From market trends and industry compliance to economical barriers and culture shifts – even unpredictable events like COVID-19 – running a business is challenging to say the least. There are so many things to consider. Which ideas or strategies should you implement?
If you want your business to be successful in the long run, then you need to embrace sustainability in all aspects. It’s not just the demand of your customers and the shift in every industry towards taking on more corporate social responsibility (CSR) initiatives, but it’s also simply the right thing to do.
Let’s learn what sustainability means, why it is important, and how you can incorporate sustainability into your business.
What is sustainability?
In business terms, sustainability is a business approach to create long-term value by considering how an organization conducts operations in ecological, social, and economic environments. In simpler terms, sustainability means that you run your business in such a way that you reduce or prevent harm to the environment, conduct fair labour practices, ensure a clean supply chain, and improve the lives of the people in any society that you conduct business within.
What is ESG in sustainability?
Sustainability consists of three core aspects: environmental, social, and governance. Sustainability issues are therefore often referred to as ESG issues, and companies are judged on their sustainability efforts based on their ESG performance.
Why is sustainability important?
While sustainability is obviously great for the environment and society at large, it also has the potential to create tremendous positive value for a business' bottom line, in attracting top-notch talent, brand perception, and more! Let’s get into why sustainability is not just important, but increasingly becoming critical for your business:
Shareholders win with sustainability:
While sustainability is obviously great for the environment and society at large, it also has the potential to create tremendous value for a business' bottom line. In a global survey conducted by McKinsey, 83% of C-suite executives and investment professionals believe that ESG programs are likely to generate more shareholder value. In other research by Accenture on responsible leadership, it was found that those companies with better ESG performance enjoyed 3.7 times higher operating margins than their counterparts. Moreover, their shareholders also received 2.6 times higher annual total returns, as compared to those companies who performed poorly in terms of ESG metrics.
Cost-efficiency improves with sustainability:
When you place limits, the human mind is forced to become creative and find alternatives. Sustainability as an approach automatically places limits and seeks alternatives that can help to reduce costs and increase operating profits. This isn’t just an ideal situation either. That same survey by McKinsey found that operating profits jumped by as much by 60%!
One of the ways that businesses end up paying more is due to the global supply chain. For example, if you run an engine-manufacturing company, you would have to source materials from all over the world. This can cost more in the long-term as you pay for shipping, taxes, and offshore processing. If, on the other hand, you were forced to source locally, you would end up paying less (overall, since bulk rates may no longer be applicable), and reduce the stress on the environment while also upholding fair trade and labour practices. You would also be able to enjoy subsidies and tax incentives as governments tend to want to boost sustainability efforts.
Sustainability improves brand perception and helps you gain a competitive advantage:
For some businesses, an improved brand perception occurs as a by-product of their sustainable initiatives. For others, they must undertake sustainability measures to fix their damaged brand perception due to environmentally or socially harmful practices conducted in the past (or in secret). Either way, brands today are making public promises to improve their sustainability efforts and ensuring information about their current ESG initiatives is promoted and part of public knowledge. From Apple and Nike to Coca-Cola and Unilever, brands around the world are jumping (and leading) the sustainability bandwagon. Why? Because it greatly improves brand perception.
Consumers today are more conscientious than ever about the impact their individual choices have on the world, and this includes the brands they patronize. The next generation of consumers, Generation Z (or Gen-Z) led by the likes of Greta Thunberg who champion action against climate change is even more invested in what brands are doing to improve sustainability and save their future. Cleaning up your processes, sourcing, and operations can leave you with more than just a clean conscience, but a competitive advantage too.
Satisfy consumer demands with sustainability:
While a competitive advantage is great to have, embracing sustainability is now an essential pre-requisite, at least from a consumer’s lens. According to a Nielsen survey, millennials (those born between the years 1985-1995) are consciously changing their habits to reduce their impact on the environment. You may have noticed it around you too. Whether it’s small changes like ditching single-use plastics like plastic straws or switching to electric vehicles to reduce their carbon footprint, millennials (who have much of the buying power today), will take the extra effort and inconvenience over causing environmental harm and prefer brands that do so as well. 66% of consumers would spend more to purchase a similar product from a sustainable brand, while 81% strongly feel that businesses should help improve the environment. These statistics clearly show how the consumer demand for products that are produced sustainably or services that follow sustainable practices is on the rise. Thus, for your business, going green can add more green (money) to your bank account.
Of course, your sustainable initiatives should not be limited to eco-friendly or eco-conscious measures alone (though that is one of the chief concerns consumers have), but also cover the whole spectrum of social and economic measures to truly be known as a sustainable business. After all, consumers today can and will uncover token gestures and ‘cancel’ or boycott businesses as soon as support them.
Become a sought-after employer thanks to sustainability
Not only are consumers demanding more sustainability, but so are employees. In today’s day and age how sustainable an employer is has become a key criterion that jobseekers consider before applying for a job, especially since where you work and what you do has become increasingly integrated with a person’s identity. When employees are as focused on sustainability in their daily lives as they are today, they are unwilling to work at a company or business that doesn’t align with their values. This is especially true for top-notch talent that can choose to work wherever they please.
As a business then, making sustainability a core part of your overall business you will be able to provide that extra incentive to choose great employees to join your ranks. In addition, as a company that goes the extra mile to solve ESG issues and clock in a good ESG performance, employees also feel a sense of purpose when they work for you. This increases their overall motivation and morale, ultimately leading to more productive and happier employees for you.
Now that we’ve explored the importance of sustainability for your business, you’re probably thinking, “How should I become a sustainable business?” or “How do I make sustainability a part of my business?”, right? Well, we’ve got you covered with some quick and handy tips for that as well!
Let’s dive into some ways you can make your business one that is truly sustainable:
Cover all aspects of ESG: While embracing sustainability can be overwhelming, make sure you don’t engage in any lopsided efforts. Your sustainability is truly solid when you look at all sides of your environmental impact, social impact, and governance (your policies and processes).
Strategy and sustainability should align: How do you make sustainability a core part of your business? By stitching it into every strategy. When creating a strategy, make sure it is one that embraces sustainability.
Get all your compliance ducks in a row: Compliance is a big part of sustainability, and any sustainability initiatives will have certain compliance boxes you need to check off. So, ensure that your efforts fall within the compliance stipulations to win the sustainability bragging rights you’re after.
Make transparency your top priority: No business is perfect, but one that owns up to its mistakes and makes efforts to rectify them by giving full disclosure earns the respect of its consumers and the larger community. When you’re looking to make sustainability a core part of your business approach, ensure that transparency is maintained to improve accountability, tracking, and course correction.
Involve the community and foster collaboration: Collaborate with other businesses to reduce supply chain waste or ask for community volunteers to man local sustainability initiatives like beach clean-ups or donation drives. This can improve your brand perception and garner word-of-mouth publicity, while also improving your ESG performance. Check, check, and cheque!