Profits with purpose: How organizing for sustainability can benefit

Proﬁts with purpose: How organizing for sustainability can beneﬁt the bottom line

Sustainability—a term we use to describe the busi-

ness programs, products, and practices built

around environmental and social considerations—

is often seen as a luxury investment or a public-

relations device. We think that view is cynical and

increasingly untenable. In fact, a growing body of

evidence indicates that sustainability initiatives can

help to create profits and business opportunities.

McKinsey recently launched a knowledge collabora-

tion with more than 40 companies to understand

their sustainability challenges (see sidebar “How

we did it”). We sought to develop a set of practical

recommendations for companies to capture value

from sustainability. In doing so, we found that

leading companies pursue sustainability because it

has a material financial impact. The value at stake

from sustainability-related issues—from rising

raw-material prices to new regulations—is substantial.

“Leading on sustainability is driven largely by our

desire to grow,” one technology executive told us. “The

industry changes so rapidly that we need flexibility.”

Success requires both a structured program to

improve performance and a sustainability philosophy.

Such efforts often get stuck, especially at the

business-unit level, when managers have other

priorities. Moreover, given that less than 5 percent

of companies do a good job of providing financial

incentives or career opportunities for sustainability

performance,

people may not see the pursuit

of sustainability as a way to a build their career.

Profits with purpose:

How organizing for sustainability

can benefit the bottom line

Becoming a sustainability leader requires big changes, but the effort is worth it—

in both environmental and economic terms.

Sheila Bonini and Steven Swartz

Illustration by James Steinberg

In this article, we discuss the research about

the economic benefits of sustainability. Then we

detail the organizational practices businesses

need to follow to make this work. Finally, we show

how moving in this direction can create value.

Sustainability is a long-distance journey; the

evidence is growing that it is one worth taking.

Sustainability and value creation

Over the past 20 years, the idea of corporate sus-

tainability has become part of mainstream business

discourse. Companies in many industries issue

sustainability or corporate-social-responsibility

reports; executives everywhere pledge allegiance

to the idea. Even so, the concept still carries con-

siderable baggage. In a recent report for the UN

Global Compact, 84 percent of the 1,000 global CEOs

surveyed agreed that business “should lead efforts

to define and deliver new goals on global priority

issues.” But only a third said “that business is doing

enough to address global sustainability challenges.”

To understand the role of sustainability initiatives

in business, we looked at academic studies, investor

strategies, and public data on resource efficiency.

We also surveyed and interviewed companies

with successful sustainability programs. Our con-

clusion: sustainability programs are not only

strongly correlated with good financial performance

but also play a role in creating it.

According to research by Deutsche Bank, which

evaluated 56 academic studies, companies

with high ratings for environmental, social, and

governance (ESG) factors have a lower cost of

debt and equity; 89 percent of the studies they

reviewed show that companies with high ESG

ratings outperform the market in the medium (three

to five years) and long (five to ten years) term.

The Carbon Disclosure Project found something

similar. Companies in its Carbon Disclosure Leader-

ship Index and Carbon Performance Leadership

Index, which are included based on disclosure

and performance on greenhouse-gas (GHG)

emissions, record superior stock-market returns.

Companies in the Carbon Disclosure Leadership

Index substantially outperformed the FTSE Global

500

between 2005 and 2012. Companies in the

other index also did better.

How we did it

To create the factual basis for this

article, McKinsey canvassed

the extensive literature on the orga-

nizational practices and financial

effects of corporate-sustainability

initiatives. We also did our own

analysis of resource-efficiency and

financial-performance data.

Then we interviewed executives

from 40 companies from various

sectors, including oil and mining,

sneakers, soup, cosmetics, and tele-

communications. Research

participants were chosen because

they had outperformed their

industry average across financial

and sustainability-performance

metrics. We also interviewed experts

from universities, nongovernmental

organizations, and the financial sector.

Finally, we conducted a sustainability-

assessment survey, the seventh

of this kind, of almost 40 companies,

exploring why and how companies

are addressing sustainability and to

what extent executives believe

it can and will affect their companies’

bottom line. We benchmarked the

results of these 340 respondents

against McKinsey’s global-executive-

survey database of more than

4,000 companies.

