Three Ideas for Driving Economic Sustainability in the Current Business Landscape
Before diving into talk of economic sustainability and its importance in the energy landscape, let us first clearly define the term sustainability. A term which has come dangerously close to the buzzword graveyard,
“Sustainability means meeting our own needs without compromising the ability of future generations to meet their own needs… Sustainability is not environmentalism”
Sustainability is much greater and more encompassing than better utilization of nature’s resources. Sustainability also demands social equity, strong ethics, economic profitability, and long-term planning. Understanding the definition is fairly straightforward, the test lies in truly grasping the breadth and width of its challenges and opportunities. Loosely defined, there are three parts or “spheres” of sustainability:
Environmental. Economic. Social. While environmental concerns are the most notable and pressing concern to humanity as a race, it is interlinked with social and economic challenges, and for the context of this piece, the focus shall be on economic sustainability. There is also an extensive wealth of knowledge of information on these topics readily available.
As though being a CEO or other form of a leader isn’t a difficult job enough, in today’s socio-political climate, these leaders must deliver results while carefully treading along on the rim of a melting pot containing an exceptional mix of social, environmental, regulatory, scientific and market challenges. Today’s consumer expects the producer to take clear stands on societal issues, and strict, universal laws and regulations impacting supply chain require companies to be more transparent than ever.
While the concept of sustainability encompasses all these possibilities, most leaders and executives have been hesitant to incorporate sustainability as a business strategy. Traditional business models generate value for shareholders, often at the expense of the non-paying stakeholders, such as the environment or employees. The notion that a business can only achieve profits or incorporate sustainable practices, even with the availability of 21st-century technology, is not only outdated, but the reverse can be true. It is no longer financially sound to confine talk of sustainability to PR meetings but for it to be included within fiscal year business strategic planning meetings.
Even the staunchest climate deniers cannot neglect the importance of a consistent and wholesome ecosystem, this improves stability, a very hard thing to come by. Sustainable business practices can be defined as:
- At minimum do not harm people or the planet and at best create value for stakeholders and
- Focus on improving environmental, social, and governance (ESG) performance in the areas in which the company or brand has a material environmental or social impact (such as in their operations, value chain, or customers). Incorporating such sustainable business practices into core business strategy represents economic sustainability.
So, what are some of the ways economic sustainability can be achieved? Generally speaking, these executives most move on from the mindset that the concept of sustainability is non-profitable and instead recognize it as a business opportunity.
1. Identify Sustainable Practices as a driver of innovation.
Traditional business models will eventually collapse, along with the systems which will prop them up, and when that happens, the companies which had taken the initiative to incorporate sustainability all along their value chain will have the opportunity to have prime access to leadership positions in their respective markets.
Companies like P&G have consistently been able to lead by adjusting their process to include environmentally friendly value products. Sustainability is a source of product innovation, it’s an opportunity to reinvent while building on strengths.
2. Revitalized Stakeholder Engagement
As aforementioned, traditional business models have had a tendency to only value the shareholder, but there are other stakeholders which can be engaged with. Rather than approaching environmental activists and government regulators as challenges, to view them as partners.
In 2008, by persuading Sierra Club, an environmental group in the US to endorse Green Works, Clorox’s new more environmentally friendly home cleaning product. The gamble paid off, and within the first 8 months of its launch, Green Works sold $3.4 million worth of its product, compared to $1.1 million by Seventh Generation and $0.95million by Method, both having been more established within the market at the time. Today Clorox still leads the natural cleaning market in the US.
3. Challenging the perception
The concepts of “going green” and “sustainability” are not new, these concepts or similar ones have been pushed around since the 1970s, not long after man-induced climate change was clearly identified and quantified. If there lies an issue which affects the entirety of the public, does it not stand that the entire public must be properly educated and sensitized to the issue? Studies show about 71% of consumers wish companies will better explain the meaning of all environmental terms. About 1 in 10 do not believe the terms ‘green’ or ‘environmentally friendly’ mean anything.
By better informing the target audience through shrewd marketing strategies, companies can position themselves in a unique fashion to sell premium products.
Trends, evidence, and predictions all point towards the same, sustainability is going mainstream. Today several companies track their environmental impact, collecting this data and including it to determine the true cost of a product and acting upon the findings to generate (environmental) cost savings can earn a company better profits from an increasingly growing socially aware customer.