Why sustainability adds value to business

Businesses are beginning to integrate sustainability into their day to day practice more and more, making it part of their overall business strategy and not just a “nice to have.”

But what motivates some businesses to build purpose built businesses, ones willing to recognise all stakeholders (including their customers, the community they do business in & the environment) and not just serve shareholders & a profit driven agenda?

Two different papers published by McKinsey & KPMG have reported the additional value inherent in sustainability & ESG specifically. McKinsey have shown that consumers are shifting their spending toward products with ESG-related claims & KPMG earlier this year reported customers “are increasingly aligning with a company's values and its commitment to social, environmental, and ethical principles” and voting with their wallets.

Both reports confirm that consumers are concerned with “total wellness” – their own wellbeing, but also that of the planet. And they are interested in understanding what businesses are doing as leaders to deliver sustainability to them as consumers.

The McKinsey study was done in partnership with Nielsen IQ and captured US sales data from five years (2017 – 2022) across 44,000 brands and is a cross category report. The report found instances of success across the board for sustainable products delivering sales and this was especially true at entry and premium price point levels.

The other interesting learning was that success rates (sales) were higher in instances where businesses delivered across a number of pillars. For example a business able to demonstrate sustainability on how they were reducing their environmental impact while also showing how they were supporting a community or workforce initiative proved more successful than when just delivering on one ESG pillar.

Patagonia are an example of an international brand who have embedded sustainability into their entire commercial ethos while still delivering profit. They believe that you "can prioritize purpose over profit and protect this wondrous planet, our only home".

For large and listed businesses in the EU, the Corporate Sustainability Reporting Directive has made sustainability reporting a legal requirement from January of this year.

Listed SMEs will come under this legislation from 2026 and will be obligated to submit sustainability reports from 2027. But SMEs should expect the trickle down effect from now: as an SME, if you are a supplier to a large or listed business in the EU, you can be sure that they will be asking you questions on your carbon footprint & how that effects their supply chain.

Apart from regulatory requirements, customers are beginning to ask more questions on the topic of sustainability and transparency. For most businesses, your customer is one of your most important stakeholders. Get ahead of the curve and start your sustainability plan today.

You can make sustainability part of your business by developing a plan, and identify short, medium & long term goals. Bring your employees and key stakeholders on the journey. Assign some targets to your plan so that you create intention and purpose. And then, communicate it.

And if you are still looking for reasons on why you should have a sustainability strategy, here is why purpose driven businesses integrate sustainability into their mindset & commercial strategy:

💰Deliver cost-savings through decreased utility bills and wastage

💡 Drive leadership and innovation

🌿Enhance your brand profile by demonstrating your commitment to sustainability & transparency

💼👩‍💻👯Attract socially conscious investors, customers and employees; improve employee morale and health (and in turn, their commitment)

🌿Demonstrate to customers and partners that you’re taking strides to be environmentally and socially responsible.

💸 Meet criteria for business loans

Don’t wait for your plan to look or read perfectly. At the start of your sustainability journey, it probably won’t. Set down a plan. Build a team around you who will help to enable this plan. Set targets so that it becomes a tangible set of actions, and not just a collection of wishful statements. Communicate it. Report it every 12 months. And then hit repeat.

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Start looking at sustainability as something that will add value to your business as opposed to shying away from it because you feel it just represents additional cost. Right now it presents the biggest opportunity for you to engage with and acquire new customers. Customers know there is regulation on the way which will force this agenda. Small & medium businesses who move now to integrate sustainability into their business, will demonstrate that they are genuine & authentic when it comes to sustainability.

Take the move, start measuring and begin your journey towards a business that delivers total wellness for the bottom line, people, planet & prosperity.

Listen back to Monica Toriello's conversation with Sherry Frey of Nielsen IQ & Steve Noble & Vinit Doshi of McKinsey's Consumer Packaged Goods Practice where they talk through highlights from the report and some subsequent insights.