Sustainability is far more than just a buzzword in today’s business landscape. While the concept of running a “sustainable” business is nothing new, executives are facing increasing pressure to adapt their processes with a focus on ethical, environmentally friendly strategies.
As climate change intensifies, and we continue to see the rising impact companies have on the world via carbon emissions, organizations across every sector are beginning to take note. In fact, the Fortune 500 ranking of America’s biggest companies found virtually every brand had “Corporate Social Responsibility” listed as one of their core objectives.
What’s more, a study by MIT/BCG found that 90% of executives find sustainability to be important. However, only 25% say they’ve incorporated a comprehensive sustainability strategy into their business model. Perhaps the biggest reason for this is that many companies simply aren’t aware of how beneficial sustainability can truly be to their venture.
Running a sustainable business isn’t just a necessity to protect our planet. It can also have a direct impact on a company’s opportunities, bottom line, and capacity for growth.
The Evolving Business Benefits of Sustainability
Sustainability in the business landscape refers to the impact companies have on the environment, their community, and society. Sustainable businesses strive to positively impact the world around them, minimizing their production of waste and their negative footprint.
Through Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG) policies, the most sustainable businesses address issues we all face. They tackle inequality, the depletion of natural resources, climate change, and human rights issues.
However, business sustainability isn’t just altruistic. It’s quickly becoming a necessity for companies, as organizations see the rising impact of the triple bottom line: People, Planet, and Profit.
While many organizations have embraced sustainability naturally, others have been forced into agendas due to pressures from consumers, shareholders, governments, and the media. Today, failure to adhere to sustainability guidelines doesn’t just damage the planet, it has an impact on a company’s reputation and ability to preserve profit.
Demand for sustainability has also increased in the wake of major global events. Since the pandemic, focus on ESG factors has increased among shareholders, investors, and customers. Nielsen found the rise of the “conscious shopper” means sustainable businesses are now better positioned to out-perform their peers. Indeed, 60% of customers now say they’re making more environmentally friendly and ethical purchases since the pandemic.
The Top Business Benefits of Sustainability
The most obvious benefit of business sustainability is the opportunity to protect and preserve our planet’s resources. When businesses engage in sustainable practices, investing in sustainable IT or similar methods, their chances of wasting essential resources are reduced.
Even simple strategies, like recycling and repairing equipment, rather than simply replacing it, can reduce the pressure on landfills and cut dangerous emissions. However, it’s not just our planet that reaps the benefits of a strong approach to sustainability.
Here are some of the other amazing benefits organizations can unlock.
1. Improved Brand Image and Competitive Advantage
Consumer priorities are changing. Today’s buyers don’t just want the best product features and pricing, they want to connect with brands that share their values. Around 63% of Americans in one study said they want corporations to actively drive positive social and environmental change.
The same report found 87% of American consumers support brands advocating for the issues they care about, and that 73% would stop purchasing from a company without sustainability strategies. Younger generations in particular, such as millennials and Gen Z, are becoming more “eco-conscious shoppers”. 74% of Gen Z consumers say they’d spend more on sustainable brands.
Sustainability initiatives give businesses a unique opportunity to differentiate themselves from their competitors, demonstrate their commitment to crucial values, and increase revenue. With the right strategy, companies can boost their reputation, and create more loyal, engaged customers.
2. Enhanced Appeal for Investors
It’s not just consumers that want to connect with more sustainable brands. According to one report from Gartner, 85% of investors in 2020 considered ESG factors in their spending decisions. What’s more, around 91% of banks say they monitor the ESG performance of investments.
A report from EY in 2021 also found 74% of institutional investors are more likely to abandon companies that don’t perform well on sustainability measures. 90% of investors even said they were paying more attention to sustainability for future investments.
Some of the world’s biggest investors, including State Street, Vanguard, and BlackRock have all published guidelines to support ESG frameworks and standards. For new startups and evolving companies, this indicates a strong approach to sustainability is necessary to access funding in the years ahead.
3. Better Talent Access and Retention
Alongside investors and customers, employees are also prioritizing sustainability in their decisions. Around 40% of millennials say they’ve taken a job based largely on a company’s sustainability credentials. These candidates also say they’d consider a pay cut to work with companies who share their values connected to ESG initiatives.
People want to work for companies with a solid brand reputation, and a positive impact on the world around them. This is particularly true now that talented team members are looking for more meaning in their work. Developing a purpose-driven strategy for sustainability can also boost retention.
When employees have a clear insight into the vision, values, and purpose of the companies they work with, they’re more likely to feel engaged by the organization. Around 89% of executives even believe companies with a shared purpose benefit from higher levels of employee satisfaction.
At a time when talent shortages are rampant in virtually every industry, a good sustainability initiative could be the key to ensuring companies can obtain the skilled professionals they need.
4. Greater Productivity and Performance
Sustainable practices don’t just help to attract and retain employees, they can also make team members more productive, and efficient in the workplace. True business sustainability doesn’t just involve implementing recycling projects and eco-friendly practices into organizations.
