Sustainability Focus Yields Business Benefits

JON SPRINGER

CHICAGO — Growing societal concerns over topics such as the environment and diversity are not problems for American business, but opportunities, author and Fortune magazine editor Marc Gunther told attendees at the FMI Show here Sunday.

“Society has higher expectations of business today, and the smart companies are getting out ahead of them,” said Gunther, who argued that organizations that embrace solutions to these issues are finding real business benefits as a result.

“Twenty years ago, companies saw environmental issues purely as problems, as costs,” he added. “Today, there are a vast array of instances where Fortune 500 companies are working hand in hand with big environmental groups to solve problems together.”

Gunther, whose specialty at Fortune has been reporting on company values, said a common characteristic of successful companies today is a willingness to incorporate values as a purpose of business. “Purpose is one thing that sets apart a great company.”

Executing that plan has called for a new approach to business that is more relationship-driven than in the past, Gunther argued. McDonald's, for example, addressed concerns over its role in sustainable fish supplies by developing a view that fish is a food McDonald's wants to continue to be able to buy 25 years down the road. “Worry not about the next quarter, but the next quarter-century,” he said.

Gunther pointed to a groundswell of societal activity driving corporate concerns toward sustainability. He credited engaged employees, effective advances made by activist groups and the proliferation of information through the Internet with leaving companies “no place to hide” and encouraging a trend toward transparency.

Increasingly, he added, customers are using their values to pick companies with which they'll do business, and investors are also playing a part. Goldman Sachs, for example, influenced markets and, not incidentally, made money, when it took the issue of climate change into account before making investments and recommendations, Gunther said.

Companies bullied into confronting sustainability issues, including Nike (worker and factory conditions), McDonald's (health and obesity concerns) and TXU (greenhouse gas emissions), eventually found the solutions to those problems had unexpected business benefits, Gunther said.

Nike found that by monitoring conditions at its overseas factories to prevent worker mistreatment, it received better worker productivity, Gunther said. Private equity firms making a bid for energy giant TXU first got the blessing of leading environmental groups before proceeding, and with their help shifted business strategy — and public sentiment — to a leading-edge position in the carbon-emissions debate.

And by becoming more transparent about food ingredients and offering more healthful menu choices, McDonald's was able to draw more visits from families, Gunther said.

“I wonder what [late McDonald's founder] Ray Kroc would say if he could walk into a McDonald's today and see them giving away yoga DVDs and serving Asian salad,” Gunther said. “He'd think the world had changed. And it has.”

Wal-Mart has also made significant strides embracing sustainability that also yield profits for the company. A “zero waste” position resulted in programs to sell used items such as clothes hangers to recyclers rather than paying to haul them to landfills.