Why Embracing Sustainability Is Important For Businesses

The message from the UK Government has been ringing loud and clear for a while now: align your business strategy to sustainability targets and reap the financial benefits. Drag your feet and you’ll lose out.

Paying attention to environmental, social, and governance (ESG) issues is becoming increasingly critical for all companies in every industry.

Research suggests companies with high ratings for ESG performance enjoyed average operating margins 3.7 times higher than those of lower ESG performers. Shareholders also received higher annual total returns to shareholders, outpacing poorer ESG performers by 2.6 times. In other words, using sustainability as a business approach can add long-term value by understanding how a given organisation operates in the ecological, social, and economic environments.

In order to address sustainability appropriately companies need to bridge two critical gaps:

• “The knowledge gap”: A study recently found that whereas 90% of executives find sustainability to be important, however only 60% of companies incorporate sustainability in their strategy, and merely 25% have sustainability incorporated in their business model.
• “The compliance – competitive advantage gap”: More companies are seeing sustainability as an area of competitive advantage, but it is still a minority – only 24%. However, all companies will need to be compliant in the future. Management should address these topics with urgency, not mesh them together. Compliance is holistic, a “must do”.

They understand the importance of sustainability, how to achieve it and use compliance to their advantage. They also understand the risks of getting this wrong; for instance, promising and not delivering or addressing material issues without being consistent on compliance can have a significant negative impact.

Just like with overall strategy there is no “one right solution” on sustainability. The best solution depends on the ambitions and challenges at each company.

In summary, sustainability is a major challenge, one that matters beyond individual companies. But a reassuring number of large companies are developing forward-thinking sustainability policies and insisting that their supply chain do the same. It is really becoming clear that sustainability is an issue that isn’t going away!

Sustainability is certainly achievable for almost all companies. Yet, as with any overall business strategy, a one size fits all solution is not the correct way to approach the task. The best solutions can depend on the ambitions and challenges of each company. However, it would also be sensible to suggest that careful focus should be on ensuring development is in collaboration not conflict, with your supply chain to foster longevity throughout, achieving a collective compliance and carbon reduction.

It is hard to ignore the significant and reassuring number of large companies who are actioning impactful forward-thinking sustainability policies. More noteworthy however, are those who are now insisting that those within their supply chain do the same. 

Following this example, we collectively have to accept that sustainability is a significant global challenge, but one we have to tackle together. It is one that extends beyond the responsibility of individual companies. Whether sustainability compliance is a priority in your organisation today or not, it is becoming clear that sustainability is an issue that isn’t going away. The more time that passes without addressing this issue, the more significant the impact will be to your business and the greater the risk of being left behind in this global transformation.