McKinsey on Sustainability & Resource Productivity July 2014

Even more intriguing is recent research by three

economists (two from Harvard and one from the

London Business School) suggesting that sustain-

ability initiatives can actually help to improve

financial performance. The researchers examined

two matched groups of 90 companies. The com-

panies operated in the same sectors, were of similar

size, and also had similar capital structures,

operating performance, and growth opportunities.

The only significant difference: one group had

created governance structures related to sustain-

ability and made substantive, long-term investments;

the other group had not.

According to the authors’ calculations, an investment

of $1 at the beginning of 1993 in a value-weighted

portfolio of high-sustainability companies would

have grown to $22.60 by the end of 2010, compared

with $15.40 for the portfolio of low-sustainability

companies. The high-sustainability companies also

did better with respect to return on assets (34 per-

cent) and return on equity (16 percent).

The authors

conclude that “developing a corporate culture

of sustainability may be a source of competitive

advantage for a company in the long run.” As careful

academics, they note that this research was not

done in laboratory conditions, and therefore they

cannot claim definitive proof of causality:

“confounding factors might exist.” But they clearly

believe that they are onto something—that it is

the sustainability policies themselves that were

responsible for the better financial performance

of the high-sustainability group.

Additionally, there is evidence that being more

efficient at using resources is a strong indicator of

superior financial performance overall. We created

a metric (the amount of energy, water, and waste

used in relation to revenue) to analyze the relative

resource efficiency of companies within a sector.

On that basis, we found a significant correlation

(95 to 99 percent confidence) between resource

efficiency and financial performance in sectors

as diverse as food products, specialty chemicals,

pharmaceuticals, automotive, and semiconductors.

In each sector, there were also a small number

of companies that did particularly well, and these

were the ones that had taken their sustainability

strategies the furthest.

No wonder, then, that investors are increasingly

comfortable with the idea of putting their money into

socially responsible investment. In the United

States, such investment grew by 486 percent between

1995 and 2012, outpacing the broader universe of

managed US assets, which grew by 376 percent over

the same period.

In the last three years, socially

responsible investment has grown by 22 percent; it

now accounts for more than 11 percent of all assets

under management in the United States ($3.74 tril-

lion). Globally, more than $13 trillion is invested

in assets under management that incorporate

ESG metrics.

With trillions of dollars in play, the professionals

have taken notice. The quality and availability

of sustainability data has improved, for example,

as mainstream data providers such as Bloomberg,

MSCI, and Thomson Reuters have begun to

offer sustainability-performance data in much-

improved formats.

As a result, investors are able to go well beyond

“negative screening” (not investing in certain kinds

of companies or industries). This approach was

inherently limited, and did not lead to higher returns.

Now, investors are more sophisticated; they are

seeking above-market returns by investing in best-

in-class sustainable companies.

Osmosis Investment Management, for example,

assesses companies using a proprietary methodology

based on relative resource productivity; it has

built a portfolio of large companies that has out-

performed the market over the past eight years.

Goldman Sachs’s GS Sustain assesses both market

Proﬁts with purpose: How organizing for sustainability can beneﬁt the bottom line

competitiveness and management quality with

respect to environmental, social, and governance

performance. Generation Investment Manage-

ment uses a global research platform to integrate

sustainability into investing, taking into account

key global issues such as climate change and poverty.

All three have delivered above-market returns.

Applying performance management to

sustainability

Although sustainability is usually somewhere on the

corporate agenda, there are often problems with

execution, even in the most committed companies.

To find and deliver real strategic opportunities,

leaders should consider applying four organizational

practices. These principles aren’t new—they are

associated with performance management, in

particular—but they are not often used to address

sustainability challenges.

Identify issues and set priorities

Two-thirds of companies in a representative sample

from the S&P 500 have more than 10 different

sustainability focus topics, and some have more

than 30. That’s too many: it’s hard to imagine

how a sustainability agenda with this many focus

areas can break through and get the necessary

buy-in to be successful. While there are several

areas that companies need to comply with,

it’s better to concentrate on a few strategic themes.

