The business case for sustainability

3 september 2012
business case for sustainability

While the definition of sustainable business practices continues to evolve, as a concept it is here to stay and will only become more important for companies who seek to reap the benefits of implementation. Recent research found that profit increased 9% in companies with a focus on green practices, and in public companies a 33% increase in share price.

The term “sustainability” in a business and environmental context is one which has existed since the late 1990s. However, where it once referred to the requirement for businesses (or industries) to develop goods and services which meet the current day demands of the consumer, whilst – almost paradoxically – not depleting those resources involved in its production to the detriment of future generations, today, this definition has evolved somewhat – and many argue, not for the better. Where it should exist as a vehicle for improved production practices, better recycling initiatives and smarter consumption, arguments abound that commercialisation has changed this pure focus.

This raises an important question: Is the concept of sustainability in itself, sustainable, or has it come time to let the idea go? We’ve set out to learn more about the concept of sustainability, and to determine if the principle has merit in today’s social duality – a society which values improved economic standards and which increasingly desires reassurance that improvements are not made at the expense of the environment.

Redefining business sustainability

Unsurprisingly, given the time Sustainability has been a concept, the definition of what it is has evolved. A recent research study into the concept of sustainability determined that the definition has changed and is best defined as a “profit-driven corporate response to environmental and social issues that are caused through the organization’s primary and secondary activities”. This definition works in tandem with the concept of the Triple Bottom Line (TBL) which has become a popular accounting practice (In fact, in 2007 the United Nations ratified the concept of a “Triple Bottom Line” as a standard for Urban Accounting practices).

Under this methodology businesses aim to improve three measurable aspects of their business: Commercial, social and ecological impacts. Indeed, when a business successfully implements a triple bottom line or similar approach, there are multiple benefits.

Business sustainability – pros

There are countless anecdotes and case studies of successful businesses which have implemented sustainable business practices. The advantages cited and common to many of these case studies include:
  • Improved environmental, health and safety performance (less accidents, less fines, fewer lost workdays, resulting in better financial benefit)
  • New environmentally sound products
  • Positive societal value perception which may or may not increase financial performance, but which do yield other benefits. These may include enhanced brand reputation and value, enhanced ability to attract specific work talent, requirement to improve R&D budgets which in turn lead to further innovation which may include lower production costs or new product developments
    • With the combination of the above, many businesses show increased market share, lower costs, increased profits and better employee satisfaction
  • Improvements to technology mean that often the benefits of pursuing sustainability have business benefit to those companies creating the original pollution
  • Big oil companies are investing more and more into renewable energy sources and realising the benefits of doing so in many other areas of operation
  • In some cases, consumers are willing to pay more for ‘green’ products, thus offsetting all or some of the costs associated with improved production

Business sustainability – cons

Of course there are counter-arguments to sustainability. Pundits argue pursuit of sustainable practices by industry:
  • It is not efficient. Companies should focus on doing what they are good at (Concept of specialisation) and let other industries focus on how to improve the management of waste produced as a result
    • This benefits society through better produced goods and through specialists determining how to best treat waste products
  • The immediate costs of sustainable business practice and the benefits they provide are not always immediately measurable. That is, the long term benefit of sustainable practices may not outweigh the short term costs of replacing lost ecosystems for some countries.
  • Developing countries have a need to produce to survive for example, rather than to protect the environment
  • It is impotent. If only some companies/industries engage in the practice, what good can those who do practice sustainability do?

Factors to consider

Before your firm decides to ‘go green’, there is an important question that requires answering first. In going green, are you looking to make changes to management systems, to manufacturing processes or to the products themselves? Each of these is completely different to the others, but each, in their own way, can reap massive benefits for the environment and for the company as a whole too.

Once you have determined what path(s) you wish to embark upon, make sure you research and plan for the changes and what they will/may do to your business internally as well as from the consumers perspective. Managing consumer expectation is as important as anything else you may do. A few things you may wish to consider in determining how to make your business more sustainable include:
  • Decreasing energy use
  • Purchase more material inputs from local suppliers reducing your carbon footprint
  • Decrease natural resource usage
  • Increase natural light into the office
  • Recycle more and eliminate non-renewable waste
  • Engage with your stakeholders – their buy in and opinions will help drive your initiative

Final thoughts

As with any big business decision, there is a requirement to make sure you do your homework and that you plan for all eventualities. However, increasingly, research shows that sustainable business practices reap benefits for companies which implement them. In fact, Accenture found that profit increased 9% in companies with a focus on green practices and in public companies a 33% increase in share price.

We believe that sustainability is here to stay and adds value to the economy and the environment.

If you are looking to embark on this route, just make sure you involve your stakeholders, learn about what is important to them, speak to your R&D teams about what is feasible without impacting performance and above all, be realistic in your time frames. If you can do that, the signs point towards your company doing well as well as the environment benefiting too!