Spreading the gospel of sustainable companies

Edoardo Gai

Edoardo Gai, head of sustainability services at the Swiss investment assessment firm RobecoSam, says Korean corporations should alter their investment strategies to make sustainability a top corporate value even in times of sluggish growth.

Gai works on the Dow Jones Sustainability Indices (DJSI), a global index that evaluates companies’ management achievements in terms of sustainability. To award DJSI prizes to Korean companies, Gai visited the country and sat for an interview with the Korea JoongAng Daily.

He explained that sustainable corporate management helps companies survive better in tough economic times by enabling them to generate new profitable avenues.

“In a difficult economy, when it’s not easy to attract investments, companies have to differentiate themselves from other companies, and show the difference and their superior values to investors,” said Gai. “In this context, sustainability values become marketing and innovative business strategies.”

Jointly developed by Dow Jones and RobecoSAM in 1999, the index has evaluated how sustainable a company is by looking at factors such as corporate asset size, social responsibility activities, businesses that pursue social values, and environment and employee-friendly business decisions over the past 15 years.

The index also analyzes how such corporate strategies influence a company’s sales performance.

Korea was first named in the DJSI World indices in 2008, when three companies were ranked. This year, 22 Korean companies were among the world’s top 2,500 companies.

Q. How have Korean companies perceived the concept of sustainability?

A. The concept of sustainability itself makes sense not just from an ethical point of view but also in creating competitive advantages and value for the company. I think these resonated very well in board rooms.

Additionally, Korea as a country started putting a strong focus on sustainability, especially after the G-20 summit in 2010, where the significance of sustainability was stressed.

Although some investors are certainly recognizing the value, many investors nowadays are considering the risks related to climate change and corporate governance when choosing which company to invest in. They may not call these factors “sustainability,” but they have begun to recognize their importance. Therefore I think more investors will in the near future start thinking this way.

How can sustainability contribute to boosting profits?

There are different approaches in which companies can apply sustainability, and there are various benefits. We think companies with sustainability strategies are usually more ready to react to any abrupt changes that happen in macroeconomic conditions, the business environment and social situations in and outside a country.

In such circumstances, companies with sustainability strategies are more keen at avoiding risks, because they already identify any possible risks in the process of changing corporate strategies to be sustainable.

For instance, investors nowadays want to know how much a company is preparing for CO2 impacts and investment decisions in relation to the issue. So, companies react before and prepare policies to reduce CO2 emissions in advance. They find ways to save energy costs and to seek out technologies for fewer carbon emissions. This kind of effort helps attract clients and quality talent to your company and helps you to have better relationships with your suppliers.

Can this be considered a long-term investment for companies?

Yes, sustainability is considered one of the goals to be achieved after long-term investment. Nevertheless, we know that investors tend to think about short-term returns. We recommend that corporations maintain a healthy tension between short-term and long-term investments.

To make companies keep investing in long-term goals like sustainability, I find this DJSI index helpful because it shows if a company is working sustainability in a direction that promises benefits to the company’s current status and future.

On the other hand, we see the global community getting smaller and more highly connected every year. With issues like climate change and financial instability, no country can escape being influenced by another. We have to be ready.

What should businesses do to maintain sustainability in a tough economy?

Across my career, I observed a number of crises, including the bursting of the IT bubble and the financial crisis of 2008. At every crisis, I expected that companies wouldn’t be able to spend on sustainability because companies usually think that spending on sustainability is an extra cost. But every time I was proven wrong. Because in a difficult economy, when it’s not easy to attract investment, companies have to differentiate themselves from other companies, and show their superior values to investors. In this context, sustainability values become marketing and innovative business strategies. I saw companies’ participation in sustainability projects increase during tough economic situations.

BY KIM JI-YOON [jiyoon.kim@joongang.co.kr]