Why the Business Case for Sustainability Will Win Out

Last summer, the beer company Anheuser-Busch temporarily rebranded its iconic Budweiser cans by plastering the word “America” across them instead of the word “Budweiser.” Nothing says “I love the U.S.A.” like a clever marketing campaign, right?

In fact, Anheuser-Busch has another program that sells its passion for this country in a more concrete and more profound way: It’s called the Better World campaign, and it has resulted in the company’s reduction of water use at its U.S. breweries by almost 50% over the past 10 years, recycling of 99.8% of its waste at the same facilities, and scaling back on its packaging materials by more than 75,000 tons. Three months ago, Anheuser-Busch went a step further and announced it would purchase 100% of its electricity from renewable sources by 2025 — an act it estimates will make it the largest corporate direct purchaser of renewable electricity in the global consumer goods sector.

Then Donald Trump declared that he would withdraw the United States from the 2016 Paris climate agreement. The United States had reiterated in that global accord that it was targeting a reduction of U.S. greenhouse gas emissions by 26% to 28% below 2005 levels by 2025.

Anheuser-Busch’s reaction? Chief sustainability and procurement officer Tony Milikin reaffirmed the company’s climate commitments. “Fossil fuels contribute directly to climate change,” he wrote, in a column published the same day as Trump’s statement. “By initiating long-term agreements with clean-energy providers, businesses can provide stable demand and the capital for further investment in local renewable energy infrastructure projects.” Buying renewable energy makes good business sense, Milikin added: “In some markets, renewable energy purchased via PPAs [power purchase agreements] is cheaper than grid-sourced electricity.”

Milikin’s comments may not have been designed as a direct rebuke to the president, but they essentially said that Anheuser-Busch remains fully committed to climate efforts because it’s (1) good for America and (2) economically smart for the company.

Anheuser-Busch is not an outlier. More than 1,200 U.S. governors, mayors, and businesses have signed an open letter pledging that “We Are Still In.” Apple, Campbell Soup, General Electric, Facebook, Tesla, and Walmart have all said that they will continue with company-specific plans to battle climate change.

MIT Sloan Management Review has been investigating sustainability’s business case for years. Our new report, “Corporate Sustainability at a Crossroads,” points out that adjusting a company business model to capture sustainability opportunities “will work in the long term only if one can establish a business case for these efforts.” How and why companies make that case has been a recurring theme in our eight years of examining how climate action is becoming corporate policy. Here are some of the stories we’ve highlighted:

• Our 2011 sustainability report noted that institutional investors, such as universities and state pension plans, are providing motivation and incentive, by demanding more information on companies’ sustainability performances. Roberta Bowman, then senior vice president and chief sustainability officer of Duke Energy Corp., the Charlotte, N.C.-based electric utility company, said: “In addition to the more traditional ‘socially responsible investors,’ we are finding that some of our mainstream investors are now looking at sustainability performance as an indicator of overall business value. They’re acting on the theory that our sustainability measures — our efficiency with resources, our employee retention, etc. — are predictors of overall business profitability.” Today Duke, through its Duke Energy Renewables LLC subsidiary, acquires, develops, and operates wind and solar renewable generation in 14 states across the United States.
• Footwear and apparel company Timberland LLC, based in Stratham, New Hampshire, was working closely with the U.K.-based auditing organization Leather Working Group when we talked to Betsy Blaisdell, manager of environmental stewardship for Timberland, for our 2014 sustainability report. The auditing group maintains a protocol that assesses the environmental compliance of tanners and promotes sustainable environmental business practices within the leather industry. “Through our work with the group, we can foster best practices related to energy, chemical, and water management, and make sure we only buy from silver- or gold-rated tanneries,” said Blaisdell. “The work also reduced complexity in sourcing.” Today, Timberland uses an index that measures the climate impact, chemicals, and resources consumed in the manufacture of some of its footwear products. The index helps the company compare a product’s score with its profit margin. Sustainable products “may be more expensive to produce, but generate better margins,” said Blaisdell.
• Stonyfield Farm Inc. remade part of its supply chain to help ensure access to organic bananas, an important part of its product mix. Wood Turner, then the company’s vice president of sustainability innovation, told us in 2014 that the New Hampshire yogurt company had for years been purchasing the pesticide-free fruit from an excellent Costa Rican grower association. But the association relied on contract processors to turn the bananas into puree, and that part of the process had a lot of instability. The situation, said Turner, affected the growers’ ability to see significant margins and Stonyfield’s “security of supply, which creates all kinds of challenges for us.” Stonyfield’s solution was to collaborate with the grower association “to disrupt their business model by installing small-scale processing capability.” The growers became processers as well as farmers – allowing them to sell directly into the global marketplace and stabilizing Stonyfield’s supply chain at the same time. Stonyfield still touts this collaboration on its online Source Map, which details who’s producing its ingredients.

The bottom line: Sustainability efforts that make corporate operations more stable and are financially profitable have built-in incentives for companies to remain committed to them. That will continue to be true — whether the U.S. is a party to the Paris agreement or not.

We invite you to explore our sustainability reports and interviews from over the years, and read our new sustainability summary about all the ways that corporations are battling climate change today.