We all have heard how important sustainability is for business… but why? Let’s take a look at the varying factors that demonstrate how adopting sustainable practices can benefit a company financially, socially, and environmentally.
Competitive Edge
Customers (and investors) are increasingly prioritising sustainability when making purchasing and investment decisions. Adopting sustainable practices can differentiate companies in the marketplace, enhance brand reputation and attract a new wave of environmentally conscious consumers and investors.
The 2023 Bain & Company Survey found significant interest among consumers to purchase sustainable products, with 50% reporting that sustainability was one of their top 4 purchase criteria, and respondents globally reporting they would pay 11% more on average for minimised environmental impact.
A research report by Accenture found that between 2013 and 2020, companies with consistently high ratings for environmental, social and governance (ESG) performance have outperformed their peers, achieving operating margins 3.7 times higher than lower ESG performers and generating 2.6 times higher annual total returns to shareholders.
Financial Performance
As well as being a higher priority for customers and investors, companies with strong sustainability initiatives uncover operational efficiencies such as improved processes, waste reduction, resource conservation, and reduced energy use; leading to significant cost savings.
A McKinsey & Company report found that a company with a strong ESG score can lower capital costs by roughly 10% and that companies with strong ESG performance have a 4.7% higher return on investment (ROI) than their counterparts with weaker ESG performance.
A study by Kroll analysed data from over 13,000 companies across industries and found that those with better ESG ratings outperformed their peers with lower ratings; globally, ESG leaders had annual returns of 12.9% vs 8.6% for laggards.
Risk Management
Sustainability initiatives can help companies manage risks related to regulatory compliance, supply chain disruptions, and reputation damage. Governments around the world are increasingly implementing regulations aimed at reducing environmental impacts and promoting sustainable development. By proactively integrating sustainability into company operations, businesses can stay ahead of regulatory requirements.
The Carbon Disclosure Project (CDP) reports that companies actively managing and planning for climate change secure an 18% higher return on equity (ROE) than companies that do not; and a 67% higher ROI than companies who refuse to disclose their emissions.
Also, sustainable business practices promote long-term resilience by fostering relationships with stakeholders, enhancing resource efficiency, and ensuring the availability of essential resources for future generations. Companies that prioritise sustainability are better positioned to adapt to changing market conditions and environmental pressures.
Attracting and Retaining Talent
Employees want to work for companies with strong sustainability ethics and initiatives, benefits include improved employee morale, attraction to top talent, and reduced turnover rates.
A survey conducted by Glassdoor found that 75% of employees prefer to work for a company that is environmentally responsible.
Another survey conducted by Swytch found that nearly 70% of employees report that their company’s strong sustainability program impacts their decision to stay with it long term.
Setting the Industry Trend
Sustainability not only helps your company stand out against competitors but also influences peer behaviours. Companies that are first in their field to adopt sustainable practices, can set themselves apart as a thought leader and prompt other companies to follow in their footsteps.
The business case for sustainability is compelling, with tangible benefits for companies that prioritise ESG responsibility in their operations and decision-making processes. By embracing sustainability, businesses can create value for themselves, society, and the planet in the long run.
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