Why companies should be interested in having a sustainability plan
When it comes to sustainability, today’s urgency for an action plan is real.
Every day it becomes more evident, for private and public sector, how not planning today will most certainly result in losing tomorrow.
And we are not talking about losing trees or endangered species which, unluckily, a Wall Street guy might not be interested in.
We are talking about failing our entire economic system.
But not everyone has taken it seriously, yet.
In fact, although 90% of executives think that sustainability is important only 60% of companies have a sustainability strategy.
Being sustainable is not a hippie thing.
Don’t underestimate it, as sustainability is not some superficial and escapable trend for which you don’t have that extra time or money to dedicate.
And if you don’t believe me (fair enough), you will most likely value what Larry Fink, CEO of leading investment company BlackRock, had to say in his 2021 annual letter to CEO’s.
Fink states not only that “climate transition presents a historic investment opportunity”, but that businesses that want to keep being successful and hold a place in tomorrow’s market have to come up with a reliable sustainability plan.
In fact, endorsing corporate responsibility is not only inevitable, as it will eventually be regulated by governments (please hurry up), but is also in the very interest of a company’s profit.
According to McKinsey latest study, having social, environmental and governance propositions does not compromise future returns, but is rather a long-term investment.
1970 Nobel Prize winning economist Milton Friedman stated on the New York Times that the only responsibility of corporate executives is to make profit.
This declaration was obviously criticized but, for the sake of the cynics, lawyer and leading sustainability consultant William Blackburn came up with the so called “Show me-the-money model”, based on the well-known views of the Nobel Prize winner.
Blackburn’s model outlines 7 key sustainability driven factors that drive pure economic profit and will make happy every Scrooge McDuck out there. So here is why you should have a sustainability plan.
1. Reputation and brand strength
The reputation of a company is very much based on its social and environmental performances. If you do good, you look good. This will affect sales, stock price, new customers, retain employees etc…
2. Competitive and desirable products and services; new markets
By incorporating sustainability in its design process, companies can become more innovative. This means meeting customer needs, come up with competitive products, enter new markets. At the end of the day, this all translates into increased sales.
Using less raw material, producing less waste, increasing energy efficiency and preventing accidents means spending less money. Optimization of resources is not only good for the environment but for the economy, too. A social aspect is there, too.
A company is likely to see an increase in productivity thanks to an improvement in the relation with its employee, who develop a sense of attachment thanks to shared values.
4. Operational burden
Be smart and play in advance. By implementing policies about environmental protection or social inclusion, companies prevent themselves from incurring in governmental regulations that could interfere with their operations (fines, taxes, convictions etc…)
5. Supply chain costs
A close contact with the supply chain can bring concrete economic benefits.
You’ll gain direct control over costs, reduce waste, optimize energy efficiency and ensure a regular and sustainable supply.
6. Cost of capital
A modern and forward-looking approach at the business can translate into an increased appeal for investors. The price of your shares can go up if you become more attractive. You gain increased reputation with ethical investors and reduced risks in Governance/management.
7. Legal Liability
A more ethical and fair driven organization is closer to legal compliance.
Fair dealing will ensure safety and quality of the products and is most likely to meet their commitments without incurring in legal liabilities which could affect profits.
Don’t say we didn’t warn you. Forewarned is forearmed.