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How family enterprises are embracing sustainability

Family enterprises play their role in the global sustainability agenda. 

In brief

  • More than 75% of the world’s largest family enterprises now measure and report on their sustainability progress.
  • Suntory is seeking a supply of grain, trees, and water 200 years from now, while Bosch is incentivizing its suppliers to build sustainable practices. 
  • Leading family enterprises are building sustainability into their business practices and linking their reputation and legacy to the sustainability agenda.

Family enterprises are one of the key contributors to global output and employment. The 2021 EY and University of St. Gallen Family Business Index1 reveals that the largest 500 family businesses generate US$7.28 trillion in revenue and employ 24.1 million people. Together they constitute the third-largest economic contribution in the world by revenue after the United States and China1.These multibillion-dollar enterprises also have the required leverage to drive behavior change of the thousands of smaller enterprises from which they procure each year.  Their intentions and actions are vital for the global sustainability agenda to succeed.

Family enterprises are known inherently to take a long-term business view and take actions to protect their family reputation and legacy. They are particularly well-suited to focus on sustainability. Many family-driven or family-funded companies have indeed already demonstrated how to build businesses on sustainable grounds or pivot to sustainable practices. To investigate this perception, EY recently conducted an analysis of the sustainability journeys of the 500 largest family enterprises across the globe.

According to Steve Varley, EY Global Vice Chair, Sustainability, “Despite some 600 environmental, social and governance (ESG) frameworks being in use today, creating an 'alphabet soup' of different approaches that generate confusion, some companies have got on with the work and driven their own ESG agenda.”

Global Family Business Index 2021
of the 500 companies listed have started reporting their sustainability progress

We found that 78% of the 500 companies listed in the 2021 Family Business Index already report on their sustainability progress. Of these, about 59% use well-established reporting standards, such as the Global Reporting Initiative (GRI), Science Based Targets initiative (SBTi), and World Economic Forum Stakeholder Capitalism Metrics (WEF SCM). Another 19% independently publish their sustainability reports externally. Family enterprises are reporting on sustainability despite the complex maze of multiple reporting standards available.

Despite some 600 environmental, social and governance (ESG) frameworks being in use today, creating an 'alphabet soup' of different approaches that generate confusion, some companies have got on with the work and driven their own ESG agenda.

Steve Varley

EY Global Vice Chair, Sustainability

How EY can help

Japan’s Suntory, for example, is a private family enterprise in the beverage industry that has already aligned itself to GRI, SBTi, as well as WEF SCM standards. This 122-year-old company has implemented bold initiatives across seven sustainability themes – water, CO2, raw material, containers and packaging, health, human rights, and enriching life. Given the importance of water in its products, its water conservation efforts are amongst the most ambitious: Suntory is undertaking a forest development project in Japan that will provide twice the water it consumes2. Based on the success of its “Natural Water Sanctuary”3 projects in Japan, this concept has now been applied in other Suntory locations, including the US.

 

According to Rick Price, Director, Global Environmental Stewardship, Beam Suntory, “We’ve become a business that looks forward, not one to two years, but one to two hundred years. We think about making sure we’ve got a sustainable supply of grain trees, and water.”

 

Its overall efforts at reducing greenhouse gases were certified by SBTi in September 2021, indicating that its plan is consistent with the goal of limiting global warming to 1.5 °C.4  Its US subsidiary, Beam Suntory, created two new sustainability roles in July 2021: Vice President – Global Environmental Sustainability, and Global Vice President – Consumer & Society Sustainability. This plural approach – split across environment, customer, and society – very well aligns with what EY has found to be a more tenable definition of sustainability.

We’ve become a business that looks forward, not one to two years, but one to two hundred years. We think about making sure we’ve got a sustainable supply of grain trees, and water.

Rick Price

Director, Global Environmental Stewardship, Beam Suntory


The EY Future Consumer Index (July 2021)5 found that sustainability may mean different things to different consumers across the globe. For some, sustainability equates to climate, while for others it could be about health and well-being, or about clean water or clean energy. 

Private family enterprises across other industries are also making progress in their sustainability disclosures and actions. Bosch, a 125-year-old advanced manufacturing and mobility giant based in Germany, with operations spread across 400 locations across the world, is now aligned to GRI reporting standards. The company has been carbon neutral since Q1, 2020.6 It recently added sustainability as a key award category in its Bosch Supplier Awards, as part of its attempt to tackle sustainability across its supply chain. Any supplier that wants to win this award must demonstrate top ratings in the Carbon Disclosure Project (CDP). Bosch has also set itself SBTi targets that will involve increasing renewable energy usage, from 14% in 2018 to 100% in 2030 and reduction in greenhouse gas (GHG) emissions that would limit global warming to 1.5 °C.
What drives these families to commit to sustainability?

1. Family reputation and legacy 

Family enterprises, and in particular privately held ones, have less regulatory pressure to act on sustainability. However, as sustainability becomes a key reputational determinant, these companies are leading the agenda to protect their reputation and legacy. 

2. Peer group inspiration

Family enterprises and offices across geographies, industries, and multiple generations are incorporating sustainability into their long-term outlook. They offer inspiration to other families looking to adopt a sustainability framework. 

3. Reduction in “intention gap”

In the past, customers were found to be concerned about sustainability, but not willing to pay more for a sustainable product or service – this was labelled as the “intention-gap”.7 Gradually, the share of customers willing to pay for sustainable products and services is on the increase. According to the EY Future Consumer Index, July 2021, “43% of global consumers want to buy more from organizations that benefit society, even if their products or services cost more. And 64% are prepared to behave differently if it benefits society.” 


The authors would like to thank Ashish Gambhir, Dom Kelleher, Marko Nikolic and Joanne Warrin for their contributions to this article.


Summary

When 78% of the largest family enterprises in the world are paying attention to sustainability, others start to pay attention and ask why. They begin to question the value sustainability could have on their own businesses and may themselves then choose to investigate and potentially adopt better practices. Family enterprises’ significant influence on the wider sustainability agenda should not, therefore, be underestimated.

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    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.