The Ledger

By Amber Walkowiak
From McCombs TODAY

Eric Israel, managing director of forensic and global sustainability services for KPMG, gave a presentation Oct. 6 on how sustainability relates to business value. His talk was part of the MPA Distinguished Speaker Lyceum.

According to Israel, sustainability plays a large role in a company’s value and its outlook for the future.

Israel listed the Carbon Disclosure Project is one example of how important sustainability practices and plans are to investors. The project is sponsored by financial investors and asks Fortune 500 companies around the world to report on their carbon emissions. The investors then use these reports to determine in which companies they will make long-term investments.

Israel stressed that sustainability is not merely compliance with the laws. He argued that sustainability should look beyond the minimums of compliance and plan for the future.

He also noted that sustainability means different things for different companies. For a flooring company, sustainability might include a flooring recycling program. For clothing manufacturers, sustainability might include monitoring the production of their products and ensuring that the plants abide by labor laws as well as environmental regulations.

Israel went on to say that sustainability is about efficiency and competitiveness, regardless of what business you are in.

He referenced Wal-Mart’s Sustainability Product Index as a great example of this. Not only will the index allow Wal-Mart to make decisions to increase efficiency, but the program creates a large amount of goodwill and improves Wal-Mart’s image in the minds of its customers, especially when that increased efficiency leads to lower prices.

Israel’s final point concerned trends in ethics and sustainability. In 2008 ethics was the number one driver for companies to report sustainability practices, which is a significant change from 2005, when economic benefits were the primary driver.

Climate change also joined the ranks in 2008 as the second most important driver for reporting, leaving economic benefits in third place.

Israel closed by pointing out that no matter the reason, companies need to address climate change and sustainability early and forcefully. He cited research that said an early change would cost 1 percent of global GDP, which is a lot of money, but a late response could cost up to 5 percent of global GDP.