- Think of an initial question.
- Try and answer it using as many falsifiable hypotheses as possible.
- Test those hypotheses through observation.
- Discard those that fail.
- Build on those that show promise by asking better and better questions.
Sustainability increases profit Sustainability expert Freya Williams reveals that at least ten companies generate a billion dollars or more in annual revenue from products or services that have sustainability or social good at their core. These green giants, which include Ikea, Tesla, Toyota and Nike, view sustainability as a core component of their business strategy. The proof is in the numbers: the share prices of green giants are outperforming conventional equivalents by 11.7 percent a year.
Boosts investment returns Sustainable investing is growing like a weed, with assets under management reaching $8.72 trillion in 2017. A Harvard study in 2016 reveals that firms which perform strongly on sustainability issues most relevant to their business hugely outperform competitors with poor ratings on the same issues. The trend is only set to grow: millennials are twice as likely to commit to an investment that targets environmental or social outcomes.
Protects against recession A Harvard Business Review study found that in the Great Recession of 2008, US companies committed to sustainability achieved “above average performance” in financial markets, translating to an average of $650 million in incremental market capitalisation. Firms with strong corporate social responsibility reputations also experience “no meaningful declines in share price compared to their industry peers during crises.” Alternatively, companies with poor CSR reputations decline by “2.4-3 percent; a market capitalization loss of $378 million per firm”.
Drives innovation Ecovative is a New York-based manufacturer that combines agricultural waste with mycelium (the root structure of mushrooms) to create an ingenious replacement to plastic packaging and other synthetic materials. Its mushroom-based offering is cost competitive, completely renewable, naturally fire resistant and easy to design and mould. Fortune 500 companies, international mills and furniture makers use it as an alternative to conventional, petroleum-based materials.
Encourages long-term thinking Sustainable businesses understand that social and environmental risks like climate change and land degradation reveal themselves over a long timeframe. That’s why companies like Mars, Unilever and Kraft invest in Rainforest Alliance certification to help preserve the agricultural produce they need to remain profitable in the decades ahead.
Increases operating efficiency One third of all food produced for human consumption isn’t eaten, and restaurants are some of the worst offenders. Winnow, a London-based start-up, has developed smart meter software that records how much and what kind of food is being thrown in the bin. The very act of recording spoilage encourages chefs to improve their production process. Winnow claims 200 kitchens have reduced food waste by half since using the smart meter, saving tens of thousands of pounds in the process.
Builds partnerships Unlike many of its competitors, New Britain Palm Oil avoids chopping down Papua New Guinean rainforests to plant crops. Instead, it leases fields from local farmers, reducing poverty and building long-term community trust. The company also boasts a fully traceable supply chain, which allows it to charge a premium for its sustainably sourced products. By contrast, almost $25 billion in mining projects in Peru were stalled by conflict between local communities and big miners in 2015.
Attracts talent Unilever’s sustainable living brands portfolio, which includes Dove and Ben & Jerry’s, is growing 30 percent faster than the rest of the business. Unilever also uses its sustainability credentials to attract and retain talent. A company spokesperson claimed that “we are in LinkedIn’s top three most sought-after employers globally and 50 per cent of graduates cite our sustainability credentials as the main reason for wishing to join us”.
Enhances consumer trust Trust isn’t intangible. It’s a key indicator that can deliver a sustained commercial advantage. Advocacy group Trust Across America has developed a model for identifying America’s most trustworthy companies. From 2013 to 2016, trustworthy companies produced a 16.7 percent annualised return versus 9.5 percent for the S&P500 over the same period.
How do I make my business more sustainable?
You can bring sustainability into your business operations in one of two ways.
Boot strappers are practical, preferring to work incrementally. You begin by making a series of small changes to reduce waste and increase efficiency. These changes lead to cost savings over time, which are used to finance more expensive technology and R&D. Eventually, your business model is transformed: you’ve become a sustainability powerhouse without ever taking a big risk. Example: Toyota.
Pioneers are dreamers. You’re willing to adopt a transformative business model with sustainability at its centre, even if up-front costs are high and you face no social pressure to be more sustainable. When you succeed, your advantages as first-mover compound, potentially setting up an enduring, competitive advantage. Example: Tesla.
Would you like to create a more sustainable brand?
BWD is a B Corp-certified advisory firm with expertise in sustainability strategy and communications. Email us at: firstname.lastname@example.org
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- how technology is disrupting capitalism
- why the sharing economy is booming
- what questions you should be asking to prepare for the future.
- How will you transition from industrial age technologies, like television and oil, to digital age technologies, like electric cars and renewables?
- How will you adapt your business model to take advantage of the Internet of Things? In a connected world, your opportunities are bigger than you realise. But so are your threats.
- Does your organisation understand the danger posed by zero-marginal cost? If relevant, are you investing in transitioning your business to an aggregator model?
- Have you invested in your social license to operate? Social media and greater environmental awareness means unethical or irresponsible behaviour can do permanent damage to a business.
- Have you thought about how to benefit from the growth of the sharing economy? Can you collaborate with likeminded partners to share opportunities and build social capital?