Why Sustainability is Good for Businesses
There is so much talk around sustainability in businesses that you would probably know a lot about it already. However, there remains a big gap between awareness and implementation. Entrepreneurs are well aware that sustainability is the need of the hour, but how many take the effort to incorporate it into existing business practices? Not many.
Sustainability is not a short-term strategy by any means, it is meant for the long haul, and the value derived from it will also be seen only later on. Being naturally short-sighted as humans, we tend to care more about immediate gains. Entrepreneurs are no exception to this.
But does following the path of sustainability mean that profitability is no longer in the picture? Do sustainable businesses fail to survive the competition? Is sustainability expensive? Valid concerns and the answer to all these questions is “it depends”.
Sustainability and socially responsible practices often neither change the course of a business nor diverts attention from the primary goal. It is a way of building businesses differently, adding more value to it rather than taking any away. It gives you more opportunities to stand out and that too, for a longer time.
Let’s explore why sustainability is beneficial for businesses today.
Boosts Innovation and Creativity
Engaging in sustainable practices allows companies to think out of the box and find creative solutions. So many innovations (all the way from bioplastic bags to electric vehicles) are a result of thinking differently. Whether it is a new technology, a new product or a new business model, entrepreneurs that think beyond the ordinary create something differentiated and thus, remain ahead of the others.
Procter & Gamble, for example, found that 3% of annual US household electricity budgets went in heating water to wash clothes. By switching to cold water washing, they could save 80 Billion kWh and emit 34 Million fewer tons of carbon dioxide. This led them to work on cold water detergents on a priority and has helped the trend spread across the globe.
Because businesses in the traditional sense do not account for many sustainable practices, there are plenty of low-hanging fruits that entrepreneurs can leverage and use to their advantage. There is so much scope for innovation that you can pick up any aspect of your business- supply chain, operations, packaging, etc. and make them sustainable yet economically viable.
With the availability of resources and technology to so many entrepreneurs today, businesses have immense potential to innovate and stand out from the competition.
Socially Conscious Businesses Attract Customers
Numerous studies have proven that by incorporating sustainable business practices, brands can sell more and that too at a premium price. The Global Corporate Responsibility Report published by Nielson showed that a whopping 66% of consumers were willing to pay more for a socially conscious company. Millennials proved to be even more concerned about this aspect, with 77% of them happy to may more.
This goes on to prove that consumers today are as much concerned about what the brand stands for as any other thing. Companies that advocate sustainability, voice their opinions and treat it as a way of life have a much more significant impact on potential buyers. So, you are not only broadening your customer base but also commanding a better price and image in the market.
If the customers that buy from you feel they are contributing in their small way towards a better world, they will come back to you time and again. Again, it requires a long-term vision on the part of an entrepreneur to see this.
Improves Resource Utilization
When you start thinking about becoming a sustainable company, every little aspect is accounted for. Whether it’s your energy consumption, digital footprint, packaging material or return orders, you put a full stop to everything wrong.
Sustainability naturally directs you to use fewer resources and make the most of the amount you have. This results in saving on costs, attacking your bottom line figures quickly. Lessening energy consumption, using digital records instead of manual, using fewer or different raw materials, reducing water consumption in the production process can slash your costs significantly.
You can also think of new ways to use and recycle different things. Maybe material considered as waste during production can help you enter an adjacent market or can be used to create another line of products.
Cisco, for example, treated used equipment as scrap and spent $8 Million a year to recycle it. Then, it switched to finding better uses for the same set of equipment because the products were in working condition. The result? Reuse of equipment grew from 5% to 40%, and recycling costs were down by 40%, adding millions to the bottomline.
It again involves thinking smart. Identify ways to cut down consumption and spendings because you are doing a favour not only to the planet but also to yourself.
Gives Long-Run Competitive Advantages
It is no secret that natural resources are depleting fast, and we can no longer exploit them without care. Finding and switching to alternatives that are more efficient and renewable in nature can give you long-term competitive advantages.
Not only do you end up saving costs (fight for limited resources will only drive up prices), but you will have access to reliable material before anyone else, giving you an edge. It is worth investing R&D efforts into finding alternative resources or even efficient utilisation of resources to help your company stay in the game longer.
As a brand, you also benefit from being trendsetters in the industry and encouraging others to follow the path of sustainability. This has positive implications for your company image and name. New revenue opportunities can come from the R&D and Intellectual Property you create.
Onboarding Like-minded Individuals
For a team to function smoothly, the rest of the team needs to be as strong as the leadership. By actively advocating for sustainability, you can instil a feeling of responsibility among the team so that they are inspired to do their bit not only at work but also in their daily lives. Let them be a part of your decision making and find creative solutions to sustainability problems.
You will also attract employees that genuinely believe in your vision and will put their best foot forward. So, by taking small steps as an entrepreneur or head of the company, you can greatly multiply the results by encouraging others to follow suit. Remember to always lead by example because there is a greater good at stake.
Another big benefit is onboarding like-minded investors for your company. Everyone is looking out for the next big thing in sustainability, and by adapting to this changing mindset, you can convince investors to back you and give you funds.
The Final Word
Sustainability and profitability can actually go hand-in-hand. While research and innovation do come at a price, and with some inherent risk, it can pay off very well over time. And again, growing profits are no more the only yardstick to measure success. Impact, brand name and other intangibles are equally crucial today.
Various studies have proved clearly that sustainable practices can boost your topline and bottomline. Here are some figures from an interesting report published by Oxford University and Arabesque Partners (accessed via Investors Corner).
It is high time we come together to encourage good practices that can benefit society at large and improve living standards for the coming generations. Entrepreneurship is a great tool to create change and lead from the front. You don’t need to be a billion-dollar company to create the change. The trick is always to start small.
