Sustainability issues were for a long time largely given little air time or unacknowledged in the business world. Today, it is an area that is growing in importance and impact across the economy.
The world economy has become much more complex: supply chains are now spread around the world and vulnerable to a host of environmental, social and governance (ESG) issues.
These can be as varied as the damage caused by climate change and disruption to operations from water scarcity, through to the impact on reputation and brand from the discovery that child labour is being used by suppliers.
The Business Case For Sustainability
Governments around the world are committed to decarbonizing their economies, following the signing of the Paris Agreement on climate change.
At the same time, social media and the digital economy mean we live in an increasingly interconnected world, with enhanced transparency.
Dealing with ESG issues is now seen as an essential part of doing business; getting it right can boost a company’s brand, while getting it wrong can have a serious impact on reputation and bottom line. Increasingly, businesses are signing power purchase agreements with developers of renewable energy projects, with benefits including greater transparency and trust with consumers and other stakeholders.
There is also growing evidence that sustainability helps company performance. Unilever, one of the world’s largest consumer goods groups, is driving growth through its ‘sustainable living’ brands, which are growing 30% faster than the rest of the business, according to the not-for-profit organisation Business for Social Responsibility (BSR).
ESG performance is accompanied by higher valuations and higher profits, along with a lower cost of capital and lower exposure to risks.
A Strategy For Sustainability
Some companies may put off the idea of embracing sustainability because they think that there is just too much to do. This view often makes sustainability a destination, but it is better thought of as a journey – one in which there is value to be gained from the first step, according to the consultancy Thinkstep.
Many companies find that their customers are asking more questions about how they deal with ESG issues, and demand adherence to minimum standards in many cases.
That first step is compliance – it is simply good risk management to ensure that you comply with all the rules and regulations relevant to your business so that you are not subject to sanctions for non-compliance.
The next step is responding to market drivers. Many companies find that their customers are asking more questions about how they deal with ESG issues, and demand adherence to minimum standards in many cases.
Collecting data on such issues often provides useful insights for a business, leading them to become more engaged:
Collecting information for their own purposes before they are asked
Talking to their peers to find out more about best practices
Asking how they can help their customers achieve their own sustainability goals
Some corporations move beyond using sustainability to respond to external pressures. Instead, they use ESG issues to shape their own future, developing products and services that not only have a much lower impact, but also meet future needs, helping to drive growth.
Wherever your company sits on this sustainability “maturity curve”, it is no longer a nice-to-have or something you can ignore. It is central to your future success.