Once considered a “nice to have” aspect of a business, focusing on sustainability can actually lead to better profits, happier employees and goodwill with consumers.
However, many executives remain reluctant to commit fully to sustainability. They fear that the costs to back up such a commitment will outweigh the benefits.
However, just the opposite is true, according to a new “comprehensive business argument for sustainability” published in the Harvard Business Journal.
“Embedded sustainability efforts clearly result in a positive impact on business performance,” according to the article, written by Tensie Whelan and Carly Fink.
The pair put together their case in hopes of alleviating concerns among executives about the bottom line impact of sustainability efforts. The complete report can be read here, but what follows are some highlights.
They defined sustainability this way:
A key point the case makes is that engaging in sustainability in areas that a business intersects creates value for stakeholders, including employees, shareholders, supply chains and society as a whole. Also, a company engaged with sustainability efforts puts itself in a better position to react to social, environmental, economic and governmental regulatory changes.
Sustainability engagement also increases awareness of issues that could affect the supply chain, including draught, climate change and poor conditions for labor. Having knowledge in this area can improve a company’s ability to manage risk. They point to a recent study that found 72 percent of those involved with supply chains around the world consider climate change a large risk to their operations.
Another key area where sustainable efforts can benefit a company is in fostering innovation, according to the Harvard Business Journal report. Products that have been redesigned or newly created to conform to new environmental standards “offers new business opportunities.”
They point to two examples:
Improved financial performance is not something many associate with sustainability efforts, but the report points to studies that have shown profits can be increased by minimizing waste and better conserving energy and water during the manufacturing process.
They point to a study that found businesses can achieve a 27 percent to 80 percent internal return when making low carbon investments.
The authors are not alone in their belief that the tide has turned on sustainability in business. Academic and research reports have indicated that in the long run, sustainability efforts pay off. And in addition to Nike and 3M, companies such as DuPont, Intel and Wal-Mart have made big investments in sustainability.
As climate change becomes more widely accepted, reports such as the one in the Harvard Business Journal show that executives should have a more forward-looking approach to environmental issues. It won’t just help the environment, it might also improve profit margins.