Author: Pawan Kotharkar
Sustainability has not just become a hot topic for 2023 but also a necessity for businesses to follow. With more and more businesses incorporating sustainability in their processes and actively working to improve them, it is evident that sustainability is not just another trend that will pass away.
But what does sustainability mean in business? To put it simply sustainability in business refers to the impact it has on the environment and society. The business strategy should impact positively in either one or both areas to address some of the most pressing concerns of society. These issues include climate change, gender inequality, the impact of business processes on the environment and more. Consumers are also demanding more sustainable business practices from their loved brands and prefer companies that are responsible and are working towards sustainability.
Another reason sustainability has become an essential topic for businesses worldwide is due to governments forming stricter regulations, which if not followed can lead to significant fines. Moreover, following sustainability practices and regulations related to it can also lead companies to win government contracts as these companies are seen as responsible corporate citizens. But these are just a few of the benefits that companies enjoy from following sustainability practices in their business. Let’s look at other benefits that sustainability can provide to businesses:
- Operational efficiency – Having sustainable business practices can help businesses reduce waste, and improve energy efficiency. Further, by using renewable sources of energy, companies can lower their costs and increase their competitiveness in the market. Increasing energy efficiency also means that the same unit of product will use lesser energy and help the business further save on their energy bills. Some good examples of this could be companies that use efficient lighting and energy systems can see huge savings in their energy bills and companies that can recycle their waste can avoid the disposal fees altogether. When it comes to tackling issues in society, take for example the hiring process of any company, a lot of times several biases can prevent the right candidates from joining the position, which can lead to additional costs to the business. If companies can avoid any biases based on gender, ethnicity or other factors, they are likely to widen their talent pool and at the same time increase their chances of hiring the right candidate and avoiding the cost of re-hiring.
- Company reputation and goodwill – Companies that follow and prioritize sustainable habits are often considered to be socially responsible and attract more consumers and employees. If we think about it, no consumer or employee would want to be associated with a company whose practices cause harm to society or the environment. This will directly result in increased brand loyalty as consumers will more likely buy from brands that align with their values. Also, companies that are known for their efforts on sustainability are more likely to attract top talent. Additionally, the shared purpose within the organization will result in greater satisfaction among the employees, thus making the organization internally strong.
- Innovation and new product development – Sustainable practices can oftentimes drive innovation and new product developments as companies that have focussed their business strategy towards sustainability have more likelihood to develop new technologies, products and services to adapt to the evolving consumer demands. For example, some companies may opt to make their products from recycled materials and some companies may utilize newer technologies that would reduce greenhouse gas emissions and make a positive impact on the local climate.
The benefits don’t end just here. Another benefit which is a combined effort of the above mentioned is that sustainability is good for the bottom line of a business. Companies that prioritize sustainability often observe better financial performance than those that don’t. This is mainly due to the practices leading to cost savings, increased efficiency and improved reputation, they are also more likely to attract external funding from socially responsible investors who are looking to invest in companies that are actively making a positive impact on the world. Collaboration within different companies can also lead to major changes that lead the whole industry to a sustainable future. A really good example of this can be Unilever’s efforts in partnering up with governments and their competitors to source sustainable palm oil and reduce greenhouse gas emissions as a result.
Sustainability in 2023 is not just another trend, it’s a necessity for businesses around the world if they want to thrive in a market that will be ever-changing. Despite the initial costs and restructuring if any, the benefits outweigh the costs in the long run and will prepare the companies for future consumers and markets. As consumers demand more from companies in terms of sustainability and governments around the world implement new rules and regulations aimed at solving environmental and societal issues, businesses that prioritize sustainability will be in the best position to be market leaders for years to come.