Why sustainability creates business value

The immediate need to address sustainability concerns is clear: the world is very globalised and urbanised, resources are limited, and problems like air and water pollution from industrial operations, implying that the task is significant.

This remark is a result of managers' scepticism about include sustainability in their corporate growth plans because they fear the costs may outweigh the benefits. Commercial experience and academic research, on the other hand, show that comprehensive sustainability frameworks lead to revenue growth and tangible business returns, as well as long-term value creation.

“86% of businesses expected their sales to grow in the next 12 months as a result of their sustainability performance.” HSBC Navigator Survey 2021

World’s leading business decision makers are prioritising sustainability because they see it as key to future growth. Overexploitation of resources is a global problem. A sustainability plan, according to McKinsey, allows a corporation to make long-term investments. Many business executives are recognising the importance of reusing and recycling and are heading toward a circular economy. 

The renewable energy business is anticipated to be worth $2.15 trillion by 2025, making it an important development area.

Not convinced that implementing sustainability in your business’s strategy is a good idea yet? Research has identified some of the reasons why you should really re-consider it:

1. Increase brand value and get a competitive advantage

Millennials are the most populous generation. According to a Nielsen survey, millennials are twice as likely as baby boomers to claim they are changing their habits to decrease their influence on the environment. Generation Z is on its way to becoming the next dominant generation, and it is just as concerned about sustainability as millennials, if not more so. This shows that focusing on sustainability may greatly increase corporate brand value, and many of the world's most well-known brands are already doing so. By 2030, Apple has promised to becoming carbon-neutral in its products and supply chain. Companies that incorporate sustainability into their business strategies and corporate governance can gain a competitive edge in the long run.

2. Increase efficiency

A sustainability plan, according to McKinsey, can significantly cut expenses and have a 60% impact on operating profitability. It also reduces energy and water consumption. By incorporating sustainability into business divisions, an organization's chances of benefitting from its sustainability efforts are increased. It's also a good idea to be open about your environmental efforts. Puma's data on the amount of water utilised and carbon emitted throughout its supply chain assisted in identifying 60% reductions in water, energy, and fuel consumption. Being environmentally friendly can also help you enhance your relationships with the government and the local community.

“Leading businesses are taking extra care in determining who they can rely on and judging future partners on sustainability metrics – for instance, 92% evaluate diversity of workforce as part of their due diligence.” HSBC Navigator Survey 2021

3. Attract the best talents

For many of us, the epidemic has served as an opportunity to evaluate and rethink our priorities, which includes our work. According to a McKinsey study of US employees, over half of those polled were considering changing careers, with Millennials three times as likely to indicate they were examining their alternatives.

“96% of businesses see the workforce as having important role to play in improving their overall sustainability credentials” HSBC Navigator: The Future of Work

When it comes to hiring and maintaining the best talent, companies that balance people, planet, and profit are reaping the benefits. In Getting to Net Zero, research sponsored by HSBC, it emerges that today's business school students don't want to work for a corporation that has a high carbon footprint impact and progressively interested in classes that cover sustainability issues or carbon management.

“88% of business school students think that learning about social and environmental issues in business is a priority, and 67 percent want to incorporate environmental sustainability into their future jobs.” Stanford’s Social Innovation Review (2018).

4. Meet consumer’s expectations

Nielsen studies indicate that nearly 3 out of 4 Millennial consumers are willing to pay between 10% and 25% more for sustainable products and services. Besides, 8 in 10 respondents indicate sustainability is important for them as stated by a 2020 study conducted by IBM. 

“40% of consumers are defined as “Purpose-driven” meaning that they seek products and brands that align with their lifestyle and those with health/wellness benefits.” IBM Institute for Business Value 2020

Consumer views are turning toward sustainability, and this trend is expected to continue as the number of millennials and generation Z rises. Environmental issues are at the forefront of the discussion, notwithstanding the importance of social and economic dimensions of sustainability.

“57% of consumers are willing to change their purchasing habits to help reduce negative environmental impact.” IBM Institute for Business Value 2020

Companies must evaluate the value creation for all stakeholders, including consumers, employees, investors, society, and the environment, while making business decisions and identifying possibilities. They will incur considerable risks and be less effective than their competitors if they fail to do so in such a volatile business environment.

Sources:

Anderson, R. (2011). Puma first to publish environmental impact costs. BBC News. [online] 16 May. Available at: https://www.bbc.co.uk/news/business-13410397 [Accessed 16 Feb. 2022].

Consulting, A. (2020). How can sustainability create business value. [online] AION Consulting 2020. Available at: https://www.aionconsulting.eu/post/how-can-sustainability-create-business-value [Accessed 16 Feb. 2022].

HSBC (n.d.). Grow, grow, grow! What a successful business looks like in 2022. [online] www.business.hsbc.com. Available at: https://www.business.hsbc.com/en-gb/insights/growing-my-business/what-a-successful-business-looks-like-in-2022 [Accessed 16 Feb. 2022].

HSBC Business (n.d.). Are sustainability credentials your biggest hiring advantage? [online] www.business.hsbc.com. Available at: https://www.business.hsbc.com/en-gb/insights/sustainability/are-your-sustainability-credentials-your-biggest-hiring-advantage [Accessed 16 Feb. 2022].

HSBC Business (n.d.). Business sustainability: how to get staff buy-in. [online] www.business.hsbc.com. Available at: https://www.business.hsbc.com/en-gb/insights/sustainability/how-do-you-empower-employees-to-embrace-sustainability-practices.

HSBC Business (n.d.). Navigator: the voice of business. [online] www.business.hsbc.com. Available at: https://www.business.hsbc.com/en-gb/insights/growing-my-business/navigator-the-voice-of-business [Accessed 16 Feb. 2022].

McKinsey & Company (n.d.). How the E in ESG creates business value | McKinsey & Company. [online] www.mckinsey.com. Available at: https://www.mckinsey.com/business-functions/sustainability/our-insights/sustainability-blog/how-the-e-in-esg-creates-business-value.

Peters, A. (2019). Most millennials would take a pay cut to work at a environmentally responsible company. [online] Fast Company. Available at: https://www.fastcompany.com/90306556/most-millennials-would-take-a-pay-cut-to-work-at-a-sustainable-company#:~:text=Nearly%2040%25%20of%20millennials%20have.

Rafi, T. (n.d.). Council Post: Why Corporate Strategies Should Be Focused On Sustainability. [online] Forbes. Available at: https://www.forbes.com/sites/forbesbusinesscouncil/2021/02/10/why-corporate-strategies-should-be-focused-on-sustainability/?sh=17e800bc7e9f [Accessed 16 Feb. 2022].