Sustainability is increasingly becoming a necessity for corporations due to changing perspectives around the world. It is becoming even more critical for companies to address the gap between knowing and doing by embracing sustainable business practices. Sustainability can be defined as providing for the present needs without compromising the needs of the future generations to meet theirs. It has three pillars: economic, environmental and social.
The Importance Of Sustainability
Although 90% of executives think sustainability is important, only 60% of companies have a sustainability strategy. Often, companies that speak of being sustainable are lacking when it comes to implementation. One of the reasons I believe this is happening is because CEOs and corporate boards are not as engaged as they should be with sustainability strategies.
Starting a business to make the world more sustainable can not only highlight someone as a hero, but it also can provide a lot of wealth, as Elon Musk proved by becoming the world's richest person. The world is faced with the overexploitation of resources. According to McKinsey, having a sustainability strategy allows a company to make long-term investments. When it comes to sustainability, a do-nothing approach can mean a bigger loss in the future. Many corporate leaders are becoming aware of the need to reuse and recycle and are moving toward the circular economy. It is a huge area for growth as well with the renewable energy market expected to be $2.15 trillion by 2025.
As someone who specializes in corporate strategy and is also a World Bank Ambassador on climate change, I've put together some of the top reasons why you should implement sustainability strategies in your company:
Add Brand Value And A Competitive Advantage: Millennials are the largest generation of the population. A survey by Nielsen shows that millennials are twice as likely as baby boomers to say they are changing habits to reduce environmental impact. Generation Z is soon to become the next dominant generation and is equally concerned, and in many cases more concerned, about sustainability than millennials. This shows that corporate brands can increase their values tremendously by focusing on sustainability, and many of the world's leading brands are doing just that. Apple has committed to becoming 100% carbon neutral for its products and supply chain by 2030. Companies that embed sustainability into their business models and corporate governance can have a lasting competitive advantage.
Meet Consumer Demands: Nielsen studies show that 66% of consumers would spend more for a product if it came from a sustainable brand, and 81% of global consumers feel strongly that companies should help improve the environment. There is a changing trend among consumers toward supporting sustainability, and it is only getting stronger as the number of millennials and generation Z increases. Though sustainability is also about social and economic aspects, environmental concerns lead the thinking.
Increase Efficiency: According to McKinsey, a sustainability strategy can reduce costs substantially and can affect operating profits by as much as 60%. It also lowers energy consumption and water intake. Building sustainability into business units can increase an organization's chance of profiting from its sustainability activities. It is also good to be transparent about sustainability activities. When Puma published data on the water used and carbon emitted through its supply chain, it helped identify ways to reduce water, energy and fuel consumption by 60%. Being sustainable can also improve relations with the government and the local community. It can get the company tax incentives and subsidies.
Attract Talent: Being sustainable is important when it comes to attracting talent. Nearly 40% of millennials have taken a job because of the company's sustainability, and they are even willing to take a pay cut to work at an environmentally responsible company. With millennials becoming the largest workforce, not having a sustainability strategy can mean losing out on a lot of good talent. Being sustainable can also lead to the employees being more motivated to work because they see value in what the company is doing.
Create New Opportunities: A strong sustainability proposition can help companies tap new markets and expand into existing ones. China's initiative to fight air pollution is to create investment opportunities worth more than $3 trillion through 2030. Corporations that focus on sustainability will be in the best position to get valuable new business opportunities.
A Corporate Strategy For Sustainability
Corporations have heard the message very clearly, and now I've observed that there is an increase in the number of large corporations that have a chief sustainability officer (CSO). Not only are there more CSOs, but the rank of the CSO is also rising. Economic, social and environmental sustainability is a must in today's business environment. It has a lot of benefits as well. A corporate strategy focusing on sustainability can add brand value, meet consumer demands, increase efficiency, attract valuable talent and create new opportunities.
Talal Rafi is a World Bank Ambassador (GYCN) on Climate Change. The opinions expressed are solely representing this position.