Coca-Cola, for example, has set for itself a strategy

it calls “me, we, the world,” which encompasses

its approach to improving personal health and

wellness, the communities in which it operates, and

the environment. Within this strategy, the com-

pany reports making material, tangible progress on

metrics related to three specific areas of focus:

“well-being, women, and water.” The company does

not ignore other issues such as climate change

and packaging, but it has made it clear that this is

where it wants to lead.

To develop a clear set of priorities, it is important

to start by analyzing what matters most along

the entire value chain, through internal analysis

and consultations with stakeholders, including

customers, regulators, and nongovernmental orga-

nizations. This process should enable companies

to identify the sustainability issues with the greatest

long-term potential and thus to create a systematic

agenda—not a laundry list of vague desirables.

After extensive consultations, for example, BASF, the

global chemical company, put together a “materiality

matrix.” As Exhibit 1 shows, the chart maps the

importance of 38 sustainability-related issues based

on their importance to BASF and its stakeholders.

(Other companies use similar matrixes.) Such

exercises help companies to recognize the most

important issues early and then integrate them into

management.

Once the priorities are identified—having no more

than three to five is best—the next step is to

develop a fact base from which to create a detailed

financial and sustainability analysis. Siemens,

for example, identified one priority as helping cus-

tomers to reduce their carbon impact and has

created an environmental portfolio of green products

and services, including energy efficiency, renew-

able energy, and environmental technology. In 2013,

these generated revenues of €32.3 billion and

saved 377 million metric tons of carbon emissions.

Set goals

After completing the initial analysis, translate

this information into external goals that can be dis-

tilled into business metrics. These goals should

be specific, ambitious, and measurable against an

established baseline, such as GHG emissions; they

should also have a long-term orientation (five years

or more) and be integrated into business strategy.

And their intent should be unmistakable. One

company stated as a goal: “Reduce the impact of our

packaging on the environment.”

Getting more specific is even better. (Reduce how

much? By when? Compared to what?) Here is a

McKinsey on Sustainability & Resource Productivity July 2014

Exhibit 1

stronger approach, from a sustainability leader:

“Reduce 2005 carbon dioxide emissions by half

by 2015.” It is important to build internal support

to meet these goals. Our analysis found that the

companies that excelled at meeting sustainability

goals made sure they involved the business leaders

responsible for implementing them from the

start. One global manufacturer we interviewed

announced in 2010 that it would reduce GHG

emissions and energy consumption by 20 percent.

To do so, it set up energy assessments and energy-

management plans, established global programs to

optimize procurement and building standards, and

began to use renewable energy where possible.

Setting ambitious external goals motivates the

organization, forces resources to be allocated, and

promotes accountability. An analysis of companies

that are part of the Carbon Disclosure Project found

that those that set external goals did better on

cutting emissions—and also had better financial

returns on such investments. Stronger goals,

then, seem to encourage innovation; people may

feel more motivated to find ways to meet them.

Lack of goals is a sustainability killer: “what gets

measured gets managed” is as true of sustainability

as it is of any other business function. And yet it

is not happening. We estimate that only one in five

S&P 500 companies sets quantified, long-term

sustainability goals; half do not have any.

Show the money

Almost half (48 percent) of survey participants

said that the pressure of short-term earnings

Proﬁts with purpose: How organizing for sustainability can beneﬁt the bottom line

One company maps its sustainability priorities.

SRP 2014

Sustainability

Exhibit 1 of 3

Source: Company website

Rating by external stakeholders

Rating by BASF

Extremely

high

Extremely

high

High

Employability

Life-cycle thinking in value chain

Human rights

Risk of technologies/products

Public health/safety

Corporate governance

Renewable bio-based materials

Sustainability valuation

Partnering/multistakeholder collaboration

Gender diversity/

equal opportunities

Consumer education

Labor/social-policy rights

Water scarcity

Emerging markets

Political shifts/dynamics

Malnutrition

Security

Rebound effect

Land-use change

Biodiversity loss

Agricultural practices

Waste

Occupational health/safety

Compliance

Product stewardship

Population growth/urbanization

Renewable sources of energy

Sufﬁciency/postgrowth economics

Socially responsible environment

Poverty

Sustainable production

Regulatory environment

Energy consumption/

efﬁciency

Pollution opportunities from

technologies/products

Water pollution

Resource scarcity

Climate change/

global warming

Trust/

reputation

performance is at odds with sustainability initia-

tives. A constructive response is to make the case

that sustainability can pay for itself—and more.

