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February 16, 2009
Sustainable Corporations Outperform During Economic Crisis
    by Robert Kropp

Study finds that companies with commitment to sustainability have outperformed others by an average of $650 million in market capitalization.


A recent analysis by A.T. Kearney, a management consulting firm, indicates that companies with a strong commitment to sustainability outperformed averages by 15% in 16 out of 18 industries over the six month period from May through November 2008.

The study, entitled Green Winners: The Performance of Sustainability-focused Companies in the Financial Crisis, analyzed 99 of the largest companies recognized as sustainable by the Dow Jones Sustainability Index or the GS Sustain focus list. The study defined sustainable practice as that which is "geared toward protecting the environment and promoting social well-being while achieving shareholder value."

The performance differential between sustainable corporations and their competitors amounts to an average of $650 million in market capitalization per company, the study found.

The study found that sustainable corporations demonstrate characteristics that position them to more effectively weather crises such as the current economic downturn. Companies that focus on long-term planning develop sustainability practices that create value for shareowners. One such company included in the report managed to increase production volume by 76% over a ten-year period while reducing greenhouse gas emissions by 16%, energy use by 3% and water use by 28%.

The study also found that companies with strong corporate governance oversight outperformed competitors with no such policies in place. Examples of governance cited in the article include the key role played by boards of directors that are free of conflicts of interest and have as chairperson an individual who does not hold an executive role in the corporation.

Transparency regarding the sustainability efforts of supply chains, the sharing of carbon emissions data and membership in the United Nations Global Compact were other ways in which sustainable corporations successfully distinguished themselves from their competitors.

Sound risk managements practices and such green innovations as reducing waste and emissions, using alternate energy sources and producing natural products were also cited by the report as accomplishments that help account for the outperformance of sustainable corporations.

"The most sustainability-focused may well emerge from the current crisis stronger than ever," the report concluded, "Recognized by investors who appreciate the true long-term value of sustainability."

 

 
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