The business sense of sustainability
Sustainable business seems to be going mainstream with more board members recognising that embracing environmental thinking is not just a smart ethical choice but a strategic imperative for operating in a world facing the challenges of climate change.
Latest data
75% of business leaders surveyed in a 2023 study by Deloitte said their organisations had increased their sustainability investments since the previous year. [1]
A similar number of 75% of board members worldwide agreed that a coherent environmental, social and governance [ESG] strategy helps create sustainable organisational value and stronger financial outcomes, according to a 2023 survey from the Nasdaq Center for Board Excellence and WTW. [2]
The Harvard Business School defines sustainability as doing business without negatively impacting the environment, community, or society as a whole.
There appear to be compelling reasons why focusing on sustainability, beyond being environmentally and socially responsible, makes business sense.
An important one being that businesses find themselves under ever more pressure as stakeholders increasingly value – even demand – greater focus on, and investment in, sustainability initiatives.
Studies show that more consumers make purchasing decisions based on environmental and social considerations. [3]
An important indicator of employee engagement, retention, performance, and well-being. [4]
In addition, there are strong regulatory reasons for businesses to get onside in terms of sustainability. Many governments and international bodies are implementing stricter environmental regulations. Boards must stay informed about these regulations to ensure the company complies with current laws and anticipates future changes, avoiding detrimental legal, financial and PR consequences.
That said, there has been a backlash from some quarters against applying ESG principles in business and investment. Certain politicians, particularly in the United States, have labelled such principles as ‘woke capitalism’ and perceive them as an attack on free-market economics.
It would be unfortunate if environmental and social accountability in business gets drawn into the heart of an ideological and political struggle and becomes entangled in the so-called ‘culture wars’ in our society.
Board members may draw their own conclusions from this debate. As rational decision-makers, they will undoubtedly recognise the irrefutable empirical evidence and scientific consensus on global warming and the need – and potentially duty – for their business to formulate an appropriate way of operating in this ever-evolving climate [pun intended].
Board engagement
This debate – whether real or phoney – can serve as a useful signpost for board members to ensure a correct course of action and implementation to any sustainability initiatives they decide upon.
For such initiatives to be effective they should be coherent, genuinely meaningful, and truly ‘sustainable’ – both in terms of environmental and social impact as well as in terms of long-term viability that avoids a stagnation of commitment.
It is crucial that such initiatives align with overall corporate strategy, policies, operations and the company’s mission and values. Such alignment will minimise the risk of reputational damage that could arise if consumers, employees, or indeed journalists, seek to publicly call out a company for perceived insincerity or ‘greenwashing’.
Transparency and honesty are vital aspects in telling a company’s sustainability story – whether in communicating successes or admitting challenges and limitations.
Engaging and inspiring stakeholders will be valuable for highlighting the positive impact of a company’s sustainability initiatives and demonstrating the organisation’s commitment to creating a better future for everyone.
Board members will want to ensure that all stakeholders within the organisation are well-informed about the importance of sustainability in order to foster a culture that appreciates environmental practices and integrates them into everyday work.
Creating a shared sense of responsibility throughout the ranks towards achieving sustainability goals will be important and is supported by a 2023 industry report entitled ‘Green Skills for Green Economy’ that recommends organisations develop an ‘environmentally sustainable mindset as the norm for everyone’ rather than relying solely on a sustainability department to meet their diverse needs. [5]
Companies that integrate business sustainability into their operations may differentiate themselves in the market, attract environmentally-conscious consumers, retain engaged employees, and otherwise gain advantages over competitors.
Board legacy
And board members wishing to leave a positive legacy will know they played an instrumental role in fostering an approach that ultimately benefited business, people, and the planet.
Additional resources:
✅ Innovation, sustainability and effective directorship
✅ Leveraging TCFD to embed climate into strategy
✅ The Task Force on Climate-related Financial Disclosures (TCFD) framework explained
Giles Trendle is a NEDonBoard member and former Managing Director of Al Jazeera English. He co-chairs the steering committee of Covering Climate Now, an international alliance of media outlets coming together to boost climate coverage. He is also an associate member of Climate Change Coaches a certified B-Corp company supporting individuals, teams and organisations working towards a green and just transition.
Sources:
2: ESG Oversight Boards Opportunities in Environment & Governance – WTW (wtwco.com)
3: Do consumers care about sustainability & ESG claims? | McKinsey
4: How Important Sustainability Is To Employees – Business Leadership Today
5: (Deloitte 2023: p.22) Deloitte and IEMA: Green skills for the green economy | Report | Deloitte UK
