Making the case for strategic sustainability
What is sustainability?
The common definition of sustainability is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Embedding sustainability into a business is proven to create a positive lasting impact on business performance. Business benefits of a strategic sustainability approach include cost savings, efficiencies, an enhanced reputation and greater return on investment (ROI). Increasingly businesses are coming round to the advantages of more sustainable operations.
Benefits of embedded sustainability
1.| Improved image and competitive advantage
- The halo effect from a sustainability approach can be widespread from increased morale internally to customer loyalty and higher referral rates.
- IBM’s 2020 consumer report showed 77% of those surveyed felt it was important that brands “are sustainable and/or environmentally responsible.”
2.| Improved risk management
- Supply chains are vulnerable to many factors including climate change and conflict.
- McKinsey reports that the value at stake from sustainability concerns can be as high as 70% of earnings before interest, taxes, depreciation, and amortisation (EBITDA). This highlights the substantial financial implications that sustainability issues can have on a business.
- In the largest study on climate change data and corporations, 8,000 supplier companies (that sell to 75 multinationals) reported on their level of climate risk. Of the respondents, 72% said that climate change presents risks that could significantly impact their operations, revenue, or expenditures.
3.| Attract the best talent
- IBM’s Institute for Business Value found that over 70 percent of surveyed employees and job seekers believe “environmentally sustainable companies are more attractive employers.” And, almost half of those surveyed reported a willingness to take a pay cut to gain employment at these organisations.
- Being more ‘sustainable’ has a positive effect on employee morale and can increase motivation.
4.| Improved Productivity
- Improving productivity helps to improve efficiency, and conserve resources. This can reduce operational costs.
- Arabesque and University of Oxford analysed 200 studies and found that 90% concluded that good ESG standards lower the cost of capital. 88% concluded that good ESG practices result in better operational performance. 80% showed that stock price performance is positively correlated with good sustainability practices.
5.| Regulation compliance
- Due to stricter regulations and standards across all industries and sectors it is crucial to focus on embedding sustainability into long term plans.
- Common examples of regulations are the landfill tax, ultra-low emission zones and a ban on single use plastic. Not only would non-compliance potentially lead to fines, it could damage the reputation and image of the business.
6.| Increased revenues
- The plastic tax, introduced in April 2022, looks to tax any plastic manufactured, or imported into the UK that does not contain at least 30% recycled plastic. The UK government estimates that it affects around 20,000 packaging producers and importers.
- By achieving the minimum of 30% of recycled plastic companies can limit the amount of tax they need to pay.
- The University of Oxford and Arabesque reviewed the academic literature on sustainability and corporate performance. They found 90% of the studies analysed drew the conclusion that good
- ESG standards lower the cost of capital. So it is cheaper for those organisations to finance operations and investments.
- Better management of natural resources like water and energy can improve the bottom line. As can minimising waste.
7.| Attracts Investment and financial opportunity
- Companies who actively develop their sustainability and have long-term plans are much more attractive to investors.
- A 2021 BML study found that a quarter of UK investors plan to make an ESG investment by 2025.
Overcoming barriers to implementing sustainability measures
The benefits of operating sustainably are well documented. Here we look at some of the challenges businesses can face in operating more sustainably and how to overcome them.
Overcoming a lack of focus and data
Embedding sustainability in a business takes an:
- Understanding of the leavers you have available to help you streamline your organisation.
- Clear targets.
- The ability to evaluate the impact of the measures in place.
Often companies can try to address too many issues at once.
Overcoming a lack of focus can be as much about deciding what areas your organisation will not focus on, as much as what you will.
Harvard Business Review suggest evaluating all of your sustainability measures against 4 criteria:
- Purpose – what does the business stand for.
- Business Value – what affects the bottom line.
- Technology – what data do we have on our impact on the future.
- Stakeholder – what are people trying to tell us.
This approach involves mapping environmental and social issues to the business activities that drive value creation, value capture and value preservation. These are issues like: cost structure, a customer’s willingness to pay, pricing power, and the valuation of assets and liabilities.
We can support you to understand the relevant sustainability risks and opportunities to your business. We’ll help you to determine where to focus your efforts to operate more sustainably.
Overcoming financial barriers to entry
Real, long-term change towards sustainability can require a significant investment of both time and money. Whilst consumers say sustainability is important to them they may not be prepared or able to pay more.
This is where the business value perspective comes in. It is important to look at the sustainability measures which will have a positive impact on your bottom line. This approach can be ‘Win Win’ because it improves your sustainability credentials and saves the organisation money – increasing profitability.
