“Sustainability” has become a buzzword in recent years, and for good reason. With the impact of climate change becoming greater, it's more pressing for companies to take action to protect our planet.
Before we continue, it’s important to discern ESG (Environmental, Social, and Governance) and sustainability as distinct yet interconnected concepts. While sustainability is a fundamental pillar of ESG, encompassing environmental considerations, ESG extends beyond the boundaries of sustainability alone. It represents a broader framework that evaluates a company’s performance in 3 key areas: environmental factors, social responsibility, and governance practices. This article will primarily focus on sustainability, delving into reasons to be sustainable and how you can get started on it.
Why exactly is sustainability important for businesses?
At its core, sustainability is about protecting the planet for future generations. How does this relate to business, you may ask. For starters, it is the right thing to do. Preserving the planet for our children and their children is everyone’s responsibility, from businesses to government to non-profits to individuals.
In addition, there are several tangible and commercial advantages to gain as you start incorporating sustainability into your business strategy and operations.
- Target the growing number of ‘green’ consumers
- New product opportunities
- Investment opportunities
- Talent attraction
Let’s take a closer look.
- Cost-savings. By implementing energy-efficient technologies, optimising resource use, and reducing waste generation, companies can cut operating costs. These cost savings directly contribute to better profitability and may provide additional resources for investments in growth and innovation.
Take the aviation industry for example. In 2021, aviation accounted for over 2% of global energy-related CO2 emissions. To operate in a more eco-friendly manner, United Airlines made some changes to lighten its load onboard. They started printing on a new form of paper that resulted in a magazine that was one ounce lighter than it used to be. This may seem insignificant. But it is not. The change resulted in 170,000 fewer gallons of fuel burnt annually, which translated into $290,000 cost savings.
- Target ‘green’ consumers. Consumers today are more conscious of the environmental and social impact of their purchasing decisions. In a survey by Boston Consulting Group, up to 80% of consumers say they think about sustainability in their day-to-day purchases. By implementing sustainable practices and transparently communicating those efforts, businesses can target this growing segment of consumers.
Take Patagonia for example. In the 2011 Thanksgiving season, they ran an advertisement “Don’t Buy This Jacket” to encourage customers to reconsider their purchase, or buy a used Patagonia product. The campaign was successful in communicating the brand’s purpose and drove sales up by 30%, a clear indication that customers are actually more supportive of sustainable brands, even back in 2011.
- New product opportunities. Embracing sustainability opens up new business opportunities. As sustainable practices gain prominence, there is a growing demand for innovative and eco-friendly products and services. Aligning with this market shift allows you to tap into new customer segments and unlock new revenue streams.
For example, in the electric vehicles (EV) industry, consumer demand has risen significantly over the years. According to the US Bureau of Labor Statistics, the number of EVs on the road has increased from about 22,000 in 2011 to a little over 2 million in 2021, and this figure is expected to continue to grow in the next decade.
In a YouGov poll for Forbes Wheels, drivers who consider buying EVs cited protecting the environment as the top reason to buy. This indicates that consumers do include sustainability in their buying considerations. In your business, there are bound to be opportunities for you to be green(er), and with innovation, you can potentially unlock a new business opportunity or target the growing segment of conscious consumers.
- Drive investment opportunities. A growing number of investors are paying attention to ESG performance, with evidence pointing towards sustainability-related activities being material to a firm’s financial success over time. In addition, many banks’ green financing packages offer better rates. By demonstrating a commitment to sustainability, you can attract new funding to drive growth and expansion.
In fact, banks have been pushing forth the sustainability agenda with generous green loans across various industries. For example, Aviva Investors has committed to lending £1 billion for sustainable real estate by 2025. DBS Hong Kong has also shared their support for sustainable transportation by financing Kwoon Chung Bus Holdings with HK$348 million. MUFG Bank has also backed Vena Energy, Asia-Pacific’s leading renewable energy company in a JPY16.9B green loan to generate clean energy for residents.
- Boost employer brand and talent attraction. Sustainability can also be used as a workforce strategy to attract and retain talents. In Randstad’s Workmonitor 2023 survey, 42% employees surveyed said they would not work for a business whose values did not align with theirs. The same percentage said they would not accept a job from an organisation not making a proactive effort to be more sustainable. Looking ahead, millennials and Gen Zs will make up as much as 72% of the global workforce by 2029, and with them driving the trend towards a greener future, it will help your brand stand out when you use sustainability as both a business strategy and a talent attraction strategy.
