Feature
Ninety percent of business leaders call sustainability "important" for their organization. Yet only 60% of organizations have a sustainability strategy in place, according to the World Economic Forum.
A 2022 Gartner survey confirms the heightened interest in sustainability, with 86% of business leaders calling sustainability an investment that future-proofs their organization. A further 87% said they expect to increase their organization’s investment in sustainability over the next two years. What's behind this growing interest in sustainability?
The Business Case for Sustainability
“Sustainability can be defined as providing for the present needs without compromising the needs of the future generations to meet theirs,” said Dr. Shelley Mitchell, professor of management and sustainability at the Hult International Business School.
It can be broken down into three pillars, she explained: economic, environmental and social. And the benefits are far-reaching, including:
- Reduced energy and water costs.
- Interest from new customers and increased green sales.
- Meeting consumer demands — especially for Gen Z and millennials.
- Tax incentives at local, state and federal levels.
- More interest from talent, along with boosted workforce morale and innovations.
In the Gartner survey, 83% of respondents said their sustainability programs directly created short- and long-term value for the organizations. And 80% said sustainability helped their company optimize and reduce costs.
Let’s take a closer look at some of the benefits of company-wide sustainability initiatives.
Cost Reductions
By reducing energy and resource consumption, organizations can save money on utility bills and other expenses. Sustainable practices also minimize waste, which can translate into cost savings.
“For example,” said Dr. Mitchell, “energy efficiency has a positive impact on the planet and reduces expenses for the company, ensuring a smaller carbon footprint.”
As business growth occurs, she added, so do emissions and the impact on Earth. “Bottom line,” she said, “is that the business strategy is in maintaining competitive advantage with a clearly defined CSR (corporate social responsibility) program.”
Attract & Retain Talent
In today’s competitive job market, employees are increasingly looking for employers that are committed to sustainability.
A 2022 IBM report, for example, found that 69% of the full potential workforce say they’re more likely to accept a job at a company they consider to be environmentally sustainable. Even more, around half of those surveyed — even those making less than $25,000 per year — said they’d accept a lower salary to work for these types of companies.
By demonstrating a commitment to sustainability, organizations differentiate themselves from competitors, which can be particularly useful for organizations operating in industries with a shortage of skilled workers.
Boost Reputation
Today, reputation can make or break a company. Consumers are looking for brands with values that align with their own, and they’re scouring social media, forums and other online destinations to determine which companies to seek out and which to avoid.
When BP spilled oil in the Gulf of Mexico, for instance, its market value dropped from $184 billion to $96.5 billion in the span of two months — about $32 million in brand value lost per day. And while BP is still alive and kicking, it hasn’t fully recovered from its oily reputation.
Access Better Financing
Some investors target companies with a strong sustainability performance. Why? Because investments in sustainability, which look to reduce reliance on fossil fuels and other dwindling resources, are better risk-adjusted and more future-proof.
A survey from McKinsey found that 83% of C-suite executives and investment professionals would be willing to pay a median premium of around 10% to acquire a company with a favorable ESG (environmental, social and corporate governance) profile over a negative one. And companies with a better sustainability performance (as measured by their ESG score) face a 10% lower capital cost on average.
Related Article: Building a Sustainable Future on the Backbone of Technology
What Successful Sustainability Looks Like
Companies that want to create value with their sustainability programs should start with clear priorities, defined targets and key performance indicators, according to McKinsey.
One example to look towards is outdoor clothing company Patagonia. It’s a great example of a company aligning sustainability initiatives with its internal mission and values.
Some of Patagonia’s biggest initiatives include:
- Its Worn Wear program, which encourages purchasing secondhand items.
- A commitment to using primarily (98%) recycled materials.
- Participation in the Fair Trade program.
The clothing brand has a goal to become completely carbon-neutral by 2025. In a Patagonia article, Paul Hendricks, senior manager of environmental responsibility at Patagonia, said, “The climate crisis is staring at us in the face and we’ve got to do something about it. For so long, businesses have taken incremental steps toward sustainability. We have 11 years to turn this ship around. At Patagonia, we decided we need to go all in. We can’t just set small goals, we have to go for it.”
Consumer packaged goods company Unilever has set ambitious goals to reduce its environmental impact, including reaching net zero emissions across its value chain by 2039, sourcing 100% of its raw agricultural materials sustainably and reducing virgin plastic use by 50% by 2025. Unilever is one of those companies that, even if you’ve never heard the name, you’ve likely used one of their products. The umbrella corporation includes well-known brands like Dove, Ben & Jerry’s, Klondike Bar, Axe, Lipton and much more.
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“We believe our work to protect and regenerate nature will increase our capacity to reduce GHG emissions, increase biodiversity and protect water systems, within and beyond our value chain,” the company wrote in its annual report.
Unilever also has initiatives focused on diversity, equity and inclusion, health, well-being and more, including:
- Doubling the number of products sold that deliver positive nutrition by 2025
- Ensuring 5% of their workforce is made up of individuals with disabilities by 2025
- Spending $2 billion annually with diverse businesses worldwide by 2025
Related Article: Is It Time to Update Your Environmental, Social and Governance Policy?
Moving Forward With Sustainability in Business
As the world continues to change, it's clear that sustainability will become a critical consideration for organizations of all sizes and in all industries.
A strategy for sustainability, said Dr. Mitchell, “is all about a company’s ability and capacity to create positive environmental and societal impact bringing about a scale of disruption along with creating new opportunities for stakeholders, investments, jobs, products, and services.” All while integrating ESG into every element of the business.
For new entrepreneurs looking for a model, she suggested exploring becoming a B-Corporation.
“A certified B Corp is a for-profit corporation that has been certified by B Lab, that measures a company’s social and environmental performance against the standards in the online B Impact Assessment,” she explained. “Becoming a B Corp will make your company more efficient, resilient and sets the standard of your business’s operational success.”
Whether the business is small or large, B Corporation criteria, said Dr. Mitchell, can help you evaluate how your company is performing in terms of defining social, environmental and governance best practices and where you can improve.
