Out of the Sustainability Doldrums

The doldrums. It’s a strange association with sustainability, I know, but it has stuck with me over years of interviewing corporate sustainability leaders. The doldrums are vast oceanic regions of becalmed waters with no wind, known as the “horse latitudes” because stalled 15th-century sailors would jettison ponies overboard as food and water ran short.

Corporate sustainability leaders are like explorers in an age of business discovery. Passionate about business sustainability, they voyage across the org chart sharing their vision, converting business units to the cause. But almost universally, their expeditions stall out at the doors of the financial suite. The CFO’s office has been the sustainability doldrums, sucking the wind out of sustainability managers’ sails.

“Investors don’t care about sustainability,” was the usual response from the financiers, “They only care about this quarter’s results.” For sustainability managers, there was no easy response to this claim. Sustainability successes accrue over the medium to long term, with some benefits — like avoided PR debacles — never even showing up in Bloomberg terminals. CSR managers looking to the CFO for sustainable project funds were left dead in the water.

But in the last two years, corporate sustainability leaders have begun telling a new tale. The investor winds are shifting and sustainability matters, a view confirmed by our new 2016 MIT SMR and BCG sustainability report, “Investing for a Sustainable Future.” An overwhelming three quarters of executives in investment firms agree that sustainability performance is materially important for investment decisions, citing revenue growth, operational efficiency, and risk reduction as the boons of solid sustainability management.

The shift is catching many executives off guard. They are unprepared, and none more so than those in investor relations, where only one in four IR professionals say they explain sustainability’s bottom-line impact to investors. For IR professionals, sustainability has historically been a headache, coming in the form of hostile shareholder activists or tedious sustainability information requests. It’s no wonder that half of our IR respondents don’t believe sustainability is important for competitiveness.

This history has left IR a sustainability backwater. One anecdote captured the problem plainly. When a sophisticated group of investors inquired into sustainability issues they deemed material for a company, a meeting was arranged with the company’s head of IR and the director of sustainability. As questions became precise and technical, the IR manager was quickly out his depth.