What is Sustainability? And Why Should You Care?

30/12/2014

By Simon Featherstone, global CEO, Bibby Financial Services

There is increasing pressure on everyone, companies and individuals, to become more environmentally aware. Surveys show that sustainability matters more and more to consumers and employees, and has become a key selection factor for many young people when evaluating potential employers, so can be a key tool in the war for talent.

What does sustainability actually mean for a business? And moreover, why should you, as an SME, be concerned?

Sustainability covers a variety of interlinked things. Your company’s impact on the environment has a number of aspects: your levels of energy usage and water; the amount of carbon you produce; the pollution you create, the materials and packaging you use. And this extends out in terms of your supply chain, how environmentally aware the other companies you do business with are.

You may think this is much more of an issue for big corporations – particularly large multinationals with extensive operations - than for an SME. Or that it only really applies to certain sectors. But in fact, it is just as applicable to small and medium sized businesses as to the large players, and it also has resonance across different sectors.

Why does it matter? And why should you care? Firstly, though I won’t labour the point, there is the fact that everyone, be they an individual or a business, needs to play their part in doing what they can to protect our environment.

There are also a number of concrete business reasons.

Firstly, cost. At a time when energy is becoming a scarce resource and costs are rising in many parts of the world, there is a real incentive to increase efficiency. According to the UK’s Carbon Trust, electricity costs for businesses have doubled in the last 10 years. Large corporations are investing considerable efforts in monitoring and reducing their energy usage: Microsoft reportedly hopes to produce energy savings of up to 10% a year, saving millions of dollars, through one such project involving 125 of its buildings. Whatever size your company is, there are savings to be made. For example, by installing LED lighting and automatic sensors. Payback on investment typically takes between one and three years, but thereafter your business should be saving money.

Secondly, at an extreme, there is the prospect of fines. Many governments have been introducing tougher environmental legislation and will penalise companies that flout it. Just as there has been a crackdown on governance and ethics in the banking sector, so governments want to see companies behaving responsibly in terms of the environment.

In China for example the government has begun to crack down increasingly hard on companies that cause excessive pollution. Over 650 companies have been fined in China in recent months according to reports, including a record fine of $48,000 to a factory that was allegedly causing excessive air pollution. Certainly, no matter where a company operates, it has to be increasingly aware of its environmental impact.

Thirdly and more positively, there is a significant business opportunity. Major corporates, who frequently employ CSR departments, are increasingly conscious of the need to ‘green’ their supply chains. They don’t want to do business with any companies, of whatever size, that are environmentally and socially irresponsible. So if you can show that your company places a high value on CSR and sustainability, you could be giving yourself a real advantage. If you are greener than your rival bidder, it could just help tip the balance.

Fourthly, sustainability can enhance your reputation and help in the recruitment war for talent. This applies especially to the younger demographic, where surveys have found that around seven in 10 Generation Y’ers regard themselves as ‘social activists’, and that four in five of them want to work for a company that cares about its impact on, and contribution to, society and the environment. So if you are competing for talent against other employers, being a sustainable business can give you a significant headstart.

Lastly, no business wants to find itself on the wrong end of a consumer campaign because of an environmental issue. Large companies are more in the firing line here of course. But with social media, issues can grow and spread with bewildering speed. If someone locally (or internally!) takes exception to a wasteful or negligent company practice, you could find yourself with a publicity issue on your hands. This could harm your corporate reputation and also have a serious commercial impact.

So making your business sustainable can pay off on many levels. I would encourage the management teams of any company, whatever the size, to carry out a review of the organisation’s environmental policies, energy usage and operational processes. Are there ways in which you can become greener and more efficient? Do you have clear environmental policies that are properly communicated and understood by employees? Are you working with any company that is environmentally negligent and if so can you find an alternative?

Companies that take these issues seriously and that integrate them into their way of working will be increasingly better positioned to succeed than their competitors. It really is a win-win situation.