What is the business case for sustainability? In our latest blog, Adam Whitfield, Achilles Head of ESG, looks at the evidence to support a more sustainable approach to business.
In recent times, discussions surrounding Environmental, Social, and Governance (ESG) and broader sustainability issues have become somewhat polarized, often associated with political debates and heightened emotion. For companies worldwide, however, there is a compelling business case emerging to cut through the noise and invest in well-considered sustainability strategies. A recent study conducted by IBM’s Institute for Business Value, in collaboration with Oxford Economics, surveyed 5,000 C-suite executives across 22 industries and countries, showed a clear argument for embedding sustainability practices within business operations.
Traditionally, the benefits of sustainable business practices have been categorized under the ‘three P’s’ of the triple bottom line concept, People, Planet and Profit. Focussing on the Profit aspect, the IBM report titled ‘Beyond Checking the Box’ indicated that those with embedded sustainable business practices experienced a 16% higher revenue growth and were 52% more likely to outperform their peers on profitability.
One effective approach to enhancing profitability is careful cost management , but while cost-cutting may carry negative connotations in the context of sustainability, it doesn’t have to. Take the case of GPT Group, a property management company highlighted in the report, which achieved “an 82% reduction in emissions on its 2005 baseline” thanks, in part, to the introduction of ESG data management software and reporting systems. Given the current prices in the global energy market, reducing emissions associated with business activities is both environmentally and commercially friendly.
At Achilles, we regularly see the business benefits of integrating more efficient sustainability software systems and methodologies. Take our Carbon Reduce clients who typically see a 50% reduction in their operational carbon within six years. As GPT found, this can provide huge cost-saving benefits as well as helping to address global warming and climate change.
While discussions often centre around the ‘E’ (Environmental) in ESG, the ‘S’ (Social) and ‘G’ (Governance) are equally crucial. Research from the University of Warwick, called Happiness and Productivity, suggests that ‘happy’ employees are 12% more productive. Additionally, studies like McKinsey & Co’s ‘Diversity Wins‘ emphasize the business case for diversity, stating that companies with diverse executive teams are 25% more likely to have above-average profitability – up from 21% in their 2017 report and 15% in their 2014 report.
Corporate governance (the ‘G’ in ESG) is the foundation and glue for well-established, sustainable business practices that benefit people, planet and profit. To quote the CCLA who analysed the relationship between corporate governance and financial performance ‘good governance and quality financials go hand in hand’.
The evidence is compelling – embedding well-thought-out sustainability-related principles into the fabric of a business is beneficial – not only for People and Planet but also for the long-term profitability and success of the company. Whilst receiving negative attention from some quarters, businesses should view ESG and sustainability-related efforts positively. While it may seem like increased bureaucracy, when implemented effectively, it can lead to long-term savings and value creation.
Contact us to learn more about how Achilles can support you in implementing and embedding cost-effective sustainability solutions which reduce your reporting burden and increase value.