Gradually companies are beginning to embed sustainability in their business models; the paradigm is shifting from sustainability as an afterthought to sustainability as best practice. McKinsey’s Sustainability’s Strategic Worth: Global Survey report found that CEOs are now twice as likely to cite sustainability as their top business priority when compared to 2012, demonstrating not only the need but also the desire to create an intelligent approach to sustainability that is firmly rooted in day to day business operations.
There are good reasons why environmental sustainability is moving up the executive agenda. An ever-growing wealth of research points to sustainable business practice as key to long-term success, be it acquiring new talent or managing corporate image. Below are three benefits that can be achieved from developing an intelligent approach to environmental sustainability.
1. Financial Benefit
A CDP report identified that businesses that account for climate change see 18% higher return on investment (ROI) than companies that don’t, and a 67% higher ROI than those who fail to disclose their emissions entirely.
Climate risk is also increasingly important for investors. They want to know that due diligence has been carried out on the management of climate related risks within their investment portfolios. They use companies’ non-financial disclosures to inform their investment decisions. In 2015, almost 60% of respondents view non-financial disclosures as “essential” or “important” to investment decisions, up from 35% in 2014.
62% of investors are concerned about the risk of stranded assets (i.e. assets that lose value prematurely due to environmental, social, or other external factors) and over one-third of respondents reported cutting their holdings of a company in the past year because of this risk.
An intelligent approach to environmental sustainability that incorporates investor demands can help future-proof investment and engagement from shareholders.
2. Manage Risk
A recent report by the Investment Leaders Group found that climate and energy regulation will likely have significant effects on company profitability. As a minimum increased taxation results in increased operating costs. Companies that stay ahead of the compliance curve can plan for changes well in advance. In fact, we'd go further than this and say that intelligent sustainability programmes assess all the risks as well as the opportunities climate change presents to the business.
Our research into the sustainability performance of the FTSE 100 showed an 11% rise from 2015-2016 in companies assessing the risks of climate change to their business. 58 FTSE 100 companies are now actively adapting their business strategy to address climate risks. In addition, 43 companies evaluate the opportunities to their business that arise from a changing climate.
Businesses that have a well-rounded approach to sustainability can see wide-ranging growth opportunities, not just in terms of improved financial performance but also from attracting and retaining the brightest talent and increased levels of innovation.
According to a study by MSLGroup, being involved in environment issues is the third most important driver for British millennials when job searching. With over 75% of the workforce set to be millennials by 2025, it makes sense to consider their job requirements.
In terms of innovation, Unilever is a pioneer. While recognising that it takes significant investment to reduce the amount of material in a pack, the return on investment is worth it when innovations reduce packaging and waste and result in material cost savings and increased sales.
If you want to assess how your business is benefiting from environmental sustainability and potential areas for improvement, take a look at our free tool, The Intelligent Sustainability Benchmarking Toolkit. Visit www.Intelligentsustainability.com for more information.