Outline Greener Bottom Line Business Case

If you are looking to scale your sustainability projects, it’s likely that a small group of executives and employees already recognize the value sustainability can deliver. However, the key to scaling sustainable business practices is to win the hearts and minds of your entire team, transforming sustainability from a sideline activity into an integral part of operations.?

One effective way to achieve this is by using straightforward language, focusing less on environmental altruism and more on the business facts that demonstrate how sustainability can drive profits for the company.?

Why pursue corporate sustainability among the myriad strategies available? In other words, what is the business case for being sustainable??

Here are some of the micro and macro trends driving our need to pursue sustainability as an integrated business strategy:?

Micro and Macro Trends Driving Corporate Sustainability?

1. B2B Customer Requirements?

Up to 92-percent of B2B customers in industries such as Food and Beverage will require sustainability action as most large multinational companies have verified science-based targets requiring them to reduce their greenhouse gas emissions. This includes scope 3 emissions, which are a part of the supply chain emissions. According to joint research by the University of Michigan Erb Institute and OrbAid , integrating sustainability is becoming a non-negotiable aspect of business operations for many companies.?

2. Government Regulations and Fines?

Companies could be required by the EU to pay fines ranging from $8.5 million to $40 million for not complying with new sustainability regulations. These penalties have become much stricter in recent years. In addition to financial penalties, there can be significant legal consequences, including up to eight years of prison time for executives. Such regulations necessitate that companies adopt sustainable practices to avoid severe repercussions.?

3. Climate Change Science?

The latest environmental science from the Intergovernmental Panel on Climate Change (IPCC) forecasts that as a global community, we must keep our planet's temperature rise below 1.5 degrees Celsius over the next ten years to avoid unlivable conditions and a collapse of living ecosystems. This urgent need to address climate change underscores the critical importance of sustainable business practices.?

4. Rising Accounting and Reporting Costs?

The rising accounting and reporting costs to comply with customer and government requirements average $1.2 million annually per US public company. These costs are expected to continue, if not increase, in the coming years. This financial burden can be mitigated through streamlined sustainability practices that comply with regulations and improve overall efficiency. A survey by global accounting and advisory firm KPMG found that 90-percent of companies plan to dedicate more financial resources to Environmental, Social, and Governance (ESG) over the next 3 years. Of those surveyed 43-percent plan to add employees dedicated to ESG, while 40-percent plan to invest in sustainability software , and 38-percent are looking to train and educate employees. ?

5. Consumer Preferences for Green Products?

Multiple studies, including a study by the World Economic Forum and global advisory firm Accenture, cite that 78-percent of consumers prefer green products when all else is equal. This consumer preference indicates a strong market demand for sustainable products, making sustainability a competitive advantage in the marketplace.?

6. Talent Acquisition?

Sustainability is not just a consumer demand; it’s also a significant factor in talent acquisition. According to a study by technology and consulting company IBM, 70-percent of job seekers prefer to work for sustainable companies. This preference suggests that companies with strong sustainability programs are more likely to attract and retain top talent.?

7. Cost of Capital for ESG High Performers?

The cost of capital is measurably lower for companies that perform high on ESG criteria. According to ESG research and investing support tools company MSCI , ESG high performers enjoy a cost of capital that is 0.5-percent lower than their peers. This lower cost of capital can lead to significant financial advantages.?

8. Waste Reduction and Cost Savings?

It is possible to reduce company costs while increasing sustainability. Conservative estimates by OrbAid highlight that there is over $583 billion in corporate energy and material waste in the US alone. Reducing this waste can directly improve a company’s net operating income by the same amount, demonstrating that sustainability initiatives can be both environmentally and financially beneficial.?

9. Revenue Growth?

More sustainable companies grow their revenue at a rate 3.5 times higher than the industry average. According to research by global advisory firm BCG and consumer packaging goods company Unilever , companies that invest in sustainable practices not only contribute positively to the environment but also enjoy substantial financial growth.?

10. Profit Increase?

The same study by BCG and Unilever found that sustainable companies also generate over twice the average profit percentage compared to their industry peers. An in-depth study of 2,269 companies by global advisory firm McKinsey showed that companies that achieve better growth and profitability than their peers while improving sustainability outgrow their peers and exceed them in shareholder returns. ?Leading companies delivered 2-percent higher annual total shareholder return (TSR) above companies that only outperformed on financial metrics. Notably, leaders also delivered 7-percent higher TSR?than the?balance of companies studied. This increase in profitability demonstrates the tangible financial benefits of integrating sustainability into core business strategies.?

Drive Greener More Profitable Growth?

The business case for sustainability is compelling and multifaceted. From regulatory compliance and cost savings to revenue growth and talent acquisition, the advantages of adopting sustainable practices are clear. Companies that prioritize sustainability can enjoy lower costs of capital, attract more customers and top talent, and significantly improve their bottom line. As the data shows, integrating sustainability into your corporate DNA is a smart strategic business decision that leads to greater profitability and long-term success. By focusing on the business facts and benefits, organizations can effectively engage their entire team and make sustainability an integral part of their operations, driving both environmental and financial performance.?