The global demand for sustainability is rising, with consumers, governments, and international organizations pushing for stronger climate action. While these groups have the power to make a change, parts of the private sector are lagging, which is concerning. Private sector involvement is pivotal for achieving these goals for two reasons: businesses are responsible for most environmental impacts and account for most of the global economy.
To illustrate the importance of the private sector's collective action, consider that 71% of global greenhouse gas emissions can be attributed to just 100 companies. Commodity-driven deforestation is responsible for 80% of global deforestation. Extraction and processing of natural resources account for approximately 90% of global biodiversity loss and water stress. And the list goes on – the private sector is driving many of the most extreme impacts on the planet.
As a result, many companies are embracing sustainability, and the results paint a positive picture for both the environment and economic success of these businesses. For example, Forbes reported in January 2023 that the demand for green offices is growing among businesses of all sizes. In the S&P 500, companies with sustainability strategies show an 18% higher ROI than non-sustainable competitors. In terms of social equity, racially and ethnically diverse companies are 35% more likely to perform better and 70% more likely to successfully penetrate new markets. And these are just a few examples – research continues to show similar results.
There is a cost to inaction that becomes clearer each year.
The Negative Consequences of Inaction
Environmental Impact
Business actions directly impact the environment through resource use and waste generation. Business-related carbon dioxide emissions are one of the main drivers of climate change, which primarily result from fossil fuel use. Climate disasters are a major risk for the economy and caused over $300 billion in business losses in 2022 alone.
Emissions are categorized into four groups, Scope 1, 2, 3, and 4. Scope 1 emissions are generated from a business's activities that they directly control. This includes company vehicles, onsite manufacturing, and leaks. Scope 2 emissions are indirect energy emissions. In simple terms, they are emissions generated by a utility company to produce the energy consumed by the business.
Scope 3 are known as "value chain emissions." They are all emissions that the company indirectly generates from up and downstream activities. In many cases, Scope 3 emissions make up most of a company's total emissions. Yet, they are among the most challenging to track and reduce because they depend heavily on suppliers and end product users. Scope 4 is avoided emissions, which represent emissions reductions as a result of the company's actions. This can be by purchasing carbon credits or installing low-carbon energy alternatives. A good business strategy includes goals to reduce Scope 1-3 emissions.
Waste generation is another major environmental impact of business operations. The world generates over 2 billion pounds of solid waste annually. This waste largely enters landfills. With more waste comes more need for landfills, exacerbating waste management challenges, and degrading natural landscapes. Companies that develop net-zero waste initiatives can capitalize on lower waste disposal and input material costs.
Water availability is rapidly declining, and the private sector is responsible for 17% of annual freshwater consumption. Higher consumption is exacerbating more extreme droughts and desertification, impacting regional water supplies. Estimates show that by 2030 1.1 billion people will lack access to fresh water. This is driving up water prices and raises concerns about availability for the agricultural and industrial sectors. Water-efficient infrastructure can dramatically reduce consumption in the private sector and is an important part of green building design.
Social Impact
Failing to adopt sustainable practices perpetuates a range of social issues. Income inequality worsens as marginalized communities bear the brunt of environmental degradation and resource depletion. Racial and gender inequalities persist, with vulnerable populations disproportionately affected by pollution and deteriorating living conditions.
Additionally, socially conscious companies see direct financial benefits. A study by Glassdoor found that 76% of job seekers consider a diverse workplace an important factor when considering companies. This leads to further innovation with a workplace that includes different perspectives and social awareness, allowing for better consumer engagement.
Health Impact
The disregard for sustainability has a detrimental impact on public health. Air and water pollution caused by unsustainable practices contribute to respiratory diseases, allergies, and other health issues leading to 1 in 6 deaths worldwide and 100,000 deaths in the U.S. annually. This alone costs the U.S. $866 billion in annual healthcare costs.
Furthermore, climate change-driven decline in soil quality will affect food production, reducing agriculture yields by 30% and increasing malnutrition rates by 20%. Without sustainable approaches, cities experience fewer green spaces, which are vital for mental well-being and community interaction.
The cumulative effect of these health-related challenges poses a significant burden on society and strains healthcare systems.
Business Impact
Studies report that sustainability-conscious companies have better long-term financial success. These companies are more resilient to changing environments, government regulations, and consumer values. Furthermore, they have lower operating costs, higher employee retention, and a positive public image.
Additionally, companies that implement sustainability programs yet fail to get relevant certifications or use accepted frameworks are at significant risk. The development space is an excellent example of this concern.
When implementing sustainable building design without 3rd party verification, like LEED or WELL, there is no check that the plans meet accepted standards, opening the company up to claims of cheating or greenwashing. The same concern is present for carbon accounting, which can be an opaque process for the public. A lack of an accepted framework in the process will raise questions, even if the methods used were accurate. Green building certifications and accounting frameworks provide an accepted, universal standard that benchmarks what a "sustainable building" is.
Not investing in a well-defined, certified, and accepted sustainability strategy has risks.
Getting Started on Sustainability
Businesses that choose to be sustainable will do their part in limiting these issues and capitalize on the added benefits that sustainability-conscious companies see.
That being said, implementing sustainability programs or ESG initiatives can seem daunting, but it doesn't have to be. Here are a few main challenges and solutions companies see when they turn to sustainability.
- Metrics and Certifications: Metrics and certifications might seem confusing, but they are necessary. They provide a basis for measuring and improving sustainability performance. Furthermore, many are widely accepted and provide legitimacy to your sustainability claims. Using online resources to choose metrics or working with industry experts to target certification requirements are great solutions to get the ball rolling.
- Government Policies: Unclear government policies can be a barrier, but they also present an opportunity for businesses to take a proactive role in shaping regulations. Engaging with policymakers and participating in industry associations can help drive sustainable policy changes and create a conducive environment for businesses to thrive. For example, the recent Inflation Reduction Act provides significant financial benefits for companies to improve their energy efficiency.
- Company Change: Implementing sustainability initiatives requires a mindset shift and change in management strategies. Businesses should foster a culture of sustainability from the top down, promoting awareness, education, and employee engagement. And change should not be expected overnight - it's a journey. We practice sustainability daily at Emerald, yet we did not achieve Carbon Neutrality until 2022 – learn about our journey.
- Don't Know Where to Begin: As with many things, the first step is the hardest. Sustainability programs are long-lasting and take years of monitoring to reach targets. Developing a sustainability roadmap is a great way to ensure you implement your resources efficiently.
Get Started today
The high cost of ignoring sustainability cannot be underestimated. Businesses that fail to prioritize sustainability face a range of negative impacts, affecting the environment, society, public health, and their bottom line. However, getting started can be challenging.
Emerald Built Environments is committed to helping businesses overcome these obstacles and assist at every stage of the sustainability journey.
