Sustainability: Definition and Why Is It Important with Practical Recommendations
Sustainability is increasingly essential for all companies in all sectors. 62% of executives believe that a sustainability strategy is necessary to be competitive today, and another 22% think that it will be in the future.
Simply put, sustainability is a business approach to creating long-term value by taking into account how a given organization operates in the environmental, social, and economic environment. Sustainability founded on the assumption that the growth of such strategies promotes the longevity of companies.
With growing expectations of corporate responsibility and increasing transparency, companies recognize the need to focus on sustainability in order to create climate-proof cities. Professional communication and good intentions are no longer enough.
Nike and Adidas have grown enormously. Nike has focused on reducing waste and minimizing its footprint. In contrast, Adidas has created a greener supply chain and focused on specific issues such as dyeing and disposing of plastic bags.
Unilever and Nestle have made essential commitments. Unilever specifically on organic palm oil and its total waste and resource footprint, and Nestlé on areas such as creation life cycle, climate, water efficiency, and waste.
Walmart, IKEA, and H&M have stirred toward more sustainable retail, primarily by working together across their supply chains to reduce waste, upsurge resource productivity, and optimize the use of materials. Steps have also taken to regulate local working conditions with suppliers from emerging markets.
Pepsi and Coca-Cola have ambitious goals, such as B. Greater focus on water management and setting goals for water replacement.
In the biopharmaceutical sector, Biogen and Novo Nordisk have worked towards energy efficiency, waste reduction, and other environmental measures. They have also focused on social impact through partner health and safety initiatives.
In financial services, we see banks like ANZ and Westpac in Australia nurturing local communities with good sustainability practices and incorporating sustainability into their business processes and culture.
Automakers like BMW and Toyota have come a long way in energy efficiency and pollution reduction, not to mention Tesla as an outsider who really challenges the entire industry footprint.
All of these companies are committed to sustainability, primarily through Transparency and dealing with critical issues. You are embarking on a more sustainable journey, and so should all businesses for the next decade.
To adequately address sustainability, companies need to close two critical loopholes:
“The know-how gap”: A study in which I took part from BCG / MIT found that 90% of executives consider sustainability important, but only 60% of companies include sustainability in their strategy and only 25% sustainability integrates the business model into your design.
“The gap between compliance and competitive advantage”: More and more companies see sustainability as an area of cheap advantage, but it is still a smaller: only 24%. However, all companies must comply. Management should treat these issues separately and not combine them. Compliance is holistic, “must do”. Few material problems count towards a competitive advantage.
Why All Companies Should Focus On Sustainability
Companies that distinguish themselves through sustainability fill both gaps. You have developed from know-how and compliance to a competitive advantage. You also know the risk of being wrong. For example, making promises and not delivering or addressing material issues without ensuring compliance.
Some Practical Recommendations
As with the overall strategy, there is no “one size fits all” when it comes to sustainability. The best solution depends on the desires and interests of each company. Here are some practical steps any management team can take to improve sustainability practices.
1, Align strategy and sustainability:
Management must ensure that the company’s strategy and sustainability efforts are aligned. We often see differences, which naturally makes sustainability efforts fragile, without real commitment and prioritization. There are many good examples. Take Unilever’s “Sustainable Living” example, which aims to decouple growth from production and reduce resource consumption by focusing on waste reduction, supply efficiency, sustainability, innovation, and sustainability. Ecological procurement (as in organic palm oil). Similarly, Toyota is known for innovation in hybrid engines, but less for reducing reliance on rare earth minerals. These minerals were needed for hybrid and electric motors. However, by developing alternative engine technologies, Toyota reduced its dependence on imports and operational risks, and thus the financial risks of price increases.
2, Compliance first, then competitive advantage:
First, companies must deal with compliance, which often affects regulations related to waste management, environmental pollution, and energy efficiency, as well as human rights and liability. Labour. Passivity is also an issue that concerns investors. Current BCG / MIT data shows investors are increasingly moving away from compliance risks. 44% of investors say they are selling companies with poor sustainability performance.
3, From reactive to proactive:
Many of today’s leading sustainability companies, such as Nike, Coca-Cola, Telenor, IKEA, Siemens, and Nestlé, have grown tremendously more vital as a result of a crisis. For example, Nike faced refuses and public anger over abusive labor practices in places like Indonesia in the 1990s but changed course. In 2005, it pioneered the creation of Transparency by publishing a comprehensive list of factories it contracts with and a detailed 108-page report detailing conditions and payment at factories. Widespread problems were also recognized, particularly in factories in South Asia. Realizing the impact of sustainability in a crisis, all of these companies have developed more proactive sustainability strategies.
4, Quantify, including the business case:
All businesses struggle to quantify the return on their sustainability investments. In terms of compliance, this is a simple problem. However, when it comes to areas of competitive advantage, companies must link sustainability to a business case. But those who actually form a relatively small group.
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It is a prerequisite for evaluating and improving sustainability practices. Without Transparency, you cannot judge so quickly. Transparency is based on the idea that an open environment improves performance both in the company and in the community. The only way that companies can achieve Transparency is through open communication with all key stakeholders, based on a high level of disclosure, clarity, and accuracy of the information, and openness to detect errors and improve practices.
6, Board Participation:
86% of respondents in a recent MIT / BCG survey agree that boards should play an active and substantial role in sustainability. But only 42% say their boards are essentially engaged. Panels are often essential for working with key stakeholders, such as NGOs, governments, and international organizations.
7, Engaging your ecosystem:
We see that collaboration is critical to efficient sustainability practices, significantly when solving crises and designing broader solutions. MIT / BCG data appearances that 67% of executives view as an area where collaboration is necessary to be successful.
8, Finally, and above all, involve the organization comprehensively:
One example of participation is Salesforce.com, which through its “1/1/1” philanthropy program contributes to the personal ability of every employee to get involved in organizations. And environmental initiatives that support communities. Another great example is Nespresso, which has responded to the debate about it of its capsules and has made sustainability in the DNA of every part of its business. Nespresso’s purpose tied to the Positive Cup campaign. Sustainability taken into account in every decision at Nespresso. The company appears open to reducing its impact and is even considering its aluminum source.
In short, sustainability is a major challenge that is important beyond individual companies. However, it is comforting that several large companies are developing forward-looking sustainability policies. It really becomes clear that sustainability is a megatrend that won’t go away!