The latest IPCC UN report was yet another reminder that urgent action from governments and businesses alike is needed to avert the worst effects of climate change. But, should businesses see sustainability as an unnecessary cost, or a sound business strategy? We share the top 5 benefits of bringing sustainable practices into business.
Becoming more sustainable isn’t just the right thing to do for people and the planet; it’s also good for business. Sustainability means adopting practices that can be maintained, or ‘sustained’, over time, ensuring long-term viability and resilience. In contrast, unsustainable business models are often short-sighted and prone to failure, unable to adapt to changing economic, social, and environmental conditions.
The benefits of sustainability go far beyond social and environmental responsibility; they also encompass long-term economic growth, profitability, and competitiveness. By embracing sustainability businesses can secure a brighter future for themselves, their stakeholders, and the planet as a whole.
Below, we share 5 of the top benefits companies can reap by becoming more sustainable.
#5 Improved reputation
By engaging in socially responsible activities, businesses can enhance their reputation with customers, employees, investors, and other stakeholders, which can lead to increased loyalty, trust, and profitability with their consumer base.
There is ample evidence to support the importance of sustainability in today’s consumer market. For instance, a recent study conducted by prominent payment-processor Mastercard, revealed that a majority (62%) of people want companies to prioritise sustainable practices. Additionally, other studies have found that Gen Z, is particularly conscious of sustainability and is more inclined to purchase products from companies with a reputation for sustainability. In fact, as many as 75% of Gen Z individuals prioritise sustainability practices over brand names.
#4 Attracting and retaining employees
The next sustainable benefit focuses on employees. Businesses that prioritise environmental and social responsibility are more attractive to potential employees who want to work for an organisation that aligns with their values. Moreover, when a company demonstrates its commitment to social and environmental issues, its employees are more likely to remain loyal, reducing turnover and avoiding the substantial expense of training new staff.
According to HR outsourcing provider CentricHR, the cost of replacing employees can vary significantly depending on the level of the position. For mid-range positions, businesses can typically expect to pay around 20% of the employee’s salary to replace them. However, for executive positions, the cost of replacing the employee can skyrocket to as much as 213% of their salary.
By prioritising purpose-led sustainability initiatives, businesses can create a more engaged and loyal workforce, reduce turnover costs, and demonstrate their commitment to making a positive impact on the world.
#3 Reduced costs
In light of the current economic situation, costs are a significant concern for both consumers and businesses. Incorporating sustainable practices into business operations can lead to considerable cost savings and increased efficiency. By adopting measures such as energy-efficient technologies, automation, waste reduction, and supply chain optimisation, businesses can drive down operational costs and improve their bottom line.
For instance, companies that switch to LED lighting for extended hours can save up to 80% on energy bills. Additionally, the Carbon Trust, a leading sustainability consultancy, helped a Scottish manufacturer save £170,000 annually (equivalent to 2,000 tonnes of emissions) by making simple changes to its ventilation system.
Businesses can also cut costs by transitioning to electric or hybrid vehicles, especially if they routinely enter low-emission zones in major cities or have the capability of charging from renewable sources. By embracing such measures, companies can reduce their carbon footprint while simultaneously improving their financial performance, a sustainable benefit which is becoming more necessary due to economically turbulent times.
#2 Enhanced risk management
Companies that prioritise sustainable practices are better equipped to manage risks related to reputation, compliance, and market or national disruptions.
For example, the use of electric vehicles may help protect your business from rising fuel costs and disruptions in fuel supply chains. Similarly, adopting alternative energy supplies such as solar or wind can help shield your business from unexpected increases in the cost of energy.
Furthermore, the scope of sustainable disclosure regulations is expanding rapidly and governments are contemplating the adoption of climate transition regulations. By acting proactively, companies can avoid the need for a last-minute scramble when the regulations are enforced and risk breaching compliance.
#1 Increased access to capital
The final sustainable benefit comes from the investor community. Investors are increasingly drawn to companies that prioritise social and environmental causes, motivated by both ethical and economic considerations. This shift in investment preferences is reflected in the impressive performance of companies that have taken proactive steps towards sustainability over the past few years, establishing themselves as leaders in the rapidly growing green economy.
The appeal of sustainability to investors can be attributed to the range of benefits mentioned in this list. Each one suggests to investors that sustainability is a promising market with the potential for strong returns on investment.
The most notable example of this shift in investor sentiment comes from The Climate Action 100+ initiative, which manages over $40 trillion and is led by a group of investors. Composed of five global investor networks, this initiative seeks to hold the world’s largest corporate greenhouse gas emitters accountable for their role in contributing to climate change.
To achieve this, the initiative is urging companies to take action to reduce their emissions, improve their governance practices and increase transparency around their climate-related disclosures.
