What exactly is a sustainable business strategy?
With climate change costing companies $1.3 trillion by 2026, business leaders can no longer ignore environmental and social issues. They need to look beyond profit to consider the environmental and social impact of the business if they are to achieve long-term viability. This isn't just about counteracting climate change (though still significantly important). Companies must address other social issues within their power, particularly protecting the people involved in their operations, from employees to workers in the supply chain.
At its core, a sustainable business strategy is what the business will do to reduce its negative impact and increase positive effects. This includes actions they are committed to and targets they are working towards - for example, a carbon neutrality goal or fair pay policy across the supply chain.
But why would companies engage in sustainable business strategies?
The benefits of implementing a sustainable business strategy
Now more than ever, there is a common consensus that businesses have a moral responsibility to make a positive impact. This includes empowering the people they serve and who work for them and avoiding adverse effects to the environment by preserving the resources they rely on. Additionally, many advantages make investing in sustainability more than worthwhile.
As businesses are looking for more sustainable ways to run their operations, the traditional and familiar approaches to business are questioned, and new ways of working are explored. Companies are more likely to discover and implement more effective processes and procedures.
Businesses can garner a long-term benefit in that 86% of business leaders see investment in sustainability practices as protecting their organisations from disruption. Furthermore, a commitment to sustainability impacts the short term by reducing resource costs and increasing operating profits by up to 60%.
Recruiting and retention
Creating a sense of belonging encourages employees to stay loyal to the business, even if they could get a pay rise elsewhere. A sense of belonging can be created through big-picture goals and taking social responsibility because it produces the feeling that employees are part of something bigger than themselves.
Workers are increasingly concerned about environmental and social issues, to the point where it is a factor in where they choose to work. While there is some disparity between the importance of sustainability to different generations, nearly 40% of millennials have taken a job because of the company's sustainability commitments. As Generation Z enters the workforce, this is predicted to increase.
In the same way, sustainability efforts are very attractive to consumers. Sustainable businesses can win sales from competitors as over 70% of consumers are willing to pay an additional 5% for a green product that performs as well as a non-green alternative. For many, buying decisions aren't made by considering only price and suitability but also environmental impact.
Sustainability that doesn't sacrifice effectiveness is profitable for winning over new customers and retaining loyal ones. Almost 70% of consumers say a robust sustainability plan will affect their decision to stay with a company long-term.
Inspire widespread change
As sustainability is a competitive advantage, businesses that commit to sustainability strategies increase the standards in their industry. Competitors will have to follow suit and take responsibility to keep up. This benefits everyone and reduces the negative impact on the whole industry by establishing a new norm for operation. The potential of losing out on business is a significant motivator for change, as 63% of executives of organisations with sustainability strategies report that the customer was their top catalyst for action.
How to build and implement a strong sustainability strategy
Suppose a sustainability strategy is going to make a real impact and inspire involvement from leaders, employees and customers alike. In that case, it needs to be carefully considered and introduced. A strong sustainability strategy is built by following these key development and implementation steps.
Take time to figure out what social issues are most prominent in your industry and most important to your people. This does vary depending on the business. Product-based businesses rely on physical supply chains. So the concerns around the pollution caused by manufacturing and transportation would be a priority for such companies.
On the other hand, digital services may focus on the inequality around who has access to the internet and devices, working on sharing the digital advantage with those left behind. What meaningful impact can your organisation make?
With context established and key concerns highlighted, commit to specific actions. Determine what issues the organisation will work on, what impact will result from this prioritisation and how those results will be made a reality.
For example, many businesses have set the goal of becoming carbon neutral by 2050. It's clear they are working to combat climate change by neutralising their impact according to a specific deadline. They may state initiatives such as transitioning to electric vehicle fleets. If goals are going to be achieved, there needs to be some kind of accountability for specific commitments and deadlines.
Company buy-in is essential for success. So as well as higher level initiatives like moving to a renewable energy supply chain, consider what can be done with employees. Along the same lines, encouraging or rewarding electric vehicle usage could work well. Make social responsibility part of the company culture, from shareholder commitments to customer campaigns.
Pressures from consumers and legislative bodies make sustainability in business a must-do. Innovative and ahead-of-the-curve companies will take this in their stride to establish a competitive advantage. They will constantly be improving their way of working, bringing together their workforce and partners, and exceeding customer expectations while positively impacting the environment and society as a whole. What change will you inspire with your sustainable business strategy?