Over the last few years, companies have turned corporate sustainability into a critical business priority. And the focus on sustainability is likely to continue growing over the next decade, fueled by global challenges as well as pressure from consumers, employees, investors, and regulation.
What is corporate sustainability?
Corporate sustainability is a long-term business strategy that works in harmony with society and the environment. Whilst companies can focus purely on economic gains short-term, failure to account for the social and environmental impacts of the company’s products or services makes those business practices unsustainable.
John Elkington, the co-founder of the sustainability consultancy Volans, argues that companies should consider a triple bottom line that includes “Profit, People, and Planet”.
Why is corporate sustainability important?
For many years, the business case for sustainability has focused on reducing resource usage, primarily energy, to lower costs. This is now changing as companies are seeing an impact on their top line.
For example, B2B companies that sell their products to large corporates are increasingly being asked for data on their emissions. This is because as large corporates sign up to frameworks such as Science Based Targets that are in line with limiting global warming to well below 2°C, they have to disclose their direct and indirect emissions including those related to their supply chain. B2C companies are also feeling the pinch as consumers or intermediaries push for transparency across various sustainability indices.
Companies that do not incorporate sustainability into their corporate strategy risk seeing a reduction in revenue, reputational damage and potentially being left with stranded assets. Sustainability is no longer a cause for the future—and those that don’t work to integrate it into their overall strategy will be left behind in a rapidly shifting economy.
Designing a corporate sustainability strategy
A solid sustainability strategy can do more than just protect a company’s reputation. It can also attract and retain talent, lead to market differentiation, drive innovation, and engage consumers.
Strategies across companies vary from those focused on sustainability as a way to reduce the risks to their current business model— to those pursuing a strategy of “shared value” through which they find ways to turn social problems into business opportunities helping to solve these problems in the process.
One example of a company pursuing a shared value strategy is Sambazon, which protects the Amazon rainforest from being cut down by commercializing products made with wild-harvested açaí–a fruit that is native to the rainforest. By creating an ongoing source of income for local inhabitants, it incentivizes people to maintain the forest and harvest açaí berries rather than cutting down the açaí palms.
Once a company has decided where it wants to position itself, the next step is to think through the various aspects of sustainability that are relevant to the organization such as carbon emissions, waste, water usage, biodiversity, responsible sourcing, human rights, and diversity and inclusion. This could be done through a materiality analysis that looks to understand what is most important to the company’s stakeholders and what the potential is of each item to positively or negatively impact the business.
Having defined the focus areas, the company must then measure its baseline performance and set ambitious goals. Setting medium-term goals for each of these areas (e.g. 2030 targets) can help galvanize innovation and support across the organization. To ensure credibility and drive recognition, it is worth looking at what frameworks or voluntary agreements could make sense for the company such as signing up to Science-Based Targets for carbon emissions or WRAP for waste.
For companies with physical products, life cycle analysis is a useful tool to identify the overall impact of products and to help innovate how to reduce carbon emissions, waste, and water usage. Through a life cycle analysis, a company would think through each stage of the production and consumption process including raw material extraction, manufacturing and processing, transportation, retail, usage, and end of life.
For example, Interface, a carpet manufacturer, delivered on its ambition to develop carbon-neutral flooring by innovating across each stage of the product’s life cycle. Among its innovations, it replaced petroleum-produced nylon with yarn made from discarded fishing nets and replaced natural gas at its manufacturing plant with methane from a local landfill. Life cycle thinking can help companies avoid common pitfalls such as switching to “eco-friendly” compostable products without a strategy for how these products will be collected post-use and industrially composted.
How to address corporate sustainability
The expectations around corporate sustainability are changing, and companies can no longer take a passive approach to environmental and social issues. In fact, more than 90% of CEOs said that sustainability is vital to their organization’s success. This trend will only accelerate over the coming years so companies need to act now to avoid being left behind in the race towards a carbon-neutral, sustainable world.
The first step is to bring in a sustainability expert that can help to identify focus areas, achievable goals, and a clear roadmap for the company. Once this has been agreed upon by top management, the next step is implementation. Successful implementation will generally require a strong change manager that understands sustainability and can help mobilize a significant cultural change across the organization.
Sustainability is not something that can be done by a Corporate Responsibility team that sits separately from the rest of the company, it will only succeed if it becomes part of the ways of working across every team in the organization.
Although this might seem like a large investment for an organization, it should be seen as an opportunity to increase profitability and unleash innovation. Companies like Interface and Sambazon are living proof that businesses can contribute positively to the environment and build a better tomorrow while also seeing strong returns.
Not all companies will subscribe to the principles of corporate sustainability, but the ones that embrace it will be able to harvest extraordinary long-term benefits, from public goodwill to impressive economic growth.
