What is Sustainability in Business?
In recent years, the term “sustainability” has increasingly appeared in magazines and the media, and we see it more and more in our daily lives. The days of fast fashion and disposables are gone, and consumers are shifting their purchasing considerations from satisfying a fleeting desire to what is good for their health and the environment. According to 2021 data, “sustainability” is an important consideration for consumers, with 32% of consumers willing to adopt a more sustainable lifestyle. In addition, 28% of consumers say they have stopped buying certain products due to ethical or environmental concerns. (Deloitte)
As consumers’ purchasing thoughts and behaviors and what they expect from companies change, it goes without saying that businesses need to adapt to these changes. In business, it refers to doing business without negatively impacting the environment, the community, or society as a whole. It is generally divided into two main categories: the impact of business on the environment and the impact of business on society.
“Sustainability” leading to “profit.”
Another reason sustainability is important to businesses is that it has the potential to solve global problems and promote business success. Investors use Environmental, Social, and Governance (ESG) indicators, which show the issues a company must address, to analyze data such as a company’s carbon footprint, water usage, community development efforts, and board member diversity to determine an organization’s ethical impact and sustainability practices. Research shows that companies with higher ESG metrics have a lower cost of debt and equity and that sustainability efforts can improve financial performance while gaining public support. (McKinsey)
The overlap between “social and environmental actions” and “economic benefits” is called a “shared value opportunity. In other words, “Do Good” (doing good deeds) has a direct impact on “Do Well” (the company’s business succeeds). Therefore, it is no surprise that many companies practice these rules. Thus, the rules of business are changing. While for the past several decades, the sole goal of business leaders has been to maximize shareholder profit; the new paradigm means that a balance must be struck between profit and the concerns that fall under sustainability criteria.
Sustainability Priorities in Corporate Strategy
Ninety percent of executives believe that sustainability is important. The problem is lack of implementation, with only 60% of organizations having a sustainability strategy. Having a sustainability strategy and a Chief Sustainability Officer should be a priority. Sustainability will become even more of a key factor in the future, and it is important to integrate it into the core of a company’s strategy. A growing number of Fortune 500 companies have already appointed a Chief Sustainability Officer. Prioritizing sustainability will be essential to meeting investor pressure, consumer demand, regulatory requirements, talent acquisition, and increasing productivity.
Born between the mid-1990s and late 2000s, Gen Z is a digital native, living in a world where the Internet has existed since birth. According to a First Insight study, Millennials and Gen Z consumers often make purchasing decisions that align with their values. Three-quarters of them say sustainability is more important than a brand name. Thus, it will be inevitable for businesses in the future to incorporate sustainability into their business in order to accommodate the changing needs and preferences of younger consumers, as well as for the environment, society, and business growth.