“Can we keep on doing what we are doing, indefinitely?” This is the basic question which underpins the term ‘sustainability’. Initially introduced in the 1980s, the term is now overused by governments, NGOs, businesses, entrepreneurs and civil society. The endless discussions and focus groups around the issue have led to a sense of mainstream familiarity with the concept, which in the process somewhat robbed it of its original ability to ‘nudge’ entities into action, including locally.
The original definition of sustainable development is “one which meets the needs of the current generations without compromising the ability of future generations to meet their own needs”. Yet, one could argue that, even if in general we seem to be wealthier and healthier than ever before, to some extent a portion of the current generation is still struggling to meet its “needs”, with poverty, famine and environmental degradation, still being palpable problems. In this regard, it is definitely time to transition from the discussions and round tables to the drawing board to design plans integrating sustainability into day-to-day operations.
Over the past decades, the responsibility of ensuring sustainable practices has fallen solely on the shoulders of governments. Politicians and government officials were expected to maintain a harmonious balance between the three pillars – the economy, the environment and society – while businesses were mainly tasked with profit generation and maximisation of shareholders’ wealth, following Friedman’s dictum that “the business of business is business”.
This has strengthened the economic pillar, creating jobs, wealth and opportunities, but when one reads through the local papers there is a feeling that some of this gain has come at the expense of the certain social well-being and the environment, leading to poverty, inequality and environmental degradation.
In many countries, there is growing belief that governments cannot attain sustainability on their own. Businesses are the life blood of society and inevitably vital players in participating in the sustainability process. This does not refer to one-off corporate social responsibility (CSR) activities but rather implies the need for a more holistic, continuous and integrated approach in the company’s supply chain. Having said this, what will profit-making businesses gain from altering their operations? When implemented appropriately, sustainable operations can be seen as an investment for businesses leading to high returns. Four major illustrations of this ‘win-win’ situation of sustainable business models are presented below:
Businesses can identify the needs of our society and aim to provide services
Sustainable development can be a growth driver. Various market studies are busting the myth that sustainable businesses or products cannot bring growth. Unilever’s ‘Sustainable Living’ brands, such as Dove and Hellman’s, have accounted for more than half of the company’s growth for a number of consecutive years. Such brands have also grown 50 per cent faster than the rest of the business in 2016. A recent study by B Corp (a purpose-driven business network found in the UK, including brands such as Ben & Jerry’s) has shown that its members have experienced a year-on-year growth of 14 per cent since its inception in 2015.
Moreover the 2015 Nielsen Global Corporate Sustainability Report has shown that 66 per cent of worldwide consumers seem to be willing to pay a premium for sustainable brands. All this indicates that altering unsustainable operations might be a lucrative investment. Moreover the UN Sustainable Development Goals (SDGs) have also created new niches of growth for businesses, whereby global challenges are turned into business opportunities.
Additionally, adopting sustainable measures in one’s operations can help in ensuring that businesses are addressing risk appropriately. Some state that under the status quo, we are killing the goose that lays the golden egg. By producing excess waste, emitting toxic pollutants and using up the little non-renewable resources left on our planet, businesses cannot guarantee their future operations since raw materials and business foundations are being depleted.
By adopting more sustainable ways of operations (e.g. using renewable energy resources as opposed to fossil fuels) the businesses can signal that they will be able to continue operating in the future. Moreover since businesses form part of societies it is therefore vital that communities are maintained healthy. Social instability will mean that the consumer base will falter.
Thirdly, sustainable business models also attract capital. Given the SDGs, governments will be channelling funds towards sustainable projects and will also aim to create public-private partnerships to reach these goals. Additionally, EY reports have shown that finance markets are witnessing the ‘rise of new investors’, namely millennials and female investors. These two ‘like-hearted’ groups tend to gravitate towards socially conscious and responsible businesses which have a purpose. Therefore, operating in a more sustainable manner and signalling this to the general public (e.g. through integrated/sustainability reporting, which is already being done by a few listed local companies) will allow enterprises to attract further financing and public support.
Finally, businesses following sustainable development targets can have a more specific purpose for their operations. Businesses can identify the needs of our society and aim to provide services which will help target these issues, challenges and lacunas in society. Businesses should be there to serve the community not vice-versa, therefore by answering the question “what does the community need?” businesses will be able to ensure demand for their services, while bringing positive change in society.
At EY we acknowledge this need to move away from simply discussing sustainability to actually implementing it, and we believe that businesses should be the catalysts of this change. Globally, through our Climate Change and Sustainability Services teams we seek to help organisations assess and respond to environmental, societal and governance (ESG) issues.
At EY Malta we are enthusiastic to assist local enterprises in this quest for sustainability through various channels, such as the explanation of the SDGs, the assistance in drawing up of sustainable strategies, the identification of relevant key performance indicators, the monitoring of performance as well as the eventual publication of sustainability reports. We strongly believe that the companies which will be able to turn societal challenges into business opportunities will succeed in creating growth and be competitive in an ever dynamic and demanding market.
Maria Giulia Pace is a Senior at EY Malta, and part of the Economic Advisory and Climate Change and Sustainability Services.