It is no longer a viable choice to debate whether to include sustainable business practices into your overall plan in today’s rapidly changing environment. When designing company plans, it is important to keep in mind that a values-driven approach may be crucial to long-term success.
It is necessary to first establish what sustainability in business entails before moving on to discuss the reasons why incorporating sustainability into effective company strategy is so crucial.
WHAT EXACTLY DOES IT MEAN TO BE SUSTAINABLE IN BUSINESS?
Concisely, what we mean when we talk about sustainability in business is the impact that firms have on society and the surrounding environment.
The goal of a sustainable business strategy is to have a positive influence in either of those two sectors, therefore contributing to the resolution of some of the most urgent issues facing the world today.
The following is a list of some of the global problems that may be helped by sustainable business strategies:
• The changing climate
• The unequal distribution of income
• The depletion of natural resources
• The problems associated with human rights
• Working conditions that are equitable
• Racist injustice
• Unequal treatment of women and men
• Environmental degradation
Even if it may seem that way at first, sustainability in business is not motivated only by altruism. If you aren’t doing well financially, you can’t utilize your company to accomplish good in the world, as Rebecca Henderson, a professor at the Harvard Business School, explains in her course Sustainable Business Strategy, which is offered online. Both being profitable and making a positive impact on the world are essential components of a successful company strategy, which must include both.
The concept of the “triple bottom line,” which indicates that corporations should concentrate on more than simply earnings, or the “bottom line,” and also assess their environmental and social effect, has been embraced by a significant number of companies in today’s business world. People, the environment, and financial gain are the “three Ps” that may be used to refer to these foci of attention. This environmentally responsible method of doing business almost always ends up improving the efficiency of the company.
WHY IS IT SO IMPORTANT TO BE SUSTAINABLE?
Initiatives aimed at improving an organization’s sustainability may, in addition to promoting social and environmental change, contribute to the success of the organization as a whole. It may seem odd that increasing the amount of money spent on environmentally responsible business practices would increase a company’s profitability, yet studies demonstrate that the most environmentally responsible corporations are also the most lucrative ones.
It is common practice to use environmental, social, and governance indicators (often abbreviated ESG) in order to evaluate an organization’s ethical and sustainable practices. Companies that have strong ESG ratings have been shown to continuously beat the market both in the medium and long term, as stated by McKinsey. The adoption of sustainability methods may require an initial financial outlay; however, the returns on this investment may be substantial in the long run.
BENEFITS OF SUSTAINABILITY IN BUSINESS
1. You’ll Lower the Risks to Your Business While Protecting Your Brand
A CEO’s biggest fear is that a controversy would force the company to be featured on the top page of a newspaper. Not only may unethical business activities tarnish an organization’s image and cause it to lose clients, but dealing with a public relations crisis can also distract important human and financial resources from the organization’s primary line of business.
You do not want your business to be known as the one that failed to prevent an oil leak or that had its staff work in hazardous circumstances. You may safeguard yourself against any potentially disastrous events by putting into practice a sustainable plan that safeguards both the natural environment and the safety of your employees.
2. Having a Purpose and Guiding Vision Can Give You a Competitive Advantage
The pursuit of sustainability is not in conflict with the achievement of economic objectives, and infusing your firm with a sense of purpose may help you recruit a highly motivated and competent team, which is essential to achieving financial success. During a conversation that took place on Facebook Live, Henderson brought up a recent survey that found that 89 percent of CEOs felt that a company that has a common mission would have superior levels of employee happiness. In addition to this, 85 percent of customers indicate that they are more inclined to suggest a firm to others if it has a strong purpose.
Rather to just being a place that pays employees, positioning your business as an organization that contributes to the betterment of the world may be a competitive advantage when it comes to recruiting the most qualified individuals.
Related: an HBS professor investigates the influence that a company’s purpose may have on its success
3. The Market for Environmentally Friendly Products Is Expanding
According to a survey conducted in 2019, 73 percent of customers throughout the world are open to altering their consumption patterns in order to reduce the negative effect that they have on the environment. Additionally, sales of sustainable products have increased by about 20 percent since 2014. Millennials, in particular, are more likely to spend a higher price for items that claim to have social responsibility or that include sustainable components. Your company has the potential to increase its market share by converting consumers who are concerned about sustainability into buyers and by doing so boosting sales. If your company makes a commitment to sustainable goods and practices.
4. Collaborative efforts have the potential to propel change
It is possible to have feelings of being overwhelmed, alone, or that it is just impossible to make real change as an individual. This is not the case when some of the most inventive, successful, and powerful firms in the world are working together to find solutions to some of the most urgent challenges in the world. While governments have a difficult time finding solutions to challenges involving public goods, purpose-driven businesses that collaborate to find solutions to similar problems have found considerable success.
For instance, palm oil is inexpensive, has a wide range of applications, and can be found in almost half of all packaged goods, such as ice cream, lipstick, and soap. However, the production of palm oil has been linked to record levels of greenhouse gas emissions and has contributed to the progression of climate change.
As a result of this, consumer products manufacturer Unilever made a commitment in 2008 to only use palm oil that came from sources that were certified as sustainable. The group collaborated with its rivals, as well as with governments, non-governmental organizations (NGOs), and organizations representing indigenous peoples, in order to steer the adoption of sustainable palm oil throughout the whole sector. As a consequence of this, Unilever is still a successful corporation, and the world as a whole has benefited the environmental advantages of extracting palm oil in an environmentally responsible manner.
THE VALUE OF SUSTAINABILITY
Maintaining a sustainable business model does not require giving up revenues or putting achievement on hold. Instead, it has evolved into a component that is essential to the success of the strategy used by every firm. A company that does not account for the risks associated with sustainability will have lower levels of performance across a number of dimensions, such as profitability, growth, and staff retention.
You may achieve success in spite of sustainability if you integrate sustainability into your company plan, but you’re more likely to succeed because of sustainability.
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