Environmental Sustainability for Profit

Photo by Noah Buscher on Unsplash  

In today’s business world, environmental sustainability is crucial in developing a business strategy. In fact, in Fortune 500 companies, many companies are designating their first Chief Sustainability Officers. But why? According to Talal Rafi from the Deloitte Global Team on Climate and Sustainability, sustainability is necessary in meeting evolving investor pressures, consumer demands, and regulation requirements. He also states it attracts top talent, reduces costs, and boosts profits.

Achieving sustainable profit for a business means providing a service or product that is both environmentally friendly and profitable. It is a common myth that focusing on sustainability factors means that profits will slow down. However, 37% of businesses have reported profit due to sustainability factors according to global consulting firm, Challenge Advisory. Additionally, they state there is an 18% higher return on investment for companies that proactively take climate change into consideration in their business plan. When a company takes accountability for their impact and works toward making it a positive one, they attract investors. These investors believe in the company’s future potential. In a research study by three economists from Harvard and the London Business School, they observed two matched groups of similar characteristics. The only difference between the two companies was that one had a sustainability-focused structure making sustainable investments while the other group did not. The economists found that the group with sustainability measures in place had higher financial performance. 

In addition to sustainable investments correlating with strong financial performances, a strong correlation was found between financial performance and a company’s resource efficiency. In an article by McKinsey & Company, they reported that reducing operating costs can affect operating profits by up to 60%. Companies reduce their operating costs by utilizing their resources efficiently and minimizing waste. In a report by the European Commission, they estimate that across all industries, an additional €245 billion to €604 billion profit could be made if all businesses utilized their resources efficiently.

Along with attracting investments and resource efficiency, sustainability brings in more profit because more and more Gen Z consumers are becoming attracted to sustainable products. First Insight and the Baker Retailing Center conducted two studies at The Wharton School of the University of Pennsylvania about Gen Z consumer preferences, and they found a significant difference between the two studies that were set two years apart. Not only did Gen Z customers have a strong preference for sustainable products, but also were found to influence other generations as well. Consumer preferences of Gen X to shop at sustainable brands increased by almost 25%, and their willingness to pay more for these products increased by more than 40%.

With the changing times, companies have to amp up their sustainability efforts to keep up with investor and consumer preferences. They also have to be careful about their environmental impact and look to minimize their resource use. Many companies are also launching sustainability initiatives outside of their work which can be found in their ESG reports. They hope to appeal to investors, future workers, and consumers. Sustainability efforts have dramatically risen in recent years, but will it be enough to keep the planet away from harm?