Being a sustainable business is a smart business plan.
Every change brings along new business opportunities, and each of those opportunities translates to a risk for those that don’t adapt quickly enough. Markets are global; you compete- and competition will become fiercer each time- for scarce natural resources. Consumers are better informed and more demanding. More “environmentally responsible” and “eco-friendly” products are on demand. Investors are applying non-financial criteria and indicators to value companies. The millennial generations are seeking responsible companies to work in, etc.
All these changes have provoked for new game rules to emerge, to which companies must abide by, if they wish to keep up with the times, become sustainable; they must adapt.
We can attest that those that do not have their days numbers. A company’s performance must be measured using the sustainability pyramid: Financial (a company that isn’t profitable is not sustainable); Environmental (how they manage their resources and their environmental footprint); and Social (their impact over their stakeholder groups).
What is Corporate Sustainability?
Sustainability isn’t Philanthrophy. While Philantrophy focuses on social aid projects which are unrelated to the business, Corporate Sustainability is based on the inclusion of Financial-Economical, Environmental, Social and Corporate Governance Criteria within the business strategy, as a way to create value in the short, medium and long-term for all stakeholder groups.
Not only are large companies striving to implement sustainable values, the SMEs are also rolling out these practices, where concerns grow greater to promote work and living conditions based on social and environmental betterments.
By focusing on sustainability, businesses gain more and greater risk-identifying tools to help manage them promptly, to better leverage market opportunities, and improve management outcomes by defining concrete goals and indicators. Corporate Sustainability helps broaden the spectrum of components so that the businessman has greater and better information, as well as a more comprehensive vision of their business relationship, so that all decision-making processes can be improved.
A solid example thereof, for purposes of better understanding, is the social and environmental business model of Banco ADEMI, by creating products and services designed to boost and strengthen the sustainable growth of its clients: micro and small businesses (MSMEs). By using low-cost microinsurance, they offer fire hazard and unemployment and temporary disability coverage, aiming to mitigate incidental risks and contribute towards their business sustainability. Also, with the development of the “Environmentally-Friendly Loans or Green Loans Program” (*in Spanish: Programa de Préstamos Amigables al Medio Ambiente o Préstamos Verdes), they are fostering the development of projects which are environmentally and financially viable.
Being a sustainable business translates to a series of advantages:
- Long–term company permanence: To achieve this, it is necessary to adapt to the ever-changing market trends, to new niches, and innovating to hence fulfill customer demands. The results of rolling out these new changes in management is long-term company permanence.
- Differentiation: Sustainable businesses achieve substantial differentiation from their market competitors.
- Efficiency: Being a sustainable business helps improve the outcome, thanks to a more conscientious and efficient use of resources, by saving energy, water and materials. This helps businesses offer greater consumer and shareholder value.
- Customer Engagement: This focus helps improve brand reputation, and, as result thereof, customer loyalty.
- Brand Reputation: Customers are becoming more demanding each day, and moreover, they are willing to sanction brands that are not sustainable. In the words of Warren Buffett: “It takes 20 years to build brand reputation and only 5 minutes to ruin it. If you think about that, you’ll do things differently”.
- Competitiveness: A mature business sustainability strategy leads to delivering value in the supply chain. Aspects such as reducing water usage or greenhouse gas emissions are a demand that many businesses convey to their purveyors, and this, in many cases can be the difference that makes them competitive in the overseas markets.
- Leadership: The most sustainable businesses become the most attractive places to work in. Being sustainable allows businesses to lure in and retain the best professional talent.
- Profitability: Several surveys have indicated a positive correlation between profitability and sustainable business. The prompt management of all operational, legal and reputational risks derived from environmental, social and corporate governance issues, drives positive impact in the financial behavior trends of businesses, in their access to capital and operational costs. Yet, however, there must exist a good strategy and sustainability management that focuses on issues which are truly relevant or material to the organization, and there must also be a metrics system that hence allows the organization to provide follow-up and rollout continuous improvement actions. Without a solid sustainability strategy, the impact over profitability may result low.
- Customer Demands: Sustainability today can be quite the differentiating factor, but it will soon be the standard expected by clients. Being sustainable can be the intangible element that sets your business aside from the rest. As always, the customer is always right. Business sustainability is evolving from just savings and eco-efficiency, to risk prevention (due to scarce resources, climate, etc.) and caring for the planet, because it will be demanded by the collective public. Being a sustainable business is not an obligation, but a smart business plan: Those companies that refuse to change are meant to disappear.