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Share When Sustainability Aligns with Business Objectives

At the Sustainability Interactive Conference in June of this year, one of the event's keynote speakers remarked about how a company's sustainability efforts must align with their broader business objectives in order for them to be truly effective.  After all, these initiatives cost money, and their Return on Investment ensures their long term viability as a good use of shareholder funds.  Random "good deeds" won't likely be viewed by investors as being consistent with a long term strategy. 

This week, we saw a fine example of such consistency in Coca Cola's annual sustainability report.  The argument that Coca Cola is a water abuser is no longer a valid one. 

In this report, Coca Cola disclosed that, through its conservation efforts worldwide, it replaced 115% of the water used in the production of its products in 2015.  This is a remarkable achievement, and the team at Coke deserves our congratulations.

Water has long been central to Coca Cola's sustainability efforts.  In my own presentations to college and investor audiences, I use the company as a great example of how to deal with "brand risk" via sustainability (while hypothesizing about the impact of getting this wrong.)

Potable water is a scarce commodity in many parts of the world, and is only getting more so.  Companies are wise to be good stewards of this resource.  Instead of proper management, picture CNN video footage of a Coca Cola truck leaving a water-depleted locale.  It would be devastating to the brand -- and to its market value.  Consumer trust would be lost.  Financial value would be destroyed. 

It's far better to address such risks through robust sustainability efforts than to resort to damage control.  Coca Cola has clearly believed this for years, going back to former CEO Neville Isdell.  He is credited with saying, "We have a social license to operate that must be renewed every day." 

These were remarkable words at the time.  But today's investors increasingly feel this about all of their investments, holding management teams accountable to all of their stakeholders.  In the end, it's a consistent alignment of sustainability efforts with core business objectives that makes "renewing this license" far more likely over the long run.