Corporate sustainability is a cornerstone of ethical, profitable, and successful businesses. The idea of including environmentalism as a core business practice is grounded in data, which is why 96% of the world’s largest 250 companies report on sustainability.
This positive correlation between environmental practices and business success is due to the benefits that sustainability provides. Many people first think of the direct financial savings that come from sustainability, like reduced energy costs and more favorable access to capital. However, the slew of nonfinancial and indirect financial benefits also play an important role — and in some cases may be even more important.
Benefits of Sustainability
These benefits come in several forms and can be impactful in both short- and long-term time horizons. They contribute significantly to a company's growth, resilience, and reputation.
In the globalized world, businesses need to align with long-term trends while being adaptable to unforeseen changes — both core benefits of sustainability.
Regulatory Compliance Issues
Governments around the world are increasing regulation on how businesses impact the environment. This is being driven by a growing global awareness of how human actions are changing the world, which is precipitating government commitments to reduce impacts — such as limiting greenhouse gas emissions. The United States has committed to having net-zero GHG emissions by 2050 and 24 states have put forward their own net-zero commitments. A substantial portion of this reduction will fall directly on the private sector.
By adopting sustainable practices, companies can stay ahead of the regulatory curve, avoiding costly fines and legal penalties. A study by McKinsey study found that on average one-third of a business’s profits are at risk of ESG-related changes in regulation. Proactive companies will not only save money but help ensure their uninterrupted business operations.
Reputation and Brand Image
In the current market, a company's commitment to sustainability significantly enhances its brand image. Consumers favor sustainable companies.
According to PDI Technologies' third Business of Sustainability Index report, 68% of U.S. consumers are willing to pay more for products from sustainable brands, and that jumps to 72% among millennials and 78% for Gen Z. This shift in consumer preference underscores the pivotal role of sustainability in shaping a positive and appealing brand reputation.
Innovation and Competitive Advantage
Sustainability is a powerful driver for innovation. Not only does sustainability force companies to reassess their operations to improve efficiency, but it also promotes the development of alternative solutions.
Stakeholder Expectations
Stakeholders, including investors, customers, and employees, increasingly demand sustainable practices from companies. Firms that align with these expectations benefit from increased investor interest, enhanced customer loyalty, and improved employee satisfaction.
For example, investors favor companies with good environmental performance due to their correlation with above-average returns. A recent study of 13,000 companies over nine years found companies with a high ESG rating had a 4.3% higher average annual return than poorly rated companies.
Insurance and Risk Assessment
Incorporating sustainable practices is a great way to minimize risk — whether from regulatory changes or unforeseen events. Improving company efficiency, assessing supply chain resilience, and long-term planning are all core components of corporate ESG programs. For example, businesses with strong sustainability performance performed better and were more resilient during the COVID-19 Pandemic.
This higher resilience can lead to more favorable insurance premiums due to reduced operational risks. Companies with strong sustainability practices often experience fewer accidents, disruptions, and claims, making them more appealing to insurers.
Government Incentives
Governments across the globe are increasingly offering incentives to encourage sustainability in business. These incentives include tax breaks, grants, and subsidies aimed at promoting environmentally friendly practices. For example, the U.S. government's Inflation Reduction Act provides substantial tax credits for businesses making many energy efficiency and sustainability improvements.
Employee Morale & Retention
Sustainability is continually playing a larger role in employee choices. In fact, 69% of people looking for a job consider a company's sustainability record in their job search. Furthermore, companies that incorporate sustainability into their business can align with existing employees who value the environment. This leads to happier employees that are more productive and drives employee retention.
A study by UCLA found that employees in companies with robust sustainability programs were 16% more productive than those in companies without such initiatives. This heightened productivity is attributed to increased employee engagement and a sense of purpose.
Sustainability Benefits Drive Long-Term Financial Success
Combined, these benefits enhance overall company success and longevity. These benefits provide financial benefits and build a strong brand image, foster innovation, and align with evolving stakeholder expectations — while making a positive environmental impact.
Emerald Built Environments specializes in helping businesses identify and leverage these benefits. This ranges from the initial interest stage with developing a comprehensive sustainability roadmap and GHG reporting strategy to directly implementing programs, such as achieving green building certifications. In the modern business era, engaging in sustainability is not just a moral imperative but a strategic decision that drives success. Learn how we can help take your sustainability to the next level.
