Morgan Stanley, one of the largest financial institutions in the United States (U.S.), has just released the results of their study on the corporate sustainability of 303 public and private firms across North America, Europe, and APAC. The report indicates that most firms are aware that sustainability-related activities will play significant roles in firms’ survival and growth in the coming years. The report also highlights the firms’ perception of opportunities and challenges created by the movement toward sustainability.
Indeed, up to 85% of companies believe that sustainability significantly affects their long-term corporate strategy. These firms see sustainability as a value-creation opportunity. The interesting point is that 93% of Chinese firms consider sustainability as an opportunity to create value, and this percentage is higher than that of European or American companies. According to the report, the result may come from the Chinese government’s incentives to grow green technologies, renewable energy, and others. The report also suggests that 59% of the surveyed firms believe that they meet or exceed expectations on sustainability strategy.
Besides some opportunities created by corporate sustainability, there are challenges that the surveyed firms consider significant. The top concern is related to costs. Indeed, carbon reduction technologies and green technologies are still expensive, so the high costs of investment in these programs become barriers to corporate sustainability. Next to costs, the surveyed firm is concerned about investing in sustainability conflicts with its financial goals. Specifically, the investments in corporate sustainability programs will be contrary to the shareholders-maximization logic.
The corporate sustainability survey from Morgan Stanley carefully examines how firms factor in sustainability criteria when making strategic decisions. Results show that 55% of the surveyed firms take into consideration sustainability when formulating strategic decisions on capital expenditures, R&D, product developments, and M&As. In addition, about 45% of the firms in the sample indicate that sustainability targets affect their executive compensations, either short-term bonuses or long-term incentives. According to the report, the top three issues corporate sustainability can pose are (1) the restructuring of the supply chain to meet human rights obligations, (2) the scarcity of raw materials and their higher costs, and (3) higher costs or legal risks engendered from sustainability regulation.
In short, the report on the corporate sustainability survey from Morgan Stanley informs that sustainability poses both opportunities and challenges for organizations.
Author: Bao Hoang, Ph.D.
