Monday, September 12, 2016

Businesses are Thriving with Sustainability and Risk Dying Without It

Sustainability and particularly environmental sustainability is an increasingly crucial part of business strategy. This huge and growing megatrend is expected to continue evolving and shaping global business strategy. Driven by consumer demand companies are positioning themselves to address the challenges they face. This trend continues against the backdrop of uncertain political outcomes.

Reams of research reveals the benefits of sustainability. Measures of the ROI of sustainability include company revenue, stock performance, product-level profitability, and the valuation of employee and consumer engagement. Metrics related to all of these areas underscore the sustainability advantage. Sustainability is also linked to enhanced brand reputation, innovation, product quality and global competitiveness. 

Simply put, companies that engage sustainability outperform their peers. There is also evidence to suggest that sustainability is helping companies to decouple revenue growth from GHG emissions.

Decoupling

This trend towards corporate decoupling is revealed in the latest Thomson Reuters Greenhouse Gas Emissions Report. This study reaffirms that we are seeing sustainable growth. As explained in a news release, this report, "shows for the first time that the Global 500 are beginning to grow their businesses and manage their emissions at a rate that follows the global scientific consensus on the risks of climate change."

The Global 500 account for 28 percent of the world's GDP and collectively emitted 10 percent of the world's greenhouse-gas emissions over the last five years. The Global 500 grew roughly 5 percent over a four-year period, while emissions increased by 1 percent.

Tim Nixon, Managing Editor of Sustainability at Thomson Reuters and co-author for the report commented:
"Our latest report indicates that we are seeing a positive trend across the Global 500 to limit their GHG emissions consistent with recommendations from the international scientific community. Following COP21 last year, sustainable business growth has become a top priority and focal point for many organizations. Limiting environmental impact is no longer just about doing the 'right' thing. Organizations recognize sustainable business growth is central to mitigating risk and driving top and bottom line performance."
Success factor

The data is clear, sustainability is emerging as a key success factor. A 2015 Nielsen survey titled Global Sustainability Report found that consumer brands that practice sustainability outperform those that don't. This report found that
  • Sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4 percent globally in the past year while those without grew less than 1 percent.
  • Sixty-six percent of consumers say they are willing to pay more for sustainable brands—up from 55 percent in 2014 and 50 percent in 2013.
As reported by Triple Pundit, a United Nations Environment Program (UNEP) report titled, “The Business Case for the Green Economy," shows that environmental sustainability benefits the bottom line.
  • General Motors saved over $30 million in six years through its resource productivity program while reducing waste volume by 40 percent. 
  • Grupo Bimbo in Mexico saved about $700,000 and 338,400 cubic meters of water in three years through its water reduction program. 
  • General Electric’s sales of its Ecomagination products reached $18 billion in 2009. 
Volatility

Sustainability is important especially in an increasingly volatile world. Sustainability mitigates against factors such as climate change, resource scarcity, migration and urbanization. Disruptive technological innovations are changing business models

As explained in an ING article,

"One of the ways that businesses can shield themselves from this volatility is by becoming more focused on sustainability, which will make their companies more robust and prepare them for a future where volatility is the new normal...Taking into account environmental, social and governance (ESG) issues helps companies and investors to identify risks they would not have otherwise considered and it could save them billions of pounds. Once the risks are identified, they can be avoided."

This includes important energy related actions like switching to renewable energy to avoid the price volatility of fossil fuels.  We have already seen a number of corporations that have pledged to increase their use of renewable energy, some of these companies have promised to go 100 percent renewable.

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