Over the years, companies have shown a growing interest towards prioritising measures of success beyond profits. This shift ensures that firms can attain sustainability and remain competitive in an everchanging business landscape.
Read on to learn more about business sustainability and its importance.
What is business sustainability?
Business sustainability refers to the impact companies exert on society and the environment. It is typically measured based on environmental, social, and governance (ESG) metrics. Firms today have, therefore, begun to adopt the triple bottom line: profits, people, and planet.
Profit
In a capitalist economy, a business’ success depends heavily on its ability to generate profits. As such, all companies must assess the feasibility of their operations and projects.
Profit encompasses more than just financial gains. It measures the value businesses contribute to society by creating employment, generating innovation, and paying taxes.
People
Traditionally, firms focus on shareholder value as an indicator of success. With the triple bottom line, businesses also consider stakeholder value and societal impact as well. A sustainable business should have the support of all parties impacted by business decisions – be it consumers, employees, or the broader community.
Some ways firms can secure their stakeholders’ approval and support include (but are not limited to):
● Implementing fair hiring practices or providing more responsive benefits, like better family and maternity benefits.
● Ensuring a diverse selection of suppliers.
● Ensuring all consumers have fair access to products and services.
● Giving back to the community by partnering with nonprofit organisations or providing scholarships.
Planet
Large corporations contribute significantly to environmental pollution and climate change, with over 70% of the world’s greenhouse gas emissions from 1988 to 2017 being linked to just 100 big companies (Riley, 2017). Consequently, environmental efforts by large corporations can have a substantial impact on the state of the planet.
Businesses can reduce their carbon footprint by minimising packaging waste, reducing energy consumption, and utilising ethically sourced materials. Such practices don’t just benefit the environment—they can also contribute to the cost savings for companies. For example, less packaging materials translates to lower production costs.
Why is business sustainability important?
According to Kroll (2023), implementing sustainability initiatives can lead to increase profits and opportunities, with companies with higher ESG ratings outperforming their competitors. Additionally, a more recent study by IBM (2022) found that 44% of all consumers are purpose-driven (i.e., consumers who choose brands and products aligned to their values).
Hence, companies that adopt a values-driven approach to developing business strategies can reap hard-to-qualify benefits like good reputation and public goodwill. Philanthropic efforts may also improve employee retention and reduce attrition.
Ultimately, focusing on the triple bottom line helps businesses create long-term value.
Corporate sustainability reporting
It is crucial for businesses to regularly disclose their sustainability goals and efforts. This transparency can help the public better understand how their business is a key driver of a sustainable global economy.
Conclusion
It has become increasingly critical for businesses to expand their focus beyond mere profits and actively contribute to society and the environment. Pursuing responsible economic, social, and environmental strategies helps improve a business’ sustainability and success.
As a business consultancy firm in Singapore, LiT Strategy provides reliable and high-quality strategy consulting services, such as EDG grant consultant and PSG Job Redesign advisory services, for enterprises that have applied to one of the government SME grants.
References
Riley, T. (2017). Just 100 companies responsible for 71% of global emissions, study says. Guardian. https://www.theguardian.com/sustainable-business/2017/jul/10/100-fossil-fuel-companies-investors-responsible-71-global-emissions-cdp-study-climate-change
Sustainable Brands Staff. (2023). Study Shows Stronger ROI for Companies with High ESG Ratings. Sustainable Brands. https://sustainablebrands.com/read/finance-investment/stronger-roi-companies-high-esg-ratings#:~:text=Kroll%20analyzed%20data%20on%20over,%25%20vs%208.6%25%20for%20laggards.
Haller, K., Wallace, M., Cheung, J., & Gupta Sachin. (2022). Consumers want it all. IBM Institute for Business Value. https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/2022-consumer-study