A quick Google search on the term “corporate sustainability” yields almost 3 million hits. In reading corporate press releases, annual reports, proxy statements, and other shareholder communications, it is clear that the idea of being a good corporate citizen has taken root and is more than a passing fad. Very few would argue that corporations should not consider the social and environmental considerations of their business practices, but the question remains: how do these practices affect cash flow, profitability, and shareholder value?
In the January-February 2011 issue of Harvard Business Review, Michael Porter and Mark Kramer discuss the concept of “shared value,” which recognizes that responsible business practices are not a zero-sum game. While similar in nature to corporate sustainability and corporate responsibility, shared value differs in that the benefits of corporate actions are viewed in conjunction with the costs of those actions, linking social concerns with economic realities. They cite the following examples:
- Johnson & Johnson has implemented numerous wellness programs for its employees; the resulting savings of $250 million in healthcare costs provides them with a return of $2.71 for every dollar spent on those programs.
- Walmart has saved $200 million in costs by reducing the amount of its packaging of products and reducing the miles driven by its delivery trucks. These changes not only saved money, but they helped the environment.
As more companies demonstrate that shared value is good for the planet and good for the bottom line, expect more shareholders to hold companies accountable for their actions. And expect more companies to embrace these opportunities to do well while doing “good.”