As we return to work after the summer holidays, we know that this past season has been different. There were episodes of sweltering heat, wildfires, drought – and it is dawning on us, finally en masse, that we are experiencing the direct impacts of climate change. In Spain, we were told the news that the last permanent lagoon in Spain’s Doñana National Park, a symbol of European biodiversity, has all but dried up. We are starting to feel what is known as eco-anxiety.
Settling back down into our office chairs amid the climate emergency, we might ask:
What if we were more sustainable?
Can we find a purpose for our company that carries a more positive environmental, social and economic impact?
Why don’t we optimize resources and invest in a new production model, consuming cleaner energy, and in circular economy principles?
Then, a tiny voice of resistance raises itself. Sometimes it comes from a team member, a boss, shareholders, sometimes it is our own voice: “That all sounds great, but it will make us less competitive. Sustainability is a drain of money and time. When everybody finally jumps on the bandwagon, we will too, but we have to wait if we want to compete.”
Sustainability: a competitive advantage
I often find that, although more and more people are convinced of the need to be increasingly sustainable, that whisper of resistance remains strong. But in truth, sustainability brings a competitive advantage for companies and organizations.
Funding
For a start, today, sustainability provides better access to financing, including public funding, through European (NextGenerationEU and the REPowerEU Plan), multilateral (World Bank, …) and country-specific funds.
Private funds are also available, with more and more banks offering green bonds, providing better financing conditions for sustainable enterprises and organizations with environmental projects. There are also more and more investment funds that take ESG criteria into account when choosing where to put their money.
Regulation
Regulation is also important and is making steady progress. At the European level, it is gaining ground through the European Green Deal and the new EU taxonomy for sustainable activities, as well as the new regulations on sustainability and non-financial reporting that more and more companies are required to disclose.
At a national level, many countries have approved new legal forms for purpose-driven companies which, in addition to bringing economic returns, generate social and environmental benefits: in Spain these organizations are called “sociedad de beneficio de interés común”, in the United States, benefit corporation; in France, “société à mission”; in Italy, “società benefit” and, in some Latin American countries, they are “sociedad comercial de beneficio e interés colectivo.”
Talent
Attracting and retaining talent is also showing signs of improvement. Many employees prefer to work in sustainable companies, and studies show that they are more likely to apply for and accept a job with a sustainable company. Some are even leaving their jobs when the company does not live up to their own values.
Demand
A similar pattern is emerging in product demand: global consumers are more attracted to sustainable companies. In January 2020, almost half of Europe’s citizens and three out of four Chinese citizens considered climate change to be the greatest threat to society.
According to an IBM survey, this means that more than half the world’s consumers are willing to pay more for more sustainable products or take sustainability into account when choosing a brand. Seventy percent of consumers actively encourage their family and friends not to engage with brands and companies that are perceived to be unsustainable.
Financial performance
A key question is whether corporate changes in sustainability strongly correlate with financial performance. Recent findings are still looking for such impact in different sustainable initiatives but there is already evidence that sustainability plays a role in adding to the bottom line. For instance, companies with higher ratings for environmental, social, and governance (ESG) factors have a lower cost of debt and equity, or the assets and equity have a better return better in the market in the medium and long run.
Other factors
There are many other factors related to sustainability, such as inclusion and diversity in terms of staff and management, and also fostering productivity and innovation. Furthermore, sustainability must be aligned with medium- and long-term thinking, as this is where the benefits will have the greatest impact.
All these factors make sustainable companies increasingly competitive. Not surprisingly, the position of Head of Sustainability is one of the 20 job positions which have grown the most in Spain in 2022, and is most in demand in companies, according to LinkedIn.
So, let’s go back to our return to work, to our desire to do something. We can transform our company or institution into a more sustainable organization. The most important thing is to start and to start now. Not only is it a duty to society and to the planet, it will also make the firm more competitive. Let’s make sure that that little voice that triggers resistance to change does not put out our “environmental flame.”
© IE Insights.
