Executive Summary

CAMBRIDGE, Mass., February 5, 2013 – Many companies are profiting from their sustainability efforts and are changing their business models to generate that profit, according to a new global study by the MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG). The study is being released today in a report titled The Innovation Bottom Line.

A new global study released today by the MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG) found companies reporting profits from sustainability rose 23 percent in 2012, to 37 percent of the total. Titled The Innovation Bottom Line, the study surveyed 2,600 executives and managers from companies around the world.

The study, which is based on a survey of 2,600 executives and managers from companies around the world, found that the portion of respondents reporting profit from sustainability rose 23 percent in 2012, to 37 percent of the total. At the same time, nearly half of respondents said their companies had changed their business model as a result of sustainability opportunities, a 20 percent jump over the previous year. The report calls these companies that have made business-model innovations "Sustainability-Driven Innovators."

Interestingly, the study found that companies in developing countries change their business models as a result of sustainability at a far higher rate than those based in North America, which has the lowest rate of business-model innovation and the fewest business-model innovators.

"Sustainability-Driven Innovators see the opportunity differently than do companies that haven't gleaned sustainability's financial rewards," explained David Kiron, executive editor at MIT SMR and a coauthor of the report. "They don't dwell on it as a cost issue. They focus on how their efforts can increase market share, boost energy efficiency and build competitive advantage."

Sustainability-Driven Innovators also bring a strong execution focus to their efforts, are much more likely to place customers at the center and work closely with many stakeholders, and drive sustainability objectives through skillful organizational change, Kiron said.

Read more: Findings from the report.
The extent to which a company incorporates sustainability concerns into its business model often correlates with its increase in profit, the study found. For example:

• 50 percent of survey respondents who had changed three or four business model elements said they profited from their sustainability activities, compared to only 37 percent of those who had changed only one element of their business model.
• When innovations to both target segments and value-chain processes were among the three or four business model changes, the percentage of respondents who said sustainability added profits climbed from 50 percent to nearly 60 percent.
• More than 60 percent of companies that had changed their business model and had sustainability as a permanent fixture on their management agenda said they have added profit from sustainability.
• Companies that profit from sustainability are almost 200 percent more likely to develop sustainability business cases. The business case is often integral to the company's overall strategy.

"The research suggests that business model innovation, top management support, collaboration with customers, and having a business case are all critical to creating economic value from sustainability activities and decisions," said Knut Haanaes, a BCG partner and coauthor of the report, who leads the firm's Strategy practice. "Executives need to view sustainability as both a business necessity and an opportunity. Even moderate changes to company business models can reap significant financial rewards."
In a section called "Hitting the Sustainability Bull's-Eye," the report outlines five recommended actions practiced by companies that are generating profit from sustainability.

• Be prepared to change business models
• Lead from the top, and integrate the effort
• Measure and track sustainability goals and performance
• Understand how customers think about sustainability and what they are willing to pay for in connection with sustainable products or services
• Collaborate with individuals, customers, businesses and groups beyond the boundaries of the organization

To illustrate how organizations are employing these practices, the report cites numerous company examples, including: AT&T, Campbell Soup Company, Dell, Ecover, Greif, Intel, Kimberly-Clark, Kraft Foods (recently renamed Mondelez International), Marks & Spencer, Nestlé, Patagonia, PepsiCo, Sainsbury, SAP, Sprint, Timberland, UPS, and Zipcar.

For more details on report's findings and interview transcripts, please visit the Sustainability & Innovation website.

To receive a copy of The Innovation Bottom Line or arrange an interview with one of the MIT SMR authors, please contact David Kiron at +1 617 253 8071 or dkiron@mit.edu. To arrange an interview with one of the BCG authors, please contact Alexandra Corriveau at +1 212 446 3261 or corriveau.alexandra@bcg.com.

About the Research Methodology
For the fourth year, MIT Sloan Management Review, in partnership with The Boston Consulting Group (BCG), conducted a global survey, to which more than 4,000 executives and managers responded. The report's analysis is based on a smaller subsample of 2,600 respondents from commercial enterprises, with respondents from academic, governmental and nonprofit organizations excluded. A wide variety of industries are represented. The sample was drawn from a number of sources, including MIT alumni, MIT Sloan Management Review subscribers, BCG clients and other interested parties. In addition to the survey results, the authors interviewed practitioners and experts from a number of industries and disciplines to understand the practical issues facing organizations today.

About the Sustainability & Innovation project
MIT SMR’s Sustainability & Innovation project is an exploration, in partnership with BCG, into how sustainability pressures are transforming the ways we all work, live, and compete. S&I’s research, reporting, and community help managers to understand better the new forces that will affect their organizations, to navigate through the overwhelming mass of information about sustainability, and to fend off threats and capitalize on opportunities that sustainability issues present.

About MIT Sloan Management Review
MIT Sloan Management Review leads the discourse among academic researchers, business executives and other influential thought leaders about advances in management practice that are transforming how people lead and innovate. MIT SMR disseminates new management research and innovative ideas so that thoughtful executives can capitalize on the opportunities generated by rapid organizational, technological and societal change.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 78 offices in 43 countries.

About bcgperspectives.com
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management’s agenda. It also provides unprecedented access to BCG’s extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm’s founder and one of the architects of modern management consulting. All of our content—including videos, podcasts, commentaries, and reports—can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.