In today’s ever-evolving world, debating whether to incorporate sustainability into your business strategy is no longer an option. Considering a values-driven approach when developing business strategies can be vital to long-term success.
Before getting into why sustainability is essential to successful business strategies, it's important to define what sustainability in business is, exactly.
What Is Sustainability in Business?
In short, sustainability in business refers to the effect that companies have on the environment or society.
A sustainable business strategy aims to positively impact one or both of those areas, thereby helping address some of the world’s most pressing problems, such as climate change and income inequality.
Although it may sound like it, sustainability in business is not purely altruistic. As Harvard Business School Professor Rebecca Henderson notes in the online course Sustainable Business Strategy, you cannot use business to do good in the world if you're not doing well financially. Doing well and doing good are intertwined, and successful business strategies include both.
Here are four reasons why business sustainability strategies are essential to sustained financial success.
Why Sustainability Matters for Financial Success
1. You Will Protect Your Brand and Mitigate Risks
Ending up on the front page because of a scandal is a CEO’s worst nightmare. Not only do improper practices damage an organization’s reputation and cost it customers, but dealing with a public relations disaster will divert valuable human and financial resources from the core business.
You don’t want to become the company that allowed an oil spill or forced employees to work in unsafe conditions. By instituting a sustainable strategy that protects the environment and your workers, you also protect yourself from any damaging incidents.
2. Being Purpose-Driven Is a Competitive Advantage
Sustainability does not detract from business goals, and infusing your company with purpose can help attract a motivated, skilled workforce that drives financial success. In a recent Facebook Live discussion, Professor Henderson noted a recent study showing that 89 percent of executives believe an organization with shared purpose will have greater employee satisfaction. Additionally, 85 percent say they're more like to recommend a company with strong purpose to others.
Making your company an organization that does good in the world, rather than just a place that provides a paycheck, can be a competitive advantage when attracting the best talent.
Related: HBS Professor Explores the Impact Purpose Can Have on Your Organization
3. There Is a Growing Market for Sustainable Goods
A 2018 study found that nearly half of US consumers are willing to change their consumption habits to lessen their negative impact on the environment, and sustainable product sales have grown by nearly 20 percent since 2014. Millennials in particular are more willing to pay more for products that contain sustainable ingredients or products that have social responsibility claims. If your organization commits to sustainable products and practices, it could gain market share by converting sustainability-minded customers and increasing sales.
4. Cooperative Action Can Drive Change
As an individual, it can feel overwhelming, isolating, or simply impossible to effect change in a meaningful way. That’s not the case when the most innovative, successful, and powerful companies are collaborating to solve some of the world’s most pressing problems. While governments struggle to address public goods problems, purpose-driven companies working together to address these issues have experienced great success.
For example, palm oil is cheap and versatile and found in about half of all packaged products, including soap, lipstick, and ice cream. But palm oil production has resulted in record greenhouse gas emissions and contributed to climate change.
In light of this, consumer goods producer Unilever committed to only using palm oil from certified sustainable sources in 2008. The organization cooperated with its competitors—as well as governments, NGOs, and indigenous peoples’ organizations—to lead an industry-wide adoption of sustainable palm oil. As a result, Unilever continues to be a thriving organization, and the world has reaped the environmental benefits of sustainable palm oil harvesting practices.
THE VALUE OF SUSTAINABILITY
Sustainability doesn’t mean sacrificing profits or putting success on the backburner. Instead, it has become a crucial element in any organization’s successful strategy. A business that doesn't factor in sustainability risks being less successful in a number of measures, including profitability, growth, and employee retention.
By integrating sustainability into your business strategy, you can find success because, rather than in spite, of sustainability.
Do you want to take a more values-driven approach to business? Explore our three-week online course Sustainable Business Strategy and learn how organizations can succeed financially while also playing a role in solving some of the world’s most pressing problems.