Sustainability measures that deliver value to the bottom line may be obvious, for example when a company has large energy expenses or exposure to regulations and compliance. Some value may not be immediately obvious or might be harder to measure but can still be substantial. So some connections need to be explored to determine the value.
For example greater environmental sustainability can insulate your business against negative market movements, saving money. Or using cleaner energy sources / renewable energy could protect a business from energy price volatility or fuel shortages, providing competitive advantage.
Walmart offers an example of a Business Value approach. In 2006 Walmart created a sustainability strategy with “zero waste” as its first objective. The zero waste measures that Walmart implemented included cutting fuel wasted by idling trucks, wasted electricity from lighting, and wasted packaging in its warehouses. This reduction in waste led to a reduction of costs. This cost reduction in turn helped Walmart deliver on its core value proposition of offering everyday low prices.
We can help you to:
- Identify your business’s issues to determine where the opportunities for improvement are, and what needs to occur to make your business more sustainable.
- Make these challenges a priority from both a sustainability and a commercial perspective. This will help you to recognise and manage risk, increase efficiency, revenue potential, growth, and other prospects.
- Map the short and long-term ambitions for your sustainability vision, assess the risks, and address any gaps in delivery.
- Deliver a robust sustainability programme that includes initiatives, enablers, milestones, key performance indicators and measurable targets that all help your business continually improve.
Overcoming Supply Chain Challenges
An organisation’s supply chain is key to its sustainability strategy. Ethical trade ensures that products and services have not been produced at the expense of workers rights.
Sustainable procurement integrates Corporate Social Responsibility (CSR) into your organisation’s procurement processes.
To overcome supply chain challenges we work with you to:
- Carry out a Sustainability Appraisal – Understand where you are now, your business sustainability strategy and your organisation’s goals.
- Assess the upstream Environmental Social and Governance (ESG) footprint.
- Define your vision and set your sustainability goals for procurement; Where, when, and how far?
- Identify any vulnerabilities that you may have and how best to fix them.
- Identify any human rights risks, allowing you to monitor, manage and report human rights issues.
- Help to devise and implement policies and business principles that meet regulatory and customer demands.
- Constantly look to sharpen policies and guidelines and embed skills that allow you to continue sustainable procurement practices.
Supply chains offer an area for companies to innovate and make a big difference to the people who work in them.
Overcoming Technological Barriers
Implementing new technologies to support sustainability can be a significant hurdle, particularly if the organisation lacks the necessary expertise or resources.
Management systems are crucial for a business to maintain high standards in the workplace. ISO provides a framework to create an effective management system focusing on areas such as quality, environment, energy and health and safety.
The ISO framework can be a powerful tool to help your organisation overcome technological barriers. ISO can:
- Help your organisation to maintain the highest quality standards.
- Help you identify new opportunities for your business.
- Record problems preventing them from recurring.
- Help you gain access to new markets.
- Boost marketing and sales, while improving customer satisfaction.
Read more on ISO Certification.
Embedding Sustainability in your organisation
Embedding sustainability can be difficult if employees and stakeholders are resistant to change. It may be that organisational processes are entrenched and difficult to adjust. Or that there are supply chain or reporting challenges.
Overcoming this requires sustainability leaders to drive innovation, influence mindsets and enable others to contribute to sustainability goals.
This is where the stakeholder perspective comes in. If an organisation can tap into what people are trying to tell them they can develop a situational awareness that helps to detect issues.
Engaging with internal voices is key.
People in the organisation need to be involved in:
- Identifying sustainability practices.
- Assessing the viability and impact of those sustainability practices, use a matrix or a value lens approach to capture this.
- Agreeing which practices will create a positive impact.
- Piloting the approach and learning from failures and successes.
- Fostering commitment, by communicating the purpose, allocating resources and acquiring the necessary talent.
- Clarifying expectations.
- Instilling a capacity for change.
- Building momentum.
- Developing new processes and systems.
- Reinforcing the message, monitoring and communicating the results and adapting the plan as needed.
It is important to recognise that sustainability is part of a broad societal agenda. Companies that ensure sustainability is part of their purpose and operating model are more likely to thrive.
We can work with you to understand the sustainability risks and opportunities relevant to your business. Then we can use this information to develop and implement a business strategy that is tailored to the specific needs of your business.
Resources
https://embeddingproject.org/pub/resources/EP-Embedding-Sustainability-in-Organizational-Culture.pdf
https://hbr.org/2025/01/getting-strategic-about-sustainability
