Six Things Companies Can Do To Improve Environmental, Social Impact

Consumers, shareholders and regulators are increasingly demanding that companies be committed to sustainability and social good, and now a comprehensive new report from the University of Maryland’s Robert H. Smith School of Business can help companies figure out how to do that most effectively.

The State of Environmental and Social Value Creation report, from the Smith School’s Center for Social Value Creation, lays out a framework that companies across industries can use to make measurable improvements in their environmental and social performance. It details the most effective strategies for driving environmental and social value creation, dubbed ESVC by the researchers.

CSVC Director Nima Farshchi hopes that companies can utilize this report to rethink ESVC strategy in their corporate cultures.

"We feel the research done in this report makes it digestible for a company's leadership to understand ways to create the greatest impact while not compromising their bottom line,” he says. “Utilizing these levers helps create strategic efficiencies."

The center presented the findings at its second annual ESG Conference on Dec. 9 in College Park, Md.

During the conference, Smith faculty, alums and industry experts from top companies – including Microsoft, Marriott, GE Healthcare – delved into the best practices and lessons learned for nine industries covered in the report: consumer goods and retail, energy, healthcare, technology, automotive, financial services, telecommunications, hospitality, and entertainment. Each industry is explored in detail in individual focus reports. 

The analysis revealed four core recommendations for businesses, regardless of industry:

1. Identify the ESVC levers that best fit your business. Invest your time and effort where your company can make the most impact. Continuous investment in levers like employee wellbeing, community development and supply chain resilience will not only optimize daily business operations, but also help keep businesses afloat during adverse times, the researchers say.
2. Institute operational oversight. Have leaders committed to ESVC at the top of your organization and consistently throughout. Including ESVC in daily conversations and tying executive compensation to ESVC goals can help companies drive buy-in and employee participation, say the researchers.
3. Employ a sustainable financing model that engages every employee. CSVC recommends adopting a hybrid budget, where middle managers have authority and ownership to implement ESVC initiatives, so teams don’t have to compete for funds.
4. Implement a transparent, holistic reporting system to drive real change with accuracy and real accountability. This can also help attract investors, customers and other companies as collaborators, say the researchers.

The Center for Social Value Creation worked with Sattva Consulting, led by Smith alum Rahul Shah, MBA/MS Fin ’15, on the research. The report examines the environmental and social initiatives of companies in the nine industries. The researchers also interviewed corporate leaders and reviewed more than 150 academic and corporate reports.

The changes companies are already making are often motivated by pressure from consumers, regulators, investors and the bottom line – and often by a combination of forces. The research finds that 80% of corporate ESVC commitments are driven by increased consumer demand, 67% are responding to regulation and oversight mandates, 55% by a push from investors, and 53% by a push to streamline operations and save money.

The findings reveal six ways, or “levers,” companies can generate meaningful, measurable improvement in environmental and social performance: product research, development and innovation, sustainable production, supply chain management, coalitions, financial and in-kind support, and talent management.

The center also identifies which levers are most effective for each of the nine industries reviewed. The study also identified three types of institutional change that can make the most effective use of ESVC levers: operational structure, financing and measurement and reporting.

The center points to the success of companies that have revamped their structure to embed ESVC policies in their boards and enterprise scale organizational structures. They also highlight companies that are using standalone, integrated and hybrid financing models to support their ESVC commitments. And the report calls out advancement for companies that are taking greater effort to monitor, report and communicate their performance against ESVC goals.

“Our survey shows that environmental and social value creation is an urgent concern—to consumers, to regulators, and businesses across industries,” write the researchers in the report. “The organizations finding success are those that pull the right levers and make strategic institutional changes.”

Read the full report, The State of Environmental and Social Value Creation, and the individual industry focus reports.