Review article entitled “Why Sustainability Is Now the Key Driver of Innovation.”

The article then argues, based on the study and experience of its authors, Harvard professors Ram Nidumolu, C.K. Prahalad, and M.R. Rangaswami, that becoming environment-friendly can lower costs and increase revenues. The authors make the bold statement that “in the future only companies that make sustainability a goal will achieve competitive advantage.”

A November 2009 report from the Economist Intelligence Unit approaches the business case for sustainability from a different perspective; that of senior managers surveyed in Asia, Europe, North America, Latin America, and the Middle East.

“Seventy-eight percent of respondents say sustainability initiatives are very or somewhat important to their current business strategy. Eighty-seven percent of respondents see them as very or somewhat important to future growth of plans, and the same number expect them to be very or somewhat important in five year’s time.”

The Economist Report concludes with the observation that sustainability is “an important issue for business today precisely because companies have discovered that success can lead to good financial performance, no matter the economic climate.”

In October 2009, SRI in the Rockies Conference participants were treated to a ‘duet’ presentation by Gil Friend, sustainability consultant and author of “The Truth About Green Business,” and L. Hunter Lovins, founder and president of Natural Capitalism Solutions. Friend and Lovins shared the stage and bantered back and forth with each other and with the audience of 500+ SRI industry practitioners, making the business case for sustainability.

Lovins offered an investor perspective: “We now have 15 separate studies from the sorts of wild eyed environmental radicals like Goldman Sachs and McKinsey showing that the companies that are the leaders in environment, social, and good governance policy have twenty-five percent higher stock value, the fastest growing stock value, are well protected from value erosion even after the collapse, and even after the collapse have market capitalization averaging $650 million more than their competitors,” she said. “Conversely, the worst performing companies are most likely to have nobody in charge of sustainability.”

In a very real sense, Friend and Lovins were preaching to the choir at SRI in the Rockies. For over twenty years, the SRI industry has been on the cutting edge of using ‘extra financial’ factors such as corporate social responsibility, sustainable business practices, good governance, and transparency as key identifiers of better managed companies. The SRI industry believes that companies who are leaders in the holistic integration of sustainability into business operations will do better—better for investors, and better for all citizens of a growing, vibrant, healthy global society.

The good professors at Harvard, the executives surveyed by the Economist Intelligence Unit, Gil Friend, Hunter Lovins, and many other experts in the field of sustainable business view sustainability as a “must have” strategy for long-term business profitability and success.

First Affirmative client portfolios are invested in such companies. We think of them as ‘companies of the future.