8 Strategies to make your company more sustainable and profitable
‘People, Planet, Profit’, this is a slogan that many people here in reference to sustainability within an organization. I even have this slogan on the back of my business cards. It refers to a company’s dedication to social issues, their employees, the environment and climate, while also being able to turn a profit. Ultimately, it is the CEO’s task to maximize their shareholder’s profits on the stocks that they bought into their organization.
There is a common fallacy amongst business leaders, that by going green, implementing a sustainability program, an organization will spend a lot of money on these organizations without seeing a nice ROI, lowering their overall profitability. This couldn’t be further from the truth as will be discussed in this article.
It is key for any organization to grow, by focusing on a sustainable growth program, it can be shown that companies can be more profitable. Research from the Massachusetts Institute of Technology, however, shows that sustainability and profit are far from mutually exclusive. 37% of businesses are reporting profit from sustainability and as many as one in two companies have adapted their business model to take advantage of sustainability opportunities. That’s not all, Corporations that actively plan with climate change in mind secure an 18% higher return on investment (ROI) than companies that aren’t.
Many companies don’t take the opportunity to implement sustainability programs within their organization. This failure to look beyond the short term can hurt businesses, and as resources become thinner and opportunities become scarcer, it will be harder to recover from these setbacks.
Governments at local, state, and national levels are supporting environmentally friendly businesses with incentives while pushing industry standards on pollution and emissions ever higher. With the advent of 198 Nation-States signing the UN’s 17 SDGs, legislation will only increase, compelling companies to have sustainability programs even more.
Sustainability in business, what does it mean?
Business sustainability is the practice of operating a business without impacting the environment negatively. A green business functions in the best interests of the local and global environment, meaning it supports the community and economy dependent on a healthy planet. An environmentally aware business considers more than just profits — it considers its impact on society and the environment. Such a business is sustainable because it contributes to the health of the structure within which it operates, thereby helping construct an environment in which the business can thrive.
A sustainable business adheres to the triple bottom line, a term coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. The three components of the triple bottom line are profits, people, and the planet. A sustainable business earns profits by being socially responsible and protecting our use of the planet’s resources.
Why Is Sustainability Important in Business?
The “Great Pacific Garbage Patch” is illustrative of why it’s extremely important for businesses to prioritize sustainability. According to the scientific journal Environmental Sustainability, an island of plastic twice the size of Texas (approximately 1.6 million square kilometers) is floating in the Pacific Ocean. Simply put, plastic waste harms marine life, and microplastics in seafood can end up in humans. This plastic would not exist if it weren’t for companies that use it to create and package products.
The bottom line is, if businesses don’t act responsibly as members of the global community, the one-million of the 8 million known plant and animal species will not live past the 21st century. Environmental Sustainability notes that “the human-caused rate of extinction of species of both plants and animals at present is hundreds of times higher than the natural rate in the past.”
According to Environmental Sustainability, we’re on pace to produce 27 billion tons of solid waste by 2050 due to a business environment that prioritizes rapid production and turnover of products for maximum profits. Unchecked CO2 emissions are projected to contribute to a temperature increase of two degrees Celsius by 2050, which will cause sea levels to rise and catastrophic weather events to increase. This is already happening, as can be seen with the increase of damage by hurricanes every year.
A study found that just 100 companies are responsible for 71% of global emissions. That does not mean that you should not implement sustainability practices, now is the time for businesses to become part of the solution, cut down on emissions and waste, and contribute to cultivating a livable planet. The good news is that businesses can make a major impact and account for 60% of emissions cuts by 2030, as per the Paris Climate Accord.
Sustainable Business Statistics
The following statistics illustrate where the business world is when it comes to sustainability:
- According to Cone Communications’ corporate social responsibility study, 63% of Americans want corporations to drive social and environmental change in the absence of government action.
- 87% of American consumers will make a purchase because a company advocated for an issue they care about.
- 76% of Americans expect companies to take action against climate change.
- 73% of Americans would stop purchasing from a company that doesn’t care about climate change.
- According to a report from The New Climate Economy, 95% of plastic packaging — the equivalent of $120 billion annually — is wasted after the first use, and microplastics have been found in 114 aquatic species.
- Over 140 million people will be displaced from their homes by 2050 if business continues as usual.
- Industries must drop carbon emissions by 40% by 2060 to stop the planet from warming over two degrees Celsius.
- In combination with action from governments and other stakeholders, businesses that take action on climate change by adopting green policies, technologies, and strategies for growth could realize a total of $26 trillion in economic benefits.
- According to the 2018 BSR/Globescan survey of business leaders in charge of sustainability and corporate social responsibility, respondents identified ethics and integrity as the No. 1 reason for pursuing business sustainability.
- 75% of corporate sustainability professionals say that businesses need to get better at including sustainability into their business strategy to address global mega-trends.
- 64% of North American respondents said sustainability needs to influence core business activities such as strategy and value creation; 84% of European respondents and 89% of respondents everywhere else agreed.
- Less than 33% of respondents said their businesses are engaging with sustainable strategic planning.
So how can a sustainability program within your organization make it more profitable? Here are 8 ways in which this is done.
- Focus on creating value, not just revenue.