Senior leaders will give sustainability lip service,

not capital, if they do not see financial benefits.

“Sustainability metrics can seem like random

numbers and don’t do much,” one chemical-industry

executive told us. “For our businesses, sustain-

ability efforts have to compete directly with other

demands, which means that financial impact

is key.” This needs to be done rigorously, reinforced

with fully costed financial data, and delivered

in the language of business.

Alcoa, a US-based global metals company, incor-

porates sustainability into how it does business—

and how it talks about the company to stakeholders.

In one investor presentation, for example, it

detailed how its supply-chain simplification sharply

lowered labor and energy costs as well as cut

GHG emissions, but it was the financial effects that

took front and center.

To emphasize that sustainability is a business

issue, boards should review goals at every meeting.

For each project, specific executives should be

accountable for costs and effectiveness. This is, of

course, much easier said than done. At Intel, for

example, although business leaders were interested

in saving water, they saw little financial justifi-

cation to do so: water was cheap. Advocates of the

initiative were able to calculate that the full cost

of water, including infrastructure and treatment,

was much higher than the initial estimates. Saving

water, they argued, could therefore create value

in new and unexpected ways. On that basis, Intel

went ahead with a major conservation effort.

The company now has a finance analyst who con-

centrates on computing the financial value of

sustainability efforts.

Making the business case for sustainability

might sound obvious, but apparently it isn’t. Most

companies do not communicate the financial

performance of sustainability; only a quarter said

that the financial benefits of these efforts were

well understood.

Sustainability initiatives can be challenging to

measure because savings or returns may be divided

across different parts of the business, and some

benefits, such as an improved reputation, are indirect.

It is important, then, not only to quantify what

can be quantified but also to communicate other

kinds of value. For example, an initiative might

improve the perception that important stakeholders,

such as consumer groups, nongovernmental orga-

nizations, or regulators, have of the company. This

can help to build consumer loyalty, nurture

relationships, and inform policy discussions.

Create accountability

The top reason that respondents gave for their

companies’ failure to capture the full value of sustain-

ability is the lack of incentives to do so, whether

positive or negative. According to the UN Global

Compact, only 1 in 12 companies links executive

remuneration to sustainability performance; 1 in

7 rewards suppliers for good sustainability

performance. Among the executives we surveyed,

38 percent named lack of incentives and 37 per-

cent named short-term earnings pressure for poor

results; about a third said the lack of key perfor-

mance indicators and not enough people being held

accountable were problems.

In this area, a number of companies exhibit good

practices from which others can learn, such as

tracking data and reporting indicators, including

carbon emissions, energy use, water use and waste,

and recycling. Even these companies, however,

are still working on integrating sustainability-

McKinsey on Sustainability & Resource Productivity July 2014

performance indicators into individual incentives;

the only area where most have managed this is with

regard to worker safety.

Adidas shows one useful approach. The sporting-

goods company breaks down its long-term goals into

shorter-term milestones. Its suppliers, for example,

are given strategic targets three to five years

ahead, as well as more immediate goals to encourage

them to focus. The beer company MillerCoors does

something similar. It tracks and quantifies progress

in ten areas, including water, energy, packaging,

and human rights, using its own sustainability-

assessment matrix. The idea is for MillerCoors to

understand its performance, in quantitative terms,

in areas that are often difficult to quantify.

How sustainability can create value

All the companies we interviewed are pursuing

sustainability agendas, and most are making

Proﬁts with purpose: How organizing for sustainability can beneﬁt the bottom line

Exhibit 2

Companies are pursuing sustainability in a way that creates value.

