Sustainability is an answer to the urgent need to manage and protect the natural resources of the planet, but it has also become a business imperative. Nowadays, actors across the globe face ever-increasing pressure from stakeholders ranging from investors and customers to employees and the public sector, to become increasingly sustainable. This switch has been accompanied by increased ESG (Environmental, Social and Governance) international guidelines and regulatory requirements that follow the path set by the UN 2030 agenda. This should not be seen as an obligation but as an opportunity to innovate as a company and create value for your brand.
So, how can sustainability create value for your brand?
First, integrating ESG considerations as part of the company decision-making often leads to operational and process efficiencies within the business. In turn, this improves profitability through better resource management policies, reduced waste and sustainable supply chain practices. In other words, by reducing their carbon footprint, becoming energy efficient, and implementing sustainable practices, companies benefit from cost optimization all across the supply chain.
In second place, implementing these structural changes will help companies avoid non-compliance costs. Keeping up with regulatory requirements regarding ESG disclosures and practices will ensure companies are in line with international and local legislation.
A third way in which sustainability creates value is through ESG ratings. This is because a highly ESG-rated company is associated to lower systematic risks, which in turn results in higher risk-adjusted returns for investors. As of today, most institutional investors incorporate ESG elements in their investment analytic frameworks and would apply positive screening techniques to those companies with sustainability and ESG practices. In other words, more sustainable companies will be viewed more favourably by capital providers and therefore will have access to financing at lower costs.
Last but not least, this transition towards sustainable practices not only gives companies a competitive advantage, but also provides the company with intangible value that will be seen through increased recruitment and employee retention, and customer loyalty. This last attribute is a consequence of the increasing influence of environmental awareness on consumers’ purchasing habits. As companies respond to the market’s demand to innovate toward sustainable practices which also allows them to charge higher price premiums on their offerings, they can then access a greater share of existing customers' wallets.
In conclusion, the transition towards sustainable practices will not only allow companies to create value in different, innovative ways, but it will also become the new norm as it provides wide-ranging growth opportunities. As a result, it is in the interest of all stakeholders across industries to create roadmaps that take into consideration the different ways in which companies need to change to become sustainable.