Many companies focus on driving revenue first and creating value second. But it should be the other way around. Leading with your values and delivering consistent results builds consumer loyalty, and, ultimately, revenue.
So, what do consumers value? Nearly 80 percent said they consider sustainability (of a product, the retailer, or the brand) when making at least some purchases.
And it’s not just the quality of the product or service. How a company acquires new customers, chooses suppliers, prioritizes data privacy, and elevates customer experiences are increasingly becoming essential factors behind customer loyalty.
- Get vocal on issues that you care about.
A humanistic approach to customer experience can go a long way. Consumers have social, environmental, health, and other causes they are passionate about. If their values align with your company’s, they’re more likely to work with you.
In 2017, Cone Communications conducted a study linking consumer’s shopping habits with a corporation’s values. The study, which utilized benchmark data dating back to 1993, revealed that 87 percent of consumers said they’d purchase a product because a company advocated for an issue they cared about and more than 75 percent would refuse to purchase a product if they found out a company supported an issue contrary to their beliefs.
- Limit over-production and eliminate waste
No business wants to see a surplus. Once there is a disconnect between what the market demands and what your business supplies, overproduction is imminent, which is the nexus for waste.
For example, the U.S. throws out nearly 11.3 million tons of textile waste annually. In 2018, H&M reported having $4.3 billion in unsold clothes. Other top global brands, like Nestlé, Coca-Cola, and PepsiCo, have been named the world’s leading plastic polluters three years in a row by environmental watchdog Earth.org.
But overproduction and overstocking are controllable conditions companies can help avoid by listening to customers, performing risk analysis, and consistently evaluating supplier relationships.
By eliminating waste, a company in turn will become more profitable. This can be done through upcycling and conforming to the practices of the circular economy, subjects PSCG will discuss further in later articles to come.
- Spend more now to spend less later.
When there is a demand for something fast, companies typically sacrifice quality for expediency. From fast food to fast fashion, they will use goods that are harmful to the environment but cheap to produce.
When companies are tight on cash or want to maximize spending, it’s easy to default to cheaper options because of the immediate gratification. But they need to recognize that sustainable production can also be less expensive. Yes, the initial costs can be higher upfront, but there may be better options for long-term costs.
Customers want resilience. Sixty-six percent of global consumers said they’re willing to pay more for sustainable goods. If a good is of better quality and has more extended longevity, then customers will be able to get more usage out of it, and they’re likely to trust that company again when future goods are needed.
For sustainability, initial investments using more expensive materials and methods will lead to more significant long-term savings. Businesses need to work in stride and give new processes time to work.
- Measure everything as often as possible.
Data should be at the center of every business strategy, plan, or project. Analytics helps you understand the market, analyze vendor performance, forecast demand, and improve the customer journey.
Roughly two-thirds of enterprise companies that have big data initiatives experienced decreased operational costs.
Businesses should constantly measure the three main pillars of sustainability:
- Environmental: what is the impact on the environment
- Social: how are employees and other people affected
- Economic: where is the value that translates into wealth
Customers expect sustainable businesses to know about the impact they have on the environment and have a plan to improve it. These companies are also expected to deeply understand social equity and care about employee balance and happiness.
Every leader needs to be involved, support the initiatives, and play an active role in producing positive sustainability results. By capturing these efforts via data, businesses know what is working and what areas need to be improved.
- Stay connected with the public and other stakeholders.
The notion of “If it’s not broke, don’t fix it” is not valid in business. That’s because companies should always be looking to improve everything they do – from how goods are produced to customer engagement to employee retention.
Businesses must stay connected to the public and aware of their concerns and interests, so they know how to best adhere to their requests. Sixty-two percent of customers feel emotionally connected to the brands they most purchase. Businesses need to return the favor and show customers that the feeling is mutual.
Employees equally want a voice. Leaders who allow them to be heard will have more diverse thinking, which increases knowledge sharing and can drive better decision-making.
- Get your employees to buy in.
A successful sustainability program within an organization begins at the top, and trickles down into an organization. Leadership within an organization must express their values and commitment to sustainability issues. Organizations should have meetings confirming their values and their commitment to being socially responsible. Trainings can then be implemented to discuss the value of these commitments and educate employees their responsibilities to conform with their company’s goals.
Not only will this allow for an organization to be more successful with their stated goals, but it will also allow them to attract and retain top talent, which increases profitability by lessening the cost of employee recruitment and training.
- Keep innovating and reinventing, in other words, constantly make improvements to your sustainability program.
The world is constantly changing. To keep up, businesses must be flexible with their processes and technology. Companies should be able to pivot without a severe impact on the organization. When businesses have models that prioritize innovation, they can become resilient to unexpected conditions.
Ninety-two percent of the U.S.’s small businesses reported reinventing themselves in 2020.
Some of the longest-standing brands we see today – Visa, Costco, Madonna – have the same thing in common: consistent successful brand reinvention. Whether it is a new look, product, or expansion into new markets, longstanding brands and businesses prioritize reinvention and keep innovation alive.
Now that your company is interested in taking the steps necessary to implement sustainable strategies into its business model, we can help.
with one of our sustainability consultants to discuss your goals. We would be happy to help you organize and strategize a sustainability program into your organization.