SUSTAINABILITY IN BUSINESS
Why should businesses embrace sustainability?
Sustainability is on the cusp of an evolutionary leap. Companies all over the world are beginning to explore more sustainable ways of doing business, primarily considering their long impact on the environment, society, and the economy. Becoming more sustainable may not be easy at first, but business sustainability is more of an opportunity than a threat.
However, sustainability is not just environmentalism. It is a business approach to creating long-term value by considering how a given organization operates in the ecological, social and economic environment. Sustainability is built on the assumption that developing such strategies fosters company longevity.
From a broader perspective, a sustainable business is one whose purpose and actions are equally grounded in financial, environmental, and social concerns. In the past, businesses were trying to be good corporate citizens, focusing on energy conservation and offering green products and yet this was not central to the business strategy. More recently, many businesses have begun to embrace sustainability and view it as a more integral component of their business strategy (Georgia, 2022).
As the expectations on corporate responsibility increase, and as transparency becomes more prevalent, companies are recognizing the need to act on sustainability as the benefits of being sustainable are becoming well-known (Georgia, 2022).
Some of the major advantages of taking up sustainability in business are:
Reduction of energy usage and waste: Sustainability can shape how key resources like energy, carbon, water, materials, and waste are used throughout the supply chain. Most businesses that start implementing sustainable practices almost immediately notice a reduction in their energy demand and the waste they generate. The development of sustainable business practices can help companies reduce their carbon footprint, become energy efficient, and save overhead costs. Reducing their environmental impact can not only be financially lucrative but can become a great selling point.
Enhancement of brand image and building customer loyalty: Sustainability can become a key component in buying decisions. Since 2021, customers are more aware than ever of how their buying choices can affect businesses and the difference between climate actions vs. greenwashing. There are likely to buy from companies that are mindful of their impact on society and the environment. Thus, sustainability improves businesses’ brand image and gives them a competitive advantage over competitors.
Increasing revenue: Sustainable strategies can boost revenues, cut operating costs, and achieve better borrowing rates. The more sustainable a business becomes, the less it pays on its energy bill. Cost savings can be reinvested in additional sustainability efforts to expand a business’s positive impact on the planet.
The attraction of investments and funds: Many financial and investment experts have found that organizations with sustainability plans are likely to attract investors more than those who do not have one. This explains why ESG investing is now very popular.
Increase in employee retention: Sustainable companies are more likely to treat employees as critical stakeholders, increasing employee retention and productivity. Employees want to work in companies that integrate ESG strategies in business processes and thus “do the right thing”.
Increase in the business’s ability to comply with the regulation: Incorporating sustainability into business practices allows companies to comply with regulations and avoid any non-compliance costs.
How businesses can become sustainable
Businesses can be sustainable in several different ways. Actions that companies can adopt to become sustainable include reducing waste, preventing pollution, adopting clean energy, conserving water, using energy-efficient materials, adopting sustainable business travel policies, caring for employees, collaborating with local suppliers, and recycling and reuse of products are ( Makridou,2022).
A sustainable business should look at the entire life cycle of goods or services and across the whole supply chain, especially if the source materials come from overseas. Best practices related to technologies and innovative policies are advancing the combined use of renewable energy and energy efficiency practices. Even small businesses can easily scale these practices and implement them in their organizations through a small business sustainability plan.
An environmental management system (EMS) could be used to manage, evaluate, monitor, and report a business’s sustainability performance. An effectively sustainable development strategy requires top-level commitment and It needs to be in line with all stakeholders’ requirements, policies, and action plan.
Decisions made at every level are likely to affect the business’s overall sustainability performance significantly. Understanding and reflecting on stakeholders concerns can lead to a more effective business strategy. Employees, environmental regulators and other organizations can be a beneficial source of ideas and an essential part of executing sustainability plans. Offering training and incentives to employees can also encourage them to adopt the business’s sustainability strategy. Implementing the elements of focus, motivation, commitment, support, and communication linked to a stewardship orientation is also fundamental to achieving higher levels of sustainability performance.
In order to address sustainability appropriately, companies need to bridge two critical gaps. One is the “Knowing-doing gap” which typicallymeans that whereas a business can find sustainability important, it is imperative that sustainability is incorporated in its strategy and business model. The other gap that should be addressed is “The compliance – competitive advantage gap”: More companies are seeing sustainability as an area of competitive advantage, but it is still a minority. However, all companies need to be compliant. Management should address these topics separately, not mesh them together. Compliance is holistic, a “must do”. For competitive advantage, only a few material issues count. (Knut, 2022)
Companies that stand out in the area of sustainability address both gaps. They have evolved from knowing to doing and from compliance to competitive advantage. They also know the risk of getting this wrong. For instance, promising and not delivering, or addressing material issues without being solid on compliance.
Sustainability is a major challenge, one that matters beyond individual companies. But a reassuring number of large companies are developing forward-thinking sustainability policies. It is really becoming clear that sustainability is a megatrend that simply isn’t going away and should therefore be embraced.