Understanding corporate sustainability and the benefits for business

Corporate sustainability is increasingly important for students and professionals alike. That’s why many business degree programs and corporate strategies cover or include it. A large majority of McKinsey Global Survey respondents reported that the main reason for implementing a sustainability agenda was to bring an organization’s practices, goals, missions and values into better alignment with it.

Therefore, a corporate sustainability strategy focuses on how a company can operate responsibly, considering environmental, social and economic factors. Adopting such a strategy may not only help businesses gain benefits like increased customer loyalty, improved operational efficiency and enhanced corporate reputation, but it may also reduce their negative environmental impacts.

Ultimately, corporate sustainability helps companies become better corporate citizens while enjoying such benefits as improved operations and favorable public opinion.

What is sustainability in business?

Sustainability in business is about creating corporate value that considers the interdependent economic, social and environmental factors related to corporate strategy. This concept encourages companies to think long term and take into account factors like climate change, pollution control, resource efficiency and social responsibility when making decisions. Companies should strive to build a sustainable model for their operations by considering the total costs of corporate sustainability and its potential impacts.

Similarly, sustainability is a model that focuses on creating corporate value through responsible corporate practices. Sustainable businesses should consider their environmental impacts and strive to reduce them while increasing corporate growth. By considering these aspects, companies can create corporate value that goes beyond economic performance and positively impacts society and the environment.

Environmental, social and governance (ESG) values

ESG is a way for companies to be evaluated based on how they impact society. ESG factors measure things like how the company affects the environment and how it treats its employees. But at the same time, ESG also offers a lot of business and investment opportunities.

The goal of ESG values is to recognize corporate efforts to minimize environmental impact and improve operations. Corporate governance ensures that business operations are conducted ethically and transparently with a focus on sustainability.

• Environmental — Companies need to be mindful of their environmental impacts and strive to reduce them as much as possible. This can include reducing emissions, ensuring sustainable resource use and being mindful of how corporate activities affect the environment.
• Social — Corporate social responsibility is all about how corporate activities affect society. Companies should strive to create a culture of respect for the environment, employees and human rights and contribute to their local communities.
• Governance — Corporate governance refers to how businesses are managed regarding policy, transparency and compliance. Companies should strive to create a corporate culture that prioritizes integrity and ethics while maintaining strong corporate governance practices.

By considering ESG when making corporate decisions, companies can ensure they create value for their stakeholders while promoting sustainability in their operations.

How sustainability benefits businesses

Businesses have a lot to gain from sustainable operations. Sustainability helps companies reduce their negative environmental impacts while also helping them increase efficiency and innovation, improve corporate reputation and customer loyalty, and create competitive advantages for themselves.

Reducing costs

While introducing sustainability initiatives may cost more money up front, most sustainable initiatives have been shown to save money and improve performance in the long run. For example, companies can reduce their costs through improved energy efficiency, reduced waste and recycling, better supply chain management and enhanced employee productivity.

For example, research by Deutsche Bank has shown that companies with high ratings for ESG factors have a lower cost of debt and equity. In addition, 89% of the studies they reviewed found that companies with high ESG ratings outperform the market in the medium and long term. Therefore, using financial forecasting and other best practices to consider sustainable operations can be an excellent way for businesses to save money and increase performance for the long haul.

Satisfying consumers

Consumers increasingly want to buy from sustainable and responsible companies, so sustainable operations can help businesses attract new customers and increase loyalty from existing ones. IBM reports that a majority of surveyed consumers (57%) are willing to change their buying habits if it would help reduce pollution.

Cause marketing is also a good way for businesses to show their commitment to sustainability. By partnering with nonprofits or other organizations working toward sustainable initiatives, companies can demonstrate their commitment to sustainability while increasing brand awareness.

Attracting employees

In addition to consumers, sustainable operations can help businesses attract and retain employees. Employees are often mission driven and prefer to work for a company that shares their values. According to survey research from Glassdoor, over 77% of adults across four countries would consider a company’s culture before applying for a job there. Additionally, 79% said they would consider the company’s mission and purpose.

Finding ways to integrate sustainable operations into your corporate culture can be a great way to attract and retain employees. By striving for sustainability, companies show that they care about the world we live in while creating meaningful jobs for their employees.

Impressing investors

Global ESG assets are expected to exceed $53 trillion by 2025. ESG factors are becoming increasingly attractive to investors because they provide a more sustainable long-term return. Investors are increasingly looking for companies with high ESG ratings because sustainable companies often have better financial performance and enjoy greater profitability, lower volatility and higher stock prices than nonsustainable companies.

Furthermore, sustainable businesses often have greater transparency than those without sustainable initiatives. This can help them build trust among investors and other stakeholders while also helping them identify potential risks before they become critical problems.

Regulatory compliance

Sustainable operations can make it easier to comply with present and future regulations. As governments worldwide begin to pass legislation requiring businesses to reduce their environmental impact, sustainable operations will become increasingly important. By focusing on sustainability as a core part of their business strategy, companies can anticipate changes in regulations before they happen and develop sustainable solutions accordingly.

Financial experts, such as EY, point out another advantage for companies that proactively accommodate as-yet-unestablished regulation changes: Doing so helps them stay ahead of the curve and avoid fines or other complications. Better to make necessary changes before they’re required, in other words, rather than after.

Preparing for the future

Climate change has different impacts on various industries spanning from agriculture to energy to infrastructure. So, it’s pivotal to consider the outcomes of these changes and how sustainable operations can help adapt or mitigate them. A few examples from the Intergovernmental Panel on Climate Change Working Group 2 include:

• Develop the ability to comprehend and measure climate impacts, then include these impacts in all future decision-making.
• Invest in adaptation and resilience now to help minimize future losses and damage from climate change.
• Take action to reduce emissions and mitigate climate change today so that the outcomes will be less severe.

Planning for sustainable operations and continual improvement can essentially help businesses stay current in a changing world.

How can a business be more sustainable?

Becoming more informed about sustainability issues is the first step. Companies should be aware of existing sustainable business practices and local and global trends in sustainable development. This can help them identify areas where they can improve sustainability initiatives, such as energy efficiency, waste reduction, sustainable sourcing or resource conservation.

Companies should also consider the following steps to operationalize sustainability:

• Define sustainability goals.
• Establish ESG data collection and reporting.
• Engage stakeholders in sustainable initiatives.
• Implement sustainable operations as a core part of their business strategy.

Finally, companies should keep up with the latest trends to fully utilize sustainable solutions. Keeping current on sustainable practices can help businesses stay ahead of their competitors, generate cost savings and positively impact their communities.

How to learn more about business sustainability

Earn a business degree from University of Phoenix