The link between sustainability and profits remains unclear to businesses in short term, according to new research

Only half of companies currently report their progress toward meeting environmental and social sustainability goals.

Just 24% of executives in an Economist Intelligence Unit survey believe there is a strong link in the short term (1-2 years) between financial performance and commitment to sustainability. However, 69% believe the link is strong in the long term (5-10 years), and companies worldwide are moving sustainability principles into their core policies and practices. Most will increase that emphasis over the next three years.

The survey, carried out in December 2009 and January 2010 among over 200 finance and corporate social responsibility executives, explores how companies view sustainability and how they are incorporating these principles into their daily operations. The study defines sustainability as operating in a way that preserves the long-term productive capacity of the natural and social environments. The survey, which was sponsored by Enel, produced the following key findings:

• The poor business climate is an obstacle to pursuing sustainability.
  Thirty-four percent of respondents said their firms’ immediate financial goals were a more pressing priority than sustainability. Not surprisingly, this represents the leading obstacle to embracing sustainability. Lack of consensus and clarity are also obstacles.
• Executives nonetheless increasingly see opportunity in sustainability.
  Eighty-seven percent agree that sustainability will become more important in the coming three years. Of these, 46% strongly agreed. While sustainability represents a risk for some, others see opportunity.
• Companies are embedding sustainability into various corporate functions.
  Executives report including sustainability into a variety of corporate functions, including supply chain relationships (29%), improving energy efficiency (38%), educating employees on sustainability (32%), and engaging employees in sustainability related activities (30%). Fifty-four percent say sustainability efforts have been led by top management, which may explain the wide reach of such initiatives.
• But only around half of companies report their progress on sustainability.
  Just 49% of respondents said they report progress in meeting their environmental sustainability goals. Slightly over half (53%) report their progress on meeting social sustainability goals. Nonetheless, executives say that stating goals and reporting progress towards those goals are essential in embracing sustainability.
• Cash incentives are not widespread—but are growing.
  Employee recognition programmes are the most widespread employee incentive, cited by 38% of respondents. Just 18% of firms link pay to sustainability indicators, but anecdotal evidence suggests this practice is growing among leading companies.

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Notes for editors

The Economist Intelligence Unit survey was carried out in December 2009 and January 2010. The 202 respondents were based mainly in Asia-Pacific (43%), North America (29%) and Western Europe (24%). All major industries were represented. More than one-half of respondents were executives at director level or higher. Two-thirds came from companies with more than US$500m in annual revenue and 27% from companies with more than US$10bn in annual revenue. About one-half had responsibility for finance, and one-half for corporate social responsibility.

The briefing paper is based on the results of the survey. In addition, the Economist Intelligence Unit interviewed ten senior executives and industry experts on how they integrate goals of sustainability into their business strategies and practices. The insights from these interviews appear throughout the report.

About the Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business–to–business arm of The Economist Group, which publishes The Economist newspaper. As the world's leading provider of country intelligence, the Economist Intelligence Unit helps executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information about the Economist Intelligence Unit can be found at www.eiu.com or follow us on www.twitter.com/theeiu.