Making workplaces more sustainable and environmentally friendly can help to improve the morale, cognition, and comfort of team members. Sufficient lighting, good ventilation systems and plants can create happier, more comfortable spaces for team members, improving employee output.
Additionally, sustainable businesses investing in the ethical treatment of their employees, with diversity, equity, and inclusion strategies help to minimize workplace stress and burnout. The happiness of your team members directly translates to improvements in your bottom line.
According to one HBR study, happy employees aren’t just more productive, they also generate greater sales, and are more creative than their counterparts.
5. Reduced Operational Costs and Expenses
In today’s uncertain economy, perhaps one of the biggest business benefits of sustainability comes from the ability to reduce operational expenses. Energy prices are rising, along with the cost of advanced technology and business solutions.
As the business landscape continues to evolve, companies need to find ways to innovate while keeping costs low. The right approach to sustainability can help with this. Something as simple as turning off computers when they’re not in use can significantly lower energy consumption.
Reports suggest simply switching to using a lower-power mode on equipment like computers can minimize energy consumption by up to 23%. What’s more, companies investing in repairing and upgrading rather than replacing equipment spend a great deal less on new technology.
In one case study, researchers found clients of Elytus saved $11 million over 10 years, just by using sustainable waste management strategies. In another example, Nike’s decision to weave new methods of efficiency into the production cycle reduced the amount it needed to spend on labor and raw material. Not only do these developments divert millions of pounds of waste from landfills, but they also reduce costs in terms of materials, transportation, and waste disposal.
6. Increased Profits and Revenue Opportunities
As well as reducing operational costs and expenses, the business benefits of sustainability can also extend to profit margins. In a UN Global Compact study into sustainability, researchers found that 84% of CEOs believed companies should be leading efforts to address global priority problems, such as environmental damage. Only 30% of businesses actually rose to this challenge.
However, the companies that did invest in sustainability strategies reaped significant returns. Research found that companies with higher ESG ratings outperformed the market in both the mid and long-term. Another report in 2021 found companies with higher ESG scores also returned 33.3% higher profits within a single year.
Accenture even discovered that companies with strong sustainability initiatives achieved operating margins 3.7 times higher than low ESG performers. This potential for increased business value and profits coincides with the changing nature of the current market.
73% of consumers say they’re willing to pay more and change their consumption habits just to interact with businesses that prioritize sustainability.
7. Consistent Compliance with Regulations
Consumers aren’t the only ones pushing companies to perform more sustainably. As climate concerns continue to increase, governments and regulatory bodies are increasingly introducing new guidelines for businesses to follow. Many experts agree that companies throughout the world will soon be forced to strive for “net-zero” operations, whether they like it or not.
Already, certain countries, such as Germany and Sweden have signed legally binding agreements, saying they will reach specific net-zero targets by 2045. Japan, Canada, and the UK have similar commitments they’re striving for by 2050. Plus, in the US, the Biden administration presented a strategy for 2030 to reduce emissions by at least 50%.
As governments around the world continue to prioritize the protection of the planet, many organizations are seeing an increased need to proactively address sustainability concerns. Brands that start implementing strategies to reduce their environmental and social impact now will be in a better position to deal with tightening rules and regulations.
Plus, a well-planned sustainability strategy will ensure companies can continue to increase their value and reduce potential costs incurred from increasing carbon taxes. Some governments are even beginning to offer rebates and tax credits for companies adopting sustainable practices.
8. Access to New Opportunities
Increasingly, embracing sustainability doesn’t have to mean overlooking innovation. In fact, many simple steps companies can take to improve their environmental footprint also open the door for new growth opportunities. For instance, the rise of cloud computing allows companies to reduce carbon emissions by eliminating the need for employees to travel to and from an office.
On a broader scale, strong sustainability propositions can help businesses to tap into new markets and expand their presence in existing ones. For instance, China’s strategies to fight air pollution have contributed to new investment opportunities worth more than $3 trillion in the region.
Businesses and governments alike are increasingly investing in new sustainable and eco-friendly technologies, architecture, and solutions, paving the way for new startups to enter the market. This indicates the business benefits of sustainability won’t just benefit new market entrants. They could also have a direct impact on the evolving economy, and the success of countries around the world.
Unlocking the Benefits of Sustainability
It’s easy to look at business sustainability strategies as an altruistic move, focused entirely on the opportunity to protect the planet and preserve our natural resources. While it’s true that sustainable activities are crucial to reducing waste and defending the world, the benefits of sustainability go far beyond reducing carbon emissions and tackling climate change.
For business leaders, implementing sustainability no longer has to mean sacrificing profits or opportunities to benefit the wider world. Instead, sustainability is becoming a crucial element in corporate success, helping organizations to expand, evolve, and increase revenue.
With the right sustainability strategy, business leaders can boost their connections with customers, investors, and employees, unlock new opportunities, and reduce operational costs at the same time. What’s more, they can ensure they remain compliant with ever-changing regulations and guidelines, without compromising on earnings.
Sustainability is the future of business, the only question left to answer is, will your business proactively step into the next generation, or wait to be pushed by external factors?
