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CliMatr

Why Organizations are Investing in Sustainability

 

Author: Henry Ukoha

 

Sustainability

 

Laying foundations for sustainability

 

 

Sustainability has become the buzz word in business clusters lately and if sustainable development is to achieve its potential, it must be integrated into the planning and measurement systems of business enterprises. A sustainable business is one that makes a profit, whilst improving both environmental and societal conditions. It is in the business for the long haul, setting itself up to be resilient and survive in the long term.

 

Running a sustainable business model requires a proactive long-term strategic strategy that involves implementing corporate plans and practices that address the needs of the client and its stakeholders now, while at the same time protecting, maintaining, and improving the human and natural resources that will be expected in the future. The overall goal of corporate sustainability is to design and optimize business operations in such a way that the brand is recognized by its stakeholders as a custodian of the environment, an upholder of social, cultural, and ethical values while ensuring significant economic growth.

 

Corporate sustainability provides a systemic framework that ensures a sustainable corporate foundation that contributes positively to the green economy. It is no surprise this growing trend is gaining popularity even as the case for global warming is heavily discussed around the world and climate-conscious businesses are exploring ways to reduce their carbon footprint, contribute significantly to human capital development through their Social Responsibility Initiatives and most end up innovating their business model/process as well as their product or service offerings.

 

William Mulligan ex environmental affairs manager at the Chevron Corporation reflects the view of many in the business community who believe that the environment is now a major issue (one which presents both challenges and opportunities). He says

 

‘Only an irresponsible company would dismiss this trend as a passing fad or fail to recognize the need to integrate environmental considerations into every aspect of its business. Environmental excellence has to become part of strategic thinking. It is in our best economic interests to do so. In fact, whenever we are forced to change; we often find opportunities.’

However, giving the lack-luster approach to sustainability by many organizations, it is obvious they associate sustainability with expense, but the fact is that enterprises that have embraced corporate sustainability generally have a competitive advantage, earned their local and international community’s goodwill, and are financially outperforming. DuPont, one of the early adopters of sustainability by 2007 was saving $2.2bn a year through energy efficiency alone, the same as its total declared profit that year.

 

Many organizations around the globe are realizing that, by innovating their business models, they are not only improving their financial position. They can also ensure their organization has a positive social and environmental impact, which in turn can bring other opportunities.

 

Some of the reasons why Organizations are investing in sustainability:

 

  • The impact on business

 

The exhaustion of natural resources and changes in our climate are having an impact on businesses. So, businesses need to explore the resulting risks but also aim at reducing that impact in the first place.

impact of climate change infographic

 

 

  • Enhanced Brand and Increased Competitive Advantage

 

The Natural Marketing Institute (NMI) has found in its consumer research that knowing a company is mindful of its impact on the environment and society makes consumers more likely to buy their products or services. “Consumers are more interested in aligning their personal values with the brands they buy. If consumers are aware that companies are mindful of their impact on society and the environment, it positively impacts their repeat purchasing behavior.” This demographic according to Cone Communications is roughly estimated at 86% of U.S. consumers who make purchasing decisions based on their personal, social, and environmental values. According to the BBMG Conscious Consumer Report, nearly nine in ten Americans say the words “conscious consumer” describe them well and are more likely to buy from companies that manufacture energy-efficient products (90%), promote health and safety benefits (88%), support fair labor and trade practices (87%) and commit to environmentally-friendly practices (87%), if products are of equal quality and price.

Values driving US socially minded consumers

 

  • Improve Financial and Investment Opportunity

 

Financial and investment analysts have recognized companies who have developed sustainability plans with regards to energy efficiency and reduction of environmental impact as an important evaluator criterion. According to the report U.S. Sustainable, Responsible and Impact Investing Trends, the market size of sustainable, responsible, and impact investing in the U.S. in 2018 is $12.0 trillion, or 26% of the $46.6 trillion in total US assets under professional management.

 

Sustainable and responsible investing in the US

 

  • Commitment to sustainability

 

When an organization has a clear commitment to sustainability, it can lead to other opportunities. For example, car manufacturers that were forward-looking enough to invest in e-mobility and hybrid technology in the past are now in a position to benefit from the diesel crisis in many Western markets.

 

  • Increase Employee Retention and Recruitment

 

Employees want to work with organizations that are ‘doing the right thing’ and being proactive with corporate environmental and social programs. In the report Advancing Sustainability: HR’s Role by the Society for Human Resource Management, companies with sustainability programs report 55% better employee morale, 43% more efficient business processes, and 38% improved employee loyalty.

 

  • Saves money

 

It saves money – As prices increase for energy, it pays to improve energy efficiency. By analyzing efficiency both internally and externally along the supply chain, organizations can take a more systemic approach to their business modeling. For example, companies like Nestlé and Bombardier work with smaller companies within their supply chain to improve their efficiency, and the cost savings are passed on.

 

  • Increase Productivity and Reduced Costs

 

Through the development of more sustainable business practices, efficiency in operations will increase. With better use and conservation of resources, operations will be streamlined and costs will decrease.

 

  • Sustainability and innovation

 

Sustainability and innovation go hand in hand – Companies can be creative with their innovations and indeed smaller businesses seem to shine when it comes to innovation. Business model innovation can allow creativity from different areas of a business and is not restricted to technology.

 

  • Corporate responsibility for addressing environmental issues

 

Companies are increasingly being asked to disclose how they address environmental issues. Organizations need to put processes and procedures in place so they can provide the relevant data.

 

  • Improving lives

 

Sustainability improves human lives. By addressing societal conditions such as fair and just labor practices, equality, community development, and health and well-being, sustainability promotes positive outcomes for communities and beyond.

 

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