With the intensifying risks to society and the environment, it’s clear that sustainability is more than just a buzzword. Instead, people are becoming more conscious about the impact of our choices and actions on humanity and the planet. And rightly so.
In the Global Risks Report 2022, environmental issues dominate the list of global risks for both the short and long term. Climate action failure, extreme weather, and biodiversity loss are the top 3 global risks in terms of severity over the next 10 years.
Moreover, the COVID-19 pandemic exacerbated societal and environmental risks, according to the above-mentioned report by the World Economic Forum. Eighty-four per cent of respondents felt “concerned” or “worried” about the future, and only less than 16% have a positive outlook for the world.
Given the threats the world is currently facing, sustainability becomes imperative if we are to create a more livable planet.
Fortunately, more and more businesses—big or small—are finding ways to integrate sustainable practices into their operations. In the past, companies would categorise endeavours that prioritise the good of humanity and the environment as Corporate Social Responsibility (CSR). Today, sustainability has become the primary business focus.
What does it mean to have a sustainable business strategy? A Harvard Business School article posits that it entails actions that positively impact the environment, society, or both. In doing so, global issues, such as climate change, income inequality, fair working conditions, pollution, and the depletion of natural resources, to name a few, are addressed. But, more importantly, the article underscores the need for the business to do well financially to be able to do good in the world.
It is no surprise that investors, likewise, are setting their sights on impact investing.
What is impact investing?
Impact investments aim to generate positive, measurable social and environmental impact but with an expected financial return, as defined by the Global Impact Investing Network (GIIN). Fund managers, development finance institutions, non-government organisations, family offices, insurance companies, and the like can make impact investments.
Investors are heading in the right direction as GIIN estimates the current market size of impact investing at US$715 billion. The International Finance Corporation (IFC) sets the estimate even higher at US$2.1 trillion.
But more than the promising financial gains, what makes impact investing exciting is its potential to address the world’s most pressing challenges in the areas of renewable energy, sustainable agriculture, microfinance, and the like.
Is it worth it to go green?
The bottom line is that business leaders will think of the bottom line. So while adopting more environmentally friendly practices is good for the planet, period, decision-makers will still look at whether it makes business sense. Research shows that conscientiously integrating sustainable business practices can have tangible benefits. Here are a few.
Improved brand image
Think about it, being called out for improper practices can damage a company’s reputation. No CEO would want to steer a ship that’s constantly buffeted by waves of negative issues, such as maintaining an unsafe working environment or being responsible for an oil spill. It would not only be a PR disaster, but it can cost the company time, resources, and even talent.
Consumers are throwing their support behind brands that are driven by a purpose beyond turning a profit. In the Ipsos Global Trends 2021 report, 7 in 10 consumers globally say they buy from brands that reflect their own values. They also believe that business leaders have a responsibility to speak out on social issues.
Competitive advantage
In a 2019 Nielsen study, 73% of global consumers are willing to change their consumption habits to minimise their negative impact on the environment. Moreover, the study reveals that as consumers become more aware of what they put in and on their bodies, they become interested in environment-friendly products. Plus, consumers are willing to pay more for all-natural or organic ingredients.
By gearing toward sustainable practices and products, your business can benefit by attracting more eco-conscious customers, which can drive up revenues. A May 2021 article from the World Economic Forum suggests that support for sustainable businesses is growing in both developed and developing economies. In addition, the article notes that many consumers believe brands are just as responsible for positive change as governments.
Reduced costs, increased productivity
As the world becomes increasingly focused on sustainability, many businesses are beginning to rethink their operations. And while some sustainable practices like investing in renewable energy can be costly upfront, it's important to remember that these decisions can also lead to long-term cost savings. For example, by reducing energy consumption, businesses can lower their monthly utility bills.
Moreover, sustainable practices can often increase productivity. For instance, employees who have access to natural light and fresh air tend to be more alert and have higher levels of productivity. In other words, making the switch to sustainable business practices is not only good for the environment--it's good for the bottom line as well.
As customers become more eco-conscious, this trend is reflected in their choices and buying behaviour. By implementing environmentally and socially responsible practices, businesses can improve their brand image, gain a competitive advantage, and reduce costs while increasing productivity.
If you’re looking for ways to make your business more sustainable, we can help. Gain a deeper understanding of how the economy and the environment are tightly intertwined in SMU Academy’s Certificate in Impact Investing and Mega Trends in Sustainability. Learn how to make business decisions without harming the Earth. Find out more about the course here.