SRP 2014

Sustainability

Exhibit 2 of 3

Guide investment/divestment

decisions at portfolio

level based on sustainability

Mitigate risks and

capture opportunities

from regulation

Reduce reputation

risks and get

credit for your actions

(eg, through

proper stakeholder

management)

Manage risk of

operational disruptions

(from resource

scarcity, climate-

change impact, or

community risks)

Improve revenue

through increased

share and/or

price premiums by

marketing sus-

tainability attributes

Improve resource

management and

reduce environmental

impact across value

chain to reduce costs

and improve

products’ value

propositions

Reduce operating

costs through

improved internal

resource manage-

ment (eg, water,

waste, energy,

carbon, employee

engagement)

Develop sustainability-related

products/technologies to ﬁll

needs of customers/company

(R&D function)

Build a better understanding

of sustainability-related

opportunities in new market

segments/geographies

and develop strategies to

capture them

Source: Sheila Bonini and Stephan Görner, “The business of sustainability: McKinsey Global Survey results,” Oct 2011, mckinsey.com

Risk

management

Returns on

capital

Growth

Composition

of business

portfolios

Innovation and

new products

New markets

Regulatory

management

Reputation

management

Operational

risk

management

Green sales

and marketing

Sustainable

value chains

Sustainable

operations

aggressive public commitments. Is this just green

window dressing? Our analysis says no. Companies

are addressing important environmental and

social issues in a way that creates value. In previous

work, we outlined how leading companies use

sustainability initiatives across each of the areas

shown in Exhibit 2 to manage risk and to improve

growth and returns on capital.

In this research,

we sought to understand how successful companies

did it. What these interviews demonstrated is

that companies that built sustainability into their

operations saw immediate benefits, and that gave

them the momentum to do even more, creating the

conditions for long-term success.

These leaders told us that they pursue sustainability

because they believe it has a material financial

effect. The value at stake from sustainability issues

can be as high as 25 to 70 percent of earnings

before interest, taxes, depreciation, and amortiza-

tion (Exhibit 3). Sustainability leaders can and

do change their business models to respond to major

discontinuities, such as higher natural-resource

prices or changes in demand, that create material

risks to the business—or opportunities.

Manage risk

More than 90 percent could point to a specific

event or “trigger” that got them started, such as

consumer pressure or a jump in the price of

commodities. More than half cited long-term risks

to their business: 26 percent mentioned miti-

gating reputational risk, and 15 percent each said

avoiding regulatory problems and eliminating

operational risks.

Two candy giants, for example, are looking to

guarantee future supplies of cocoa, an essential

ingredient in chocolate, in part by improving

the sustainability of their suppliers. Mars is helping

smallholder cocoa farmers in the Cote d’Ivoire

to increase their productivity by providing access

to improved planting materials, fertilizers, and

training. It is also investing in research that will

help increase the quality and performance of

cocoa plants. Hershey’s sends out experts to teach

Exhibit 3

Our research shows that the value at stake from sustainability challenges

is substantial.

SRP 2014

Sustainability

Exhibit 3 of 3

Impact Examples Potential impact, % of EBITDA

Earnings before interest, taxes, depreciation, and amortization.

Rising operating

costs

Raw-material costs driven up by supply/demand

True cost of water or carbon reﬂected in prices

Production delay or cancellation due to lack of access

Especially signiﬁcant for “local” resources—

water, power

Supply-chain

disruption

Restricted license to operate

Reputational damage based on perceived misuse

of resources

Regulation/

reputation

McKinsey on Sustainability & Resource Productivity July 2014

Proﬁts with purpose: How organizing for sustainability can beneﬁt the bottom line

Introducing the circular economy

In the traditional linear economy, inputs

go in and waste comes out. The

circular-economy model, by contrast,

is based on reusing resources, regen-

erating natural capital, and decoupling

resource use from growth. We have

devoted considerable attention to

the circular economy; we believe it has

tremendous potential for companies,

for economies, and for the environment.

