It is clear that “sustainability” focused initiatives are generally seen as cost containment initiatives or “nice to haves” in terms of business strategies. As a result of this, many of these initiatives are typically moved down the business priority list and never actually implemented.
Even when you examine companies that are seen as sustainability champions and who are embracing the low carbon economy, many of the reasons given by these organisations for adopting sustainable business practices focus around cost containment and being a good corporate citizen.
Business needs to increasingly take a view that sustainability is an investment and not a cost. Yes there are cost benefits but the reality is that investing in and embracing sustainability is your bank vault for the future success of your business.
There are typically 5 traditional reasons why your company should focus on sustainability, give or take a few:
- Corporate Compliance – King III, GRI, SRI and CDP to name but a few. Your business must ensure triple bottom line reporting and compliance with any relevant legislation. Furthermore, if your competitors and peers are doing it, best you get on the bandwagon as well.
- Cost Savings & Increasing Shareholder Value – By measuring and understanding your carbon impacts (typically energy use) you can put concrete plans in place to reduce emissions and hence costs, often with very attractive returns on investment.
- Investors – In addition to showing market returns, investors also expect you to be a good corporate citizen. Leaders in SRI indexes around the global financial markets out perform their peers regularly so there is focus from institutional investors on your sustainability performance.
- Differentiation – Employees are more likely to work for organisations that have a purpose beyond just making money. The same applies to customers who will buy from companies who are seen as “do-gooders”. In a recent poll conducted by retailer Pick ‘n Pay, The vast majority chose contributions close to home: 83% said they bought electricity-saving light bulbs, 75% said they were water-wise in their gardens and homes, and 44% said they “try to do a bit of everything, from recycling to growing our own vegetables”. About two-thirds were prepared to pay more for a product that was environmentally friendly – as long as it was not excessively more expensive.
- Maximising Market Potential – Companies that have embraced sustainability, like Siemens, IBM or GE make a large percentage of their revenues through new markets that they have traditionally not operated in. Emerging international carbon trade tariffs will also significantly impact existing revenue streams if businesses don’t address carbon intensive business activities
Whilst the reasons discussed above remain completely relevant, the sustainability agenda has moved on to more concrete business objectives.
Sustainability for organisations has become:
Less about Cost Cutting and more about Building Enduring Value
Less about Compliance and more about Resilience
Less about Marketing and more about Protecting Reputation
Less about Differentiation and more about Attractiveness
Less about New Markets and more about Retaining Existing Markets
In conclusion, sustainability is not just about being responsible for the environment; it is about creating long-term shareholder value by creating a balance between present and future business activities and their impact.
Sustainability is also about conducting your business in an ethical manner and respecting human rights and your employee well-being. You need to ensure that that all your stakeholders are considered in business making decisions as well as being responsible to your customers, over and above the financial performance of the business. This may sound less like the traditional argument for “Sustainability” and more like good and must-do business practice. Without covering all these aspects, ultimately the foundations will come crashing down. Ultimately, isn’t that what makes a business sustainable?