Sustainability is the current buzzword in all the organisations. If you an entrepreneur owning a company or a corporate employee, you will be surely familiar with your firm’s sustainability initiatives and policies. They are referred to as ESG, which stands for Environmental, social, and corporate governance.
An increasing number of organisations are integrating sustainability into their business strategy and operations. In a recent McKinsey survey, 70% of respondents said their companies have a formal governance of sustainability in place.
According to Forbes, while 90% of business executives believe in the importance of sustainability, only about 60% of their companies have a sustainability strategy. But what exactly does it mean to be ‘sustainable’ in business?
Sustainability in business refers to a company’s strategy to reduce negative environmental impact resulting from their operations in a particular market. An organisation’s sustainability practices are typically analysed against its ESG metrics. Sustainability in business generally addresses the effect your business has on the environment as well as the society. When companies fail to assume responsibility, it will lead to issues like environmental degradation, inequality, and social injustice.
Sustainable businesses consider a wide array of environmental, economic, and social factors when making business decisions. These organisations monitor the impact of their operations to ensure that short-term profits don’t turn into long-term liabilities.
Today, many consumers are adopting eco-friendly behaviors and are expecting the businesses they support to do the same.
Businesses around the globe have a serious impact on our environment. Several world-renowned companies are major polluters, consume natural resources at an alarming rate, and are responsible for some of the most detrimental environmental catastrophes in history.
Thankfully, modern organisations are waking up to the need for sustainable solutions and are increasingly making eco-friendly choices.
Example – Ikea’s products help customers cut back on their water and energy use. Their products are manufactured using recycled materials and 91% of their waste is recycled or disposed of sustainably. Most of the eminent furniture and manufacturing companies are also focusing on recycling aspects and waste management.
Research shows that companies with high ESG ratings have a lower cost of debt and equity, and that sustainability initiatives can help improve financial performance while fostering public support.
The McKinsey report also highlights that the strongest motivating factors to adopting a sustainable mindset were to align with a company’s goals, missions, or values; build, maintain, or improve reputation; meet customer’s expectations; and develop new growth opportunities.
Sustainable business strategies are unique to each organisation as they tie into larger business goals and organisational values. For instance, sustainability in business can mean using sustainable materials in the manufacturing process, optimising supply chains to reduce greenhouse gas emissions, relying on renewable energy sources to power facilities, among others.
Beyond helping curb global challenges, sustainability can drive business success. Several investors today use environmental, social, and governance (ESG) metrics to analyse an organisation’s ethical impact and sustainability practices. Investors examine factors such as a company’s carbon footprint, water usage, community development efforts, and board diversity.
Organisations need to be firmly committed to sound environmental practice in their daily operations. Companies are expected to have their Environmental Policy and Environmental Management System that are aligned with ISO 14001 and its guiding principles.
As more companies venture down the path of sustainability, the demand for professionals who are familiar with sustainable business will increase. Colleges and universities are already offering specialised courses on Sustainability that are seeing high student intakes.
Companies are creating exclusive, full-time sustainability related positions and the demand for professionals will only rise in the coming days.
If you are trying to introduce sustainable practices to your business, you will need to be innovative.
Eco-friendly businesses can be extremely profitable as well.
Moreover, some of the biggest companies in the world are embedding sustainability as a strategic imperative in their business plans. Sustainability has a broader meaning and commitment to sustainability should be an integral part of a company’s business strategy. It is about how the firms sustain their durability of business, how they organise and capitalise to ensure they remain a thriving enterprise for many years to come.