Sink or Swim: Getting On Board with Sustainability
Although themes of sustainability have been breaking down barriers of business and forcing industries to reevaluate the way in which they conduct business, there remains a major gap between awareness and action. In the past, sustainability efforts have been focused on communicating behavior changes on an individual level- asking consumers to take shorter showers or bring their own bags to the grocery store. Not to say these actions aren’t valuable and have the capacity to contribute to the growing issues of sustainability, it’s time that businesses themselves that accountability for their own practices. The article, “Boards Must Put Sustainability At the Top of Their Agenda to Thrive” by Marga Hoek, discusses three key reasons why sustainability practices need to be implemented and prioritized now more than ever.
One of the most pressing arguments, especially in light of COVID-19, is that the risk associated with not adjusting to a more sustainable means of operation could lead to an increase in backlash down the road. As consumers are becoming increasingly more educated, firms must respond by providing them more transparency and insights into not only their operations, but into their purpose. Consumers are now starting to expect businesses to provide more value outside of the generic product they sell. Consumers are now demanding that brands are actively working to become more sustainable and that instead of contributing to climate change, that they are working to significantly decrease their own carbon footprint. Of course, consumers aren’t always aware that this is what they’re expecting of brands, but we do know that consumers are asking significantly more questions about their products and their processes than ever before. In order for a business to keep or increase their position in a particular market, sustainable measures must be implemented as well as communicated, otherwise their more ethical competitors may start to gain traction with consumers and even gain market share.
Along with environmental and value-based arguments for businesses adopting more sustainability measures, we now have enough information to conclude that it can actually be more profitable for a firm to implement sustainability efforts than if they were to continue business as usual. Hoek adds that sustainability, “…offers opportunities for long-term value creation, unlocks new markets and, thus, can drive profitable growth.” Examples such as Chipotle, Tesla, Unilever, and many more have proven that switching to a more sustainable business model will not tarnish a brand image, but instead ignite a fire within the industry and consumers themselves to become more aware of the practices that contribute to climate change as well as encourage them to reevaluate their personal behaviors and purchase decisions. Through implementing sustainability initiatives, if done correctly, firms can find that their business will become overall more profitable than if they were to just pursue profits alone.
As mentioned before, a major gap remains between awareness of the issue and action that can be immediately taken. Especially in light of COVID-19, it is clear that sustainability is not a trend, nor a marketing scheme, but a concept that businesses must take seriously and work to integrate into their original business models. This responsibility often falls at the top of the leadership pyramid for a business. Sustainability efforts will be meaningless if top executives don’t understand and communicate the importance of these changes. Hoek adds, “It’s key to ensure the entire board understand how sustainability is tied to business value and operate as such. Only then will sustainability be perceived as a business and growth driver.” Often times, businesses may hire one or two sustainability experts to evaluate the brands position and to aid in working towards developing a more sustainable business model, however, this is not a job for just one or two people. Real change must start from the top and be “formalized, embedded, and synergized” with the rest of the board as well as be communicated to those in lower positions.
At the end of the article, Hoek provides a few ways in which businesses can work towards becoming a more sustainable entity, those which include:
- Establish or increase the frequency of management reporting on sustainability risks to the board
- Establish or clarify the responsibility of a board committee with a sustainability mandate.
- Establish a disclosure strategy to stakeholders and embed this in (sustainability) reporting
- These changes cannot be made overnight, as businesses have operated through the same business model and supply-chain management for decades or even centuries. The key takeaway is that if businesses don’t start to get on board with making an effort to become more sustainable, it is only going to hurt them in the long run. As we move into the 2020s, it is becoming increasingly clear that sustainability will be a key driving factor of businesses within the years to come. The choice is simple: either adapt the business model to become more sustainable and in turn stay afloat in the years to come, or refuse to adapt and sink to the bottom.