How sustainability benefits businesses
Businesses have a lot to gain from sustainable operations. Sustainability helps companies reduce their negative environmental impacts while also helping them increase efficiency and innovation, improve corporate reputation and customer loyalty, and create competitive advantages for themselves.
While introducing sustainability initiatives may cost more money up front, most sustainable initiatives have been shown to save money and improve performance in the long run. For example, companies can reduce their costs through improved energy efficiency, reduced waste and recycling, better supply chain management and enhanced employee productivity.
For example, research by Deutsche Bank has shown that companies with high ratings for ESG factors have a lower cost of debt and equity. In addition, 89% of the studies they reviewed found that companies with high ESG ratings outperform the market in the medium and long term. Therefore, using financial forecasting and other best practices to consider sustainable operations can be an excellent way for businesses to save money and increase performance for the long haul.
Consumers increasingly want to buy from sustainable and responsible companies, so sustainable operations can help businesses attract new customers and increase loyalty from existing ones. IBM reports that a majority of surveyed consumers (57%) are willing to change their buying habits if it would help reduce pollution.
Cause marketing is also a good way for businesses to show their commitment to sustainability. By partnering with nonprofits or other organizations working toward sustainable initiatives, companies can demonstrate their commitment to sustainability while increasing brand awareness.
In addition to consumers, sustainable operations can help businesses attract and retain employees. Employees are often mission driven and prefer to work for a company that shares their values. According to survey research from Glassdoor, over 77% of adults across four countries would consider a company’s culture before applying for a job there. Additionally, 79% said they would consider the company’s mission and purpose.
Finding ways to integrate sustainable operations into your corporate culture can be a great way to attract and retain employees. By striving for sustainability, companies show that they care about the world we live in while creating meaningful jobs for their employees.
Global ESG assets are expected to exceed $53 trillion by 2025. ESG factors are becoming increasingly attractive to investors because they provide a more sustainable long-term return. Investors are increasingly looking for companies with high ESG ratings because sustainable companies often have better financial performance and enjoy greater profitability, lower volatility and higher stock prices than nonsustainable companies.
Furthermore, sustainable businesses often have greater transparency than those without sustainable initiatives. This can help them build trust among investors and other stakeholders while also helping them identify potential risks before they become critical problems.
Sustainable operations can make it easier to comply with present and future regulations. As governments worldwide begin to pass legislation requiring businesses to reduce their environmental impact, sustainable operations will become increasingly important. By focusing on sustainability as a core part of their business strategy, companies can anticipate changes in regulations before they happen and develop sustainable solutions accordingly.
Financial experts, such as EY, point out another advantage for companies that proactively accommodate as-yet-unestablished regulation changes: Doing so helps them stay ahead of the curve and avoid fines or other complications. Better to make necessary changes before they’re required, in other words, rather than after.
Preparing for the future
Climate change has different impacts on various industries spanning from agriculture to energy to infrastructure. So, it’s pivotal to consider the outcomes of these changes and how sustainable operations can help adapt or mitigate them. A few examples from the Intergovernmental Panel on Climate Change Working Group 2 include:
- Develop the ability to comprehend and measure climate impacts, then include these impacts in all future decision-making.
- Invest in adaptation and resilience now to help minimize future losses and damage from climate change.
- Take action to reduce emissions and mitigate climate change today so that the outcomes will be less severe.
Planning for sustainable operations and continual improvement can essentially help businesses stay current in a changing world.