The process begins with design,

specifically by making a distinction

between a product’s consumable

and durable components. In the cir-

cular economy, consumables

are designed so that they can safely

reenter the biosphere; one way

to do this is to use pure materials that

can be easily separated and “cas-

caded” to the next use. H&M, the

global apparel retailer, for example,

collects old clothes and works

with I:CO, a reverse-logistics provider,

to sort them. The clothes are then

sold into the secondhand-apparel

market or substituted for virgin

materials in other products, and the

remaining textiles become fuel to

produce electricity.

For durable components, such as

metals, the preferred options are reuse,

remanufacturing, or refurbishment.

Such practices have long been the

norm for engines and building equip-

ment but are now becoming common

as well for photocopiers, power

tools, mobile phones, and passenger

cars. More and more industries are

discovering that taking back products

can reduce costs and strengthen

customer relationships. Doing so, how-

ever, requires a fundamental shift in

thinking—seeing consumers as users

and offering them performance,

not products.

This development is well under way.

Car-sharing services are an example;

they sell mobility, not vehicles,

and each car has multiple users, not

a single owner. Philips, the Dutch

manufacturer, offers another example.

Noticing that major customers were

reluctant to make large investments in

light of the financial crisis and the

rapid shifts in technology, the com-

pany began to offer lighting as a

service, not a product. “Customers

only pay us for the light, and we

take care of the technology risk and

investment,” explains CEO Frans

van Houten.

Toward a new industrial

revolution

Why should businesses move toward

a circular-economy model? First,

because global economic pressures,

such as rising resource prices and

a fast-growing global consuming class,

are changing the status quo. Second,

because it’s good for business. The

savings in materials alone could

top $1 trillion a year. We believe that

companies that adopt circular-

economy principles will outcompete

other actors in a world where scarce

resources expose companies to

high costs and unforeseeable risks.

The real payoff will come only when

multiple players from many sectors

come together to figure out how to

reconceive manufacturing processes

and the flows of products and

materials. Capitalizing on these oppor-

tunities will require new ways of

working. But the benefits, to both busi-

ness and the environment, are well

worth the costs.

Martin Stuchtey and Helga Vanthournout

Martin Stuchtey is a director in

McKinsey’s Munich ofﬁce, and Helga

Vanthournout is a specialist in the

Geneva ofﬁce.

For more, see Thomas Fleming and Markus

Zils, “Toward a circular economy: Philips

CEO Frans van Houten,” McKinsey Quarterly,

February 2014, mckinsey.com.

best-practice farming methods; its CocoaLink

mobile-phone service offers advice and market infor-

mation. Hershey’s is also addressing child labor

and school-attendance rates through local initiatives.

Both companies aim to have their entire cocoa

supply sustainably sourced by 2020.

Take advantage of new business opportunities

Almost half of those interviewed (44 percent)

mentioned business and growth opportunities as

a reason to get started on sustainability. A

number of different business models that embed

sustainability are emerging. Electric utilities,

for example, are working on ways to make money

by helping consumers cut their energy use.

Sustainability also offers an interesting way

to scope out product innovations that use fewer

resources or that meet specific social needs.

Redesigning products and services around sus-

tainability can drastically increase profits or

reduce costs (see sidebar “Introducing the circular

economy”). Unilever, for example, changed the

shape of a deodorant to use less plastic and created

a concentrated laundry product that sharply

reduces the use of water—innovations they might

not have found had they not been thinking

about sustainability. DuPont, a diversified science

company, began its sustainability operations

more than 20 years ago as a matter of risk reduction,

but these have turned into a major profit center.

Since 2011, the company has invested $879 million

in R&D for products with quantifiable environ-

mental benefits. DuPont has recorded $2 billion

in annual revenue from products that reduce

GHG emissions and an additional $11.8 billion in

revenues from nondepletable resources.

Improve returns on capital

Whether the trigger for commitment to sustain-

ability was risk management or growth, most

companies started by improving natural-resource

management. In fact, 97 percent of the research

participants were taking action on energy efficiency,

91 percent on waste, and 85 percent on water.

