Undoubtedly, every business organisation aims to generate a significant ROI (Return on Investment) for its survival and growth. There are, however, a large number of examples wherein organisations seeking to expand and gain an edge over their rivals ended up exploiting natural resources and negatively impacting the people and planet. This is why sustainability as a concept has gained importance and has become as relevant as business profitability under the corporate strategy. It is no longer a buzzword or a legal formality that large companies need to take care of. It is the reason that 90% of executives and decision-makers believe in the importance of the concept, but only 60% of organisations have a well-defined sustainability strategy.
Sustainability has become and should be at the core of the corporate strategy of businesses of all sizes and nature, and there are some excellent reasons for it, such as:
Demand and pressure from investors
An organisation looking forward to raising money through debt or equity need to consider the importance of ESG (Environment, Social and Governance) factors. According to recent research, 85% of investors consider ESG factors critical for their investment decision. In addition, 91% of banks prefer to provide loans and advances to an enterprise with a good ESG track record. Hence, the expansion and growth of a business can be improved if such factors are considered.
Consumer preferences
Consumers’ overall perception of the sustainability factors and protection of the environment has constantly been changing positively. For instance, a Deloitte study shows that around 60% of consumers have become more environmentally conscious and have reduced the usage of single-use plastic to improve their carbon footprint scores. It is imperative that a consumer would be willing to get associated with an environmentally responsible brand.
Regulatory requirements
Countries, including India, have committed to achieving net-zero emissions to protect the environment and battle global climate change. To attain these targets, there have been a few changes in the regulations, and a few other stringent laws shall be implemented in the future. Hence, tightened regulations can be another factor for which sustainability must be included as part of the business’s core strategy.
Talent attraction and retention
Personal ethics and beliefs of the young generation (Gen Z’s and Millennials) have become more environment-friendly than ever. As per a recent survey, around 49% of Gen Z’s and 44% of millennials admitted that they made career choices based on the ESG and ethical standards of the organisations offering them jobs.
Improved productivity and profitability of the enterprise
With higher motivation levels of employees and reduced operations costs (in the long-term period), the overall profitability of a firm can increase by 60%. Even though adopting ESG-friendly processes can be a bit expensive to introduce at first, the cost savings are enough to improve overall business profitability in the long term.
Brand value and competitive advantage
Since stakeholders want to get associated with a brand that has a green track record, a business having sustainability at the core of the corporate strategy will not only end up having a higher brand value but would have a definite competitive advantage over rivals (which have not embraced sustainability processes yet).
Creating better and new opportunities
With strong sustainability ethics and processes, companies can tap new markets and expand in the existing ones. For instance, China’s quest to fight air pollution is expected to create investment opportunities worth $3 trillion by 2030.
To sum up, sustainability is no longer a compliance requirement or something restricted to a company’s annual reports. It is part of the core strategy of a company responsible for raising finance, investment, and overall profitability of the business. Companies must have a proper system based on which sustainability can be infused with different functional areas of the business.
(The author is Mr. Shailendra Singh Rao, MD and Founder of Creduce and the views expressed in this article are his own)
