What is sustainability and what’s the opportunity for business?

5 min read

Sustainability

From CSR to ESG, Corporate Citizens to Triple Bottoms Lines, sustainability can be a minefield of acronyms and jargon. Not only that, each definition also comes with disagreements and challenges and is rarely applicable across all industries.

What is sustainability and what’s the opportunity for business?

So what does it really mean when we say a business is sustainable?

At its most simple, a sustainable business acknowledges that, through its operations, it has impacts on various groups: its employees, its suppliers, its customers, the communities in which it operates, and the environment. These businesses then commit to minimising the negative impacts they create and maximising the positive.

 

Why is sustainability so important and what’s the role of business?

It is becoming increasingly important that businesses start to acknowledge, measure and manage these impacts. We are facing a number of global challenges, from social inequality to environmental degradation, that will ultimately affect the ability of companies to carry out their operations. What’s more, business has in the past played its role in creating some of these problems.

Either driven by government legislation such as the UK Net Zero 2050 target and reporting on the gender pay gap, or by popular protest and consumer demand, there is a growing expectation that businesses address some of these environmental and social challenges. A recent poll carried about by B Lab UK, found that 78% of people think business has an obligation to help solve environmental issues and 66% think business has an obligation to help solve social issues.

 

Sustainability creates the opportunity to become more resilient

While there clearly is an expectation, there is also a significant opportunity for businesses in addressing sustainability concerns. Becoming more sustainable requires that a business address its impact on employees, suppliers, customers, society and the environment. These stakeholder groups have a huge impact on the successful running of the business and so ensuring that you are treating them correctly is a recipe for long-term resilience and success.

Firstly, employees drive a business forward, and so attracting and maintaining top talent should be a priority. But people want to know that the company that they work for holds the same values as they do. The workforce will soon be over 50% millennials and this group in particular are more energised and committed when they are working for a sustainable business.

In addition, many companies rely on a few key supplier relationships, and replacing these can be lengthy and costly. Engaging your supply chain around sustainability is a great opportunity to build these relationships beyond merely being transactional. By addressing the sustainability of your supply chain, you can create long-term values-aligned partnerships that are crucial to helping businesses weather a crisis.

Another key relationship is the one with your customer or clients. Consumers are becoming more demanding, wanting to purchase not only ‘good’ products but from ‘good’ companies. Embedding sustainability into your business can help these consumers make better purchasing decisions which creates long-term relationships. These relationships based on shared values are even more important for B2B companies who often have fewer clients.

 

Studies show that solid sustainability practices lead to lower cost of capital

Finally, sustainability provides a business the opportunity to not only increase its operational but also its financial performance.

We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them

Larry Fink

Co-founder, BlackRock

It is becoming ever clearer that businesses who do not engage with their own sustainability are becoming too risky and those that do are therefore more financially attractive.

So if sustainability is simply about looking at how your business’ operations affect the groups that are fundamental to its success, then the real headline is not the expectation there is for companies to become more sustainable, but the huge opportunity to build a business that is better for its people, better for its investors, better for the planet, and just better all round.

James Ghaffari is a Director at B Lab UK. B Lab UK is home to the B Corp movement, a global community of people using business as a force for good.

For more information, view our Sustainability & Business – What is sustainability? webinar

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