Friday, October 9, 2015

Businesses Practicing Sustainability are Leading the Way Forward

A growing number of businesses are redefining the scope of their responsibilities. Whether as part of a sustainability program, or as a function of CSR initiatives businesses are beginning to appreciate that they will not thrive in the 21st century without addressing environmental and social issues.

Importance of business

Many years ago Paul Hawken said: "Business is the only mechanism on the planet powerful enough to produce the changes necessary to reverse global environmental and social degradation."

The reason that the business community is so important to advancing global change is multifaceted. For one corporations have traditionally been at the center of many of the ills of our world. However, they also have the unique capacity and capabilities to augur augur transformational change. They have the ability to lead large scale innovation and they are at the forefront of developing best practices that others can follow.

Business case

For almost a half century the case for responsible business has been building. More companies are engaging sustainability than ever before because it makes good business sense. There is an overwhelming logic to the sustainability megatrend. In addition to reducing risks, sustainability lowers costs, increases revenues, enhances corporate reputation, attracts investors, increases market value and supports employee recruitment and retention.

The business case for sustainability continues to get stronger every year. We are seeing action from corporations, banks and investors. A number of corporations are showing leadership by reducing their greenhouse gas emissions (GHG) as are governments.

Sustainability is about more than simply providing quality products, being good to employees, or even reducing GHGs, sustainability drives innovation and supports global competitiveness.

Profits

Driven by market forces, businesses are reevaluating their role in society and shifting their corporate consciousness to incorporate issues that were not previously seen as bottom line issues.

Driven by strong returns on investment, businesses are working to make the world a better place. This seemingly Pollyanna vision of business is actually entirely consistent with Nobel Prize-winning economist Milton Friedman's famous words that businesses only responsibility is to make a profit. As he said in 1962, “… there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits …”

Sustainability drives reputation which not only decreases costs and increases revenues, it also enhances stock values. The fact that sustainability and CSR drives better market values is borne out in research by Simon Cole and his team at Reputation Dividend. According to their research, approximately 17 percent of the value of the S&P 500 was driven by reputation in 2014. That is around a third of the index’s total intangible value. Apple's reputation contributed a market value of 49.5 percent or $320.3 billion.

Self interest

Businesses are getting on-board the sustainability train as a matter of self interest. Sustainability offers good return on investment and drives higher market values. Businesses are being called to change by current and future regulations as well as the demands of stakeholders, shareholders and consumers.

A report from Center for Climate and Energy Solutions (C2ES) indicates that 91 percent of businesses in the S&P Global 100 Index view climate change as a business risk. Climate change is a threat to their facilities, supply chains and public infrastructure. The report also identifies climate change as a “threat multiplier” that exacerbates existing risks.  Managing risk is a key success factor. 

Action

A letter from 350 investors and businesses (including NestlĂ©, Unilever, Staples, General Mills, and Adidas) was sent to 29 U.S. governors voicing their support for the Clean Power Plan. The letter was organized by Ceres and it highlights the growing consensus among companies both large and small in support of clean, renewable energy.

“More than ever, businesses and investors are waking up to the threat of climate change and the urgency for low-carbon solutions that make strong economic sense,” said Mindy Lubber, President of Ceres.

The We Mean Business Coalition is another powerful organization that is helping to transform businesses. They see the transition to the low carbon economy as, "inevitable, irreversible and irresistible" and ultimately unstoppable. They work with over six million companies that are now calling for a bold climate agreement at COP21.

The We Mean Business campaign is growing quickly. During Climate Week NYC in September 2015, Walmart, Kellogg and the State of New York were added to the campaign.

However, there is still much work that needs to be done to convince the business community. There are many companies still not engaged in the culture of sustainability. Driven by the pursuit of profits and the mitigation of risk, laggards are sure to see the merits of this new business culture.

Environmentally and socially responsible business is about more than healthy profits, innovative approaches to sustainability is a matter of survival. Sustainability is unstoppable and for those who ignore the writing on the wall it will soon be a question of adapt or die. Simply put sustainability is a strategic imperative.

If the profit incentive does not motivate companies to act, self-preservation most certainly will.

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