Why only 2% of sustainability programmes succeed

Soci­ety is demand­ing more from cor­po­ra­tions and chief exec­u­tives than ever before. The new stan­dard for suc­cess includes more than finan­cial per­for­mance; com­pa­nies must have a pos­i­tive impact on the world.

And yet only 2 per cent of cor­po­rate sus­tain­abil­i­ty pro­grammes achieve their goals, accord­ing to con­sul­tan­cy Bain. It’s a fig­ure to make you rub your eyes in dis­be­lief.

Even the most high-pro­file schemes have strug­gled. The CocoaAc­tion alliance of the world’s lead­ing choco­late com­pa­nies gen­er­at­ed flat­ter­ing head­lines when it was launched, intend­ing to improve the liveli­hoods of 20 per cent of cocoa farm­ing fam­i­lies. But so far there’s no hard evi­dence the alliance is help­ing house­holds escape pover­ty.

With the right approach, com­pa­nies can see greater busi­ness results through social impact

Com­pa­nies from Wal­mart to Dis­ney and Tar­get have made pub­lic com­mit­ments to sus­tain­abil­i­ty, only to find them­selves ill-equipped to deliv­er. This is the norm, not the excep­tion.

So, what’s going wrong? Researchers at Pal­la­di­um, a glob­al impact firm work­ing in 90 coun­tries across the pub­lic and pri­vate sec­tors, inter­viewed 30 chief sus­tain­abil­i­ty offi­cers to find out. The rea­sons cit­ed for under­per­for­mance includ­ed poor inte­gra­tion with the company’s core busi­ness and the dif­fi­cul­ty of engag­ing with key stake­hold­ers in local com­mu­ni­ties.

But analy­sis point­ed to some­thing much deep­er: a lack of ambi­tion. Com­pa­nies are sim­ply not think­ing big enough.

Christo­pher Hirst, chief exec­u­tive of Pal­la­di­um, explains: “A new school may be need­ed in an impov­er­ished com­mu­ni­ty and look great in a cor­po­rate social respon­si­bil­i­ty report,” he says. “But it’s not enough to pull small­hold­er farm­ers out of pover­ty or improve your sup­ply chain in a mate­r­i­al way. The dri­vers of inequal­i­ty are com­plex and local con­text is cru­cial. Bolt-on ini­tia­tives and one-off con­tri­bu­tions bare­ly nudge the nee­dle.”

When organ­i­sa­tions think big, they can deliv­er fan­tas­tic results. Here’s an inspir­ing exam­ple. Peru has many small and strug­gling cocoa farm­ers, many of whom are age­ing while younger Peru­vians aren’t keen to join the sec­tor. The Peru Cacao Alliance was found­ed in 2012 to reimag­ine the whole sys­tem. Fund­ing was pro­vid­ed by USAID along­side pri­vate sec­tor investors, and Pal­la­di­um shaped the strat­e­gy and exe­cu­tion, recruit­ing more than 30 part­ners across the indus­try. The alliance edu­cat­ed farm­ers to improve land man­age­ment and yield, addressed the sup­ply chain, scru­ti­nised mar­kets and con­tracts, and intro­duced new tech­nolo­gies.

The results? “The size of the aver­age farm in Peru has tripled,” reports Mr Hirst. “Yield has dou­bled. Farm­ers are mov­ing out of pover­ty. The younger gen­er­a­tion is get­ting involved. Peru rose from the tenth largest spe­cial­i­ty pro­duc­er of cacao in the world to the sec­ond. It’s seen as a mod­el pro­gramme for nur­tur­ing small­hold­ers in emerg­ing mar­kets.”

This link­ing of cor­po­rate sus­tain­abil­i­ty goals with com­mer­cial goals is key and anoth­er fac­tor unearthed by Palladium’s research. Social impact can’t be pur­sued just for pub­lic rela­tions and it can’t be a cost cen­tre. These ini­tia­tives have to con­tribute to the company’s core strat­e­gy, busi­ness process­es and ulti­mate­ly the bot­tom line or risk join­ing the 98 per cent that fail.

“With the right approach, com­pa­nies can see greater busi­ness results through social impact,” says Mr Hirst. “In Lon­don, we’ve con­nect­ed social entre­pre­neurs with the cap­i­tal they need to suc­ceed. In Ugan­da, we helped one of the world’s most active micro-lenders estab­lish itself as a bank. We’re help­ing an Indi­an province to fund health­care for moth­ers with results-based return on invest­ment for investors. In each case, the finan­cial results go togeth­er with social impact, ensur­ing the long-term pros­per­i­ty of the projects and the sus­tain­abil­i­ty of the organ­i­sa­tions involved.”

Nat­u­ral­ly, many com­pa­nies will need help adapt­ing to these prin­ci­ples. Mr Hirst sug­gests com­pa­nies work with an estab­lished part­ner that can bring expe­ri­ence, local knowl­edge, gov­er­nance frame­works and the abil­i­ty to exe­cute on a bold strat­e­gy to ensure suc­cess.

“We believe a bet­ter world is pos­si­ble for every­one and that the start­ing point is an under­stand­ing of how every­thing is inter­con­nect­ed. No one can progress uni­lat­er­al­ly,” he says.

“If your com­pa­ny shares this view and wants to make a real impact, we should work togeth­er. By think­ing big, there’s no lim­it to what we can achieve.”

Pal­la­di­um is in the busi­ness of mak­ing the world a bet­ter place. Found­ed in 1965, it employs more than 2,800 experts in 90 coun­tries across the globe, work­ing with clients of all types. To find out more please vis­it thepalladiumgroup.com