For example, Bayer, the German health and agri-

culture company, developed a resource-efficiency

check to improve operations by using by-products

and reducing wastewater. The company expects the

process to save more than $10 million a year, and

this is not unusual; 79 percent of Fortune 500 com-

panies reporting to the Carbon Disclosure Project

had higher returns on their carbon investments than

their overall portfolio. Paradoxically, taking such

actions may be easier to do in companies that have

been slow to embrace sustainability. There are

almost certainly “quick wins” ripe for the picking

that can bring tangible results and create momen-

tum to do more.

An emphasis on sustainability can also reveal

opportunities for process innovations. It is not

uncommon for companies to complain that

different units do not collaborate well. By its cross-

functional nature, sustainability brings different

divisions together and provides a common motiva-

tion; the result can be new, profitable ideas.

Lockheed Martin, for example, wanted to reduce

wood waste from packing crates. But as it started

on this one modest initiative, it found other

production improvements that reduced overhead

and resulted in more than $7.5 million in savings

from a $240,000 investment. Many of the companies

interviewed had similar innovation stories but

often did not measure the results or attribute them

to sustainability. That may help to explain why

there is still skepticism about whether sustainability

is worth it.

McKinsey on Sustainability & Resource Productivity July 2014

To succeed, sustainability efforts need to be an orga-

nizational priority, with clear support from

leadership. This is not easy. Fewer than half of the

leaders with whom we spoke thought they had a

sustainability philosophy that permeates their day-

to-day operations, even though their companies

considered sustainability one of their top priorities.

Chief sustainability officers have an important role

to play in this regard. Although they often do not

have the authority to dictate the agenda, they can

influence it. This means translating the promise

of sustainability into value propositions that make

sense to different parts of the company. This

takes time and effort. But there is no alternative: for

sustainability to spread, business units need to

own their part of the agenda.

Becoming a sustainability leader can pay off, but

it is not easy. “It’s a perception issue,” one executive

told us. “We need to show that it makes good

business sense to get over the hurdle.” Fair enough—

and the evidence is building that for the best com-

panies, this standard is within reach.

The authors wish to thank Anne-Titia Bové, Hauke

Engel, Rich Powell, Fraser Thompson, and Liz Williams

for their contributions to this article.

Sheila Bonini is a senior expert in McKinsey’s

sustainability and resource productivity practice and

is based in the Silicon Valley ofﬁce; Steven Swartz

is a principal in the Southern California ofﬁce.

In February 2014, McKinsey surveyed 3,344 executives about

their companies’ sustainability activities. The respondents

represented the full range of regions, industries, company sizes,

tenures, and functional specialties.

The UN Global Compact–Accenture CEO Study on

Sustainability 2013: Architects of a Better World, Accenture and

United Nations Global Compact, 2013, unglobalcompact.org.

Mark Fulton et al., Sustainable Investing: Establishing Long-

Term Value and Performance, DB Climate Change Advisors,

Deutsche Bank Group, 2012, dbadvisors.com.

FTSE Global Equity Index Series, as of January 1, 2013.

Sector insights: what is driving climate change action in the

world’s largest companies—Global 500 Climate Change Report

2013, Carbon Disclosure Project, 2013, cdp.net.

Robert G. Eccles, Ioannis Ioannou, and George Serafeim, “The

impact of a corporate culture of sustainability on corporate

behavior and performance,” Harvard Business School working

paper, HBS Working Knowledge, Number 12-035, November

2011, hbs.edu.

2012 Report on Sustainable and Responsible Investing Trends

in the United States, US SIF Foundation, Forum for Sustainable

and Responsible Investment, 2012, ussif.org.

2012 Sustainable Investment Review, Global Sustainable

Investment Alliance, 2013, gsi-alliance.org.

For example, to track environmental, social, and governance

(ESG) factors, Bloomberg has an ESG valuation tool, MSCI

has the ESG Impact Monitor, and Thomson Reuters offers

Quantitative Analytics.

Sheila Bonini, Timothy M. Koller, and Philip H. Mirvis,

“Valuing social responsibility programs,” McKinsey Quarterly,

July 2009, mckinsey.com.

Sheila Bonini and Stephan Görner, “The business of

sustainability: Putting it into practice,” October 2011,

mckinsey.com.

Proﬁts with purpose: How organizing for sustainability can beneﬁt the bottom line