- Stand ready to comply with changing regulations. Regulators worldwide are implementing stricter environmental requirements, particularly to meet nationally determined contributions (NDCs) that are set by governments as commitments to reduce greenhouse gas emissions. By proactively embracing sustainable practices, you can better prepare for regulations and address risks more effectively.
Here’s a look at the different ESG regulations introduced over the years.
- In 2015, the Taskforce on Climate-related Financial Disclosures was introduced to work on standards for reporting climate-related disclosures
- In 2021, E.U.'s Sustainable Finance Disclosure Regulation was introduced to improve transparency in sustainable investment.
- In 2023, a new EU Corporate Sustainability Reporting Directive was introduced to mandate corporate sustainability disclosures related to ESG-related taxonomy and audit sustainability data
As the landscape continues evolving, sustainability standards and scope will only continue to be more stringent. For example, in Singapore, whilst it was not previously mandatory to do sustainability reporting, SGX has begun mandating sustainability reporting. It will be easier to start embracing sustainable practices now than be scrambling to comply with regulations when they come.
Can you choose to adopt a bystander approach?
You can for now, but you might not want to.
When it comes to sustainability, a do-nothing approach can lead to losses in the long run as you lose out on potential funding or customers to your peers who are more sustainable. A 2021 research, The Rise of Sustainable Media, examined worldwide attitudes and behaviours to sustainability and found almost half of the 24,000 respondents from 19 countries are prepared to switch brands for greener alternatives.
We believe that sustainability is the way forward, and every stakeholder plays a part. Businesses, whether big or small, are critical in the efforts to save our planet. Governments are already engaged and rolling out regulations, while consumers stand ready to call out brands who are not doing their part.
Take Nestle for example. As one of the largest food companies in the world, Nestle has been under a lot of scrutiny for what they are doing. The company has a commitment that by 2025, 100% of their packaging would be reusable or recyclable. However, an investigation by Reuters back in 2021 revealed collaborations between consumer goods giants and cement makers to burn plastic as alternative fuel. In the past, the company has also been under spotlight for exploiting freshwater sources for their own profits, without accounting for the ecological impact of doing so extensively.
In response, many individuals have voiced their concerns and asked to boycott Nestle. There are several articles on Medium, school’s newsletter where individuals called Nestle out for greenwashing, and organisations like Greenpeace and Ethical Consumer have also spoken up against Nestle.
Ultimately, sustainability cannot just be something you say you will do - it’s also something you have to commit to and take real action towards it, because the people are watching you.
Take action now
What are you waiting for? If you haven’t started looking at sustainability in a comprehensive manner, it’s not too late to start today. Begin with baby steps and go from there. Just make sure you communicate your change authentically, and stay true to your words.
If you’re unsure of how exactly you can get started, check out Binomial’s article on the four steps you can get started on sustainability here.
If you want our help with your sustainability efforts, reach out and we can explore working together. Some areas we assist clients in include:
- Conducting an initial audit to identify areas to work on
There may be low-hanging fruits that you can already start with to show your brand’s desire for change. Areas like energy, waste, and water provide easy opportunities to get started. In the mid and long-term, we can also adopt a circular economy perspective to identify opportunities to become a more sustainable business across your value chain.
- Defining a sustainability strategy and roadmap
Knowing how you can change to be part of the solution is a good first step. To reap the benefits of your commitment to sustainability (the six areas we listed above), the next step is to infuse sustainability into your business. We work with leadership teams to conduct strategic planning programmes and develop 5-year implementation roadmaps.
- Communicating the change
After you’ve begun doing the hard work, it’s also time to let others know to boost your reputation, drive customer loyalty, and attract talent. We help brands avoid greenwashing by taking an authentic approach to marketing and communicating their sustainability efforts as part of a strategic brand building effort.
- Getting started on sustainability reporting
When you’re ready to share your results with the broader community (for listed companies, this will be a hard requirement soon!), we can help. There are established standards like Global Reporting Initiative (GRI) that you can align with to guide your measurements and reporting.
To discuss further, get in touch now.