The Importance of Sustainability to Business Success

The latest buzzword or a business opportunity?

Will the real sustainability please stand up?

Sustainability – what does it mean for an organization

Today, sustainability is no longer the latest buzzword on the business block or the word of the year according to well-known dictionaries. It has been around, perhaps gaining ground gradually in terms of relevance.

Businesses have used the word from time to time to demonstrate their commitment to society. Governments have been asking businesses to ramp up their efforts on sustainability.

But what does it mean?

Sustainability for an organization is about ensuring that it is not creating a world or society that is becoming more challenged on account of its business activities. To use a few common examples, it is not the cause of:

• Natural resource depletion
• Rising income inequality (yes, it is not restricted to the environment)
• Changes in climactic patterns and rhythms
• Rise in pollution levels
• Patterns of racial or gender imbalance and injustice

In short, it is the sum total of their impact on the environment and society, beyond the financial numbers.

Taking ownership of sustainability

Businesses are good with numbers, goals and measurement.

In 1994, John Elkington developed the triple bottom line (TBL) as an accounting framework to enable organizations to measure and track not only their financial performance, but also their impact on the environment and society. The three goals it tracks, known as the three Ps, are:

1. Profits: the obvious one
2. People: the well-being of society and its people
3. Planet: the well-being of the physical location and its surroundings

Organizations are adopting TBL and other similar frameworks to measure and report on their sustainability footprint in a transparent manner. But malpractices are not uncommon. In a bid to appear above board on sustainability, “greenwashing,” or misrepresenting the real picture, is not uncommon.

Factors driving sustainability

In its article “Why sustainability is crucial for corporate strategy,” the World Economic Forum identifies the reasons it makes sense for organizations to embed sustainability into their corporate strategies. These are summarized here:

Investor demand

Gartner research finds that 85% of investors considered ESG factors in their investments in 2020, while 91% of banks monitor the ESG performance of investments. Larry Fink writes that being sustainable is not just about doing the right thing but leads to long-term, sustainable profits.

Consumer demand

With an increasing number of millennials and Gen-Z consumers, demand for sustainable products is increasing. 73% of Gen-Z consumers say they are willing to spend more on sustainable products. A Deloitte study shows that around 60% of consumers in the UK reduced their usage of single-use plastic to adapt to a more sustainable lifestyle.

Regulatory demands

The Paris Climate Agreement has made it clear that governments need to be stricter. Countries such as Sweden and Germany have legally binding net zero targets for 2045, while the UK, Canada, Japan and others have a 2050 net zero commitment. Being proactive about sustainability will lead to better relations with regulatory bodies.

Employee demands

Being a sustainable business is important to attract talent. In a Deloitte survey, 49% of Gen Zs and 44% of millennials said that they had made career choices based on their personal ethics. A recent survey shows that 51% of US business students would take lower pay if the company is environmentally responsible.

Moreover, being sustainable will lead to employees being more motivated to perform better. Sustainability reduces costs and can affect operating profits by up to 60%, according to McKinsey & Company.

Why it makes sense to be sustainable

Eventually, it boils down to the “what is in it for me” question.

Do organizations try to paint themselves green to comply with regulatory requirements, or are there benefits they derive from being sustainable and being seen as sustainable? The pun is unintended, but a strategy is most likely to be sustainable when real benefits accrue from its implementation.

A Harvard Business School post supports some of the factors identified in the WEF article and identifies the benefits of sustainability in business:

• You’ll Protect Your Brand and Mitigate Risks
• Being Purpose-Driven Is a Competitive Advantage
• There's a Growing Market for Sustainable Goods
• Cooperative Action Can Drive Change

The Value of Sustainability

No longer does the drive for sustainability mean a compromise on the bottom line. The two can not only go hand-in-hand, but sustainability can have a positive rub-off on financials.

It is now possible to attain financial success for your business along with sustainability, and not in spite of it.

Not sure how to do it? Ask Ushankk.