Sustainabilty: How Stakeholder Perceptions Differ From Corporate Reality

" A strong reputation is widely acknowledged to be the most valuable asset of a firm, and sustainability has become an important component of corporate reputation."  Many businesses report that sustainability is an important factor in their decision making processes.  Yet there is a gap between stakeholder perceptions and company performance.  Companies that more fully integrate sustainability into daily business practices are better able to convince consumers of their green practices.

Benefits of Sustainability in Business

• Reduction of energy use can create cost savings.
• Waste revenue can create new revenue streams when firms sell instead of discard by-products.
• Sustainability initiatives can stimulate a culture of innovation within the firm.
• Motivated and driven graduates seeking employment may prefer working for companies who are well received environmentally.
• Customers are more willing to pay higher prices or remain loyal to more sustainable focused companies.
• Investors and lenders often perceive such companies as better investments and lower risk companies.

Key Facts Regarding Businesses and Sustainability

• Sustainability initiatives are included in as many as 20% of mainstream advertising messages.
• 91% of all U.S.-based businesses have formal reporting policies related to their sustainability efforts.
• 88% of respondents stated that good corporate citizenship was important.This was equally reflected among stakeholders. 
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 Study Factors

• Methods included a perceptual survey and a third-party rating.
• Total sample size of individuals was 2,400 individuals, 800 for each stakeholder category represented.
• Future employees considered were defined as students graduating from a college or university in the next eight months.
• Stakeholders from six different countries were selected: China, Germany, India, Japan, the United Kingdom, and the United States (400 from each, divided equally into 3 stakeholder categories).
• Smartview 360 platform of CRD Analytics used as the measure for actual sustainability performance.  Methodology based on GRI, including NASDAQ OMX CRD Global Sustainability Index.
• Results from research was interpreted into a Sustainability Perception Score (SPS) and a Sustainability Reality Score (SRC) for all firms, creating a Sustainability IQ Matix. 

 Why does Perception Not Meet Reality?

• Individuals lack motivation to interpret sustainability messages; "In effect, although individuals wish to appear moral, their underlying attitudes and subsequent behaviors do not correspond to their publicly stated intentions."
• Because sustainability and environmental issues are seemingly unsolvable, individuals actively avoid information related to sustainability.
• Additionally, the jargon of sustainability terms is often misunderstood and not clearly laid out.  Consider the various implications of the term "Organic." Stakeholders without a specialized understanding of these differences are unable to interpret them. 
• When firms put sustainability efforts into a language stakeholders can understand, stakeholders may not understand the extent to which such actions are truly sustainable.  Yet firms can have weak sustainable initiatives overall but because consumers understand them, they are placed under the 'halo effect' while more sophisticated, long-term sustainably minded firms are overlooked. 
• Category Biases- Businesses in industries that are heavily frowned upon, such as oil companies or financial industries, are overlooked sustainably speaking because of their reputation.
• Brand Biases- Walt Disney has one of the highest ratings, and Wal-mart one of the lowest for company images.  Yet Wal-mart is emerging as a sustainability leader in the corporate world. 

Cerruti, J. Loock, M. Muyot, M. Peloza, J. (2012). Sustainability: How Stakeholder Perceptions Differ From Corporate Reality. California Management Review, 55 (1), 74-97.