By Rohit Saboo
When the industrial revolution commenced in the 18 th Century, materials began to be extracted from the Earth on an industrial scale. Then at the start of the 20 th century, the burning of fossil fuels, along with other human activities, dramatically increased the amounts of emissions and effluents being released into the atmosphere and the planet’s ecosystems.
While the picture painted above is far from rosy, there is much that leaders, organizations, and individuals can and are doing to stem the tide of climate change and rejuvenate Earth’s delicate ecosystems.
In this respect, companies especially have an important role to play. At the start of the industrial revolution, they unknowingly and unintentionally led us to where we are today. Today most of them are at the forefront of the fight against climate change. Here’s why.
A Sea Change in Attitudes is Driving Sustainability
There are today strong reasons for companies to do all they can to become more sustainable and conserve nature. Across the world, there’s been a sea change in business and political leaders’ attitudes towards cut-throat capitalism. Increasingly, meeting ESG goals is considered nearly as important as profitability.
Hence businesses are under pressure from investors and consumers to become more sustainable. Simultaneously, regulations are being rolled out to make businesses more sustainable. Hence, companies are under pressure from all fronts. While this may seem like businesses are being forced to become more sustainable, these measures have been introduced on the solid understanding that unless business as usual is modified, humanity’s future will be in jeopardy. Furthermore, being sustainable makes good business sense as well.
Sustainable businesses not only attract top talent, but they also have higher profits and lower costs. Consider that nearly 40% of millennials have joined an organization, in part, because of its sustainability policies. Millennials are also willing to take a pay cut to work in an environmentally responsible company. Hence for businesses, sustainability offers the best of both worlds: higher profits and minimum adverse impact on the environment.
There are other equally important reasons why businesses are becoming more sustainable.
Sustainability and conservation are Win-Wins for Businesses
The supply of natural resources, including petroleum is limited. When petroleum was adopted as an energy source, there were just 1.6 billion people on Earth. Today there are over 8 billion people, and most aspire to have the same standard of living as residents of the developed world. Meeting the rising aspirations of 8 billion people by burning fossil fuels is unsustainable. Using renewable energy sources is the only course of action.
Perhaps the most important reason for businesses to be sustainable is that nature contributes immensely to business and the global economy. The World Economic Forum estimates that USD 44 trillion of value generation (more than 50% of Global GDP) is dependent on nature, biodiversity, and the services they support . Any harm inflicted on nature would also harm businesses.
Consider that businesses rely directly and indirectly on biodiversity and ecosystems for profit. Should such biodiversity and ecosystems disappear, businesses would lose access to direct inputs such as water, fibres, and vital ecosystem devices such as pollination, water regulation, and fertile soils. The latter three allow businesses to exist in the first place. Other economic imperatives are also behind businesses embracing sustainability.
Concerning climate change, the writings on the wall
Every business wants to safeguard its reputation. Today, there’s no faster way for an organization to ruin its reputation than by showing a complete disregard for sustainability and the environment. Conversely, creating initiatives that genuinely benefit the environment helps boost an organization’s credentials. While disregard for the environment hurts a brand’s value and market share, having nature-positive policies makes things easier for brands. For instance, nature-positive brands can more easily expand to new markets which demand bio-diversity-friendly products and services. That’s not all.
Companies that don’t manage risks related to biodiversity leave themselves vulnerable to lawsuits and prosecution. Also, sustainable finance is actively seeking out green investments. The best way for companies to attract such financing is by implementing sustainable initiatives. In the years ahead, those with sound environmental practices will enjoy easier access to capital.
Also, businesses’ most important stakeholders such as employees, customers, shareholders, business partners, regulators, and local communities, routinely tell businesses that they’re concerned about the environment. Businesses need to actively show concern for the environment to maintain good relationships with their most important stakeholders.
Sustainability is Good Business
Becoming sustainable doesn’t mean abandoning the profit motive, far from it. Sustainable businesses not only don’t harm the environment but they’re also viable enterprises that turn a handsome profit. Businesses that transition towards sustainability aren’t doing so out of moral compunction, they’re doing it because sustainable businesses are profitable.
The times are changing and changing fast.
Sustainability can be a source of tremendous differentiation and offer a competitive advantage. A study found that 66% of consumers would spend more on a product if it came from a sustainable brand 1 . McKinsey found that a sustainability strategy can substantially reduce costs and affect operation profit by as much as 60%. It also lowers energy consumption and water intake.
Therefore, sustainable practices aren’t just good for the environment, they also benefit businesses. Firms that implement such policies not only ensure that the Earth recovers from the harm inflicted on it since the start of the industrial revolution but also that their company’s profits and brand value grow too – a win-win for all.
The author is President & CEO, National Engineering Industries Ltd
Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.
