On Monday 4 November, Lord Michael Hastings, Former Head of Citizenship at KPMG International, visited our Brussels Airport office for a roundtable to discuss sustainability with several cross-sector Belgian business leaders. Lord Hastings’ key message was that the ‘business case’ for sustainability is clear - it brings prosperity to all stakeholders.
First let’s look at sustainability in terms of the environment – the ‘E’ of ESG (Environmental, Social and Governance). Many business leaders agree: governments are lagging behind on regulation but that doesn’t mean that organizations should sit back and wait. As one of the leaders at the roundtable said: “It’s time to take back control. The more we do to tackle sustainability now, the less future generations - whether it be our kids, their kids, etc. - will experience negative environmental impacts and blame us for inaction.”
Others highlighted that the pressure for organizations to take action on the environment is increasing both internally and externally:
“If you talk to 22-23 year olds, they will ask you ‘what are you doing for the planet?’”
“Our young customers and our employees are asking much more about sustainability.”
“It’s not just about the marketing – they want to see that sustainability is embedded in the company.”
Companies that are already taking action are not only meeting stakeholder demands but may also see a benefit to their bottom line. For example, renewable energy and circular economy initiatives clearly may bring cost savings as explored in our blog: ‘Sustainability: which wave do we want to ride and when?’. Going beyond CSR is also worth considering because studies have shown that new graduates are willing to accept lower salaries to work for companies with a true purpose.,
On the consumer side, we’re increasingly seeing calls for more sustainable business practices across the value chain – from ingredients and other inputs through to packaging and delivery – but consumers are not always willing to pay for it. Education has a role to play in consumer perception. Consumer demands are not always rational and organizations need to consider what their role is in educating consumers about their products, services, and businesses. There may be the environmental case (and thus, a long term business case) for businesses to use sustainable ingredients and materials, but in the short term, can a company make the shift if its customers aren’t willing to pay for it? How do we get people to put value on something as vital as water and preserve it as a resource when they’re not willing to share the additional cost of doing so? How do different stakeholders view price vs. value and how do we bridge the divide between diverging perspectives? Corporate sustainability reporting will also have a greater impact on consumer decision making in the future in both B2C (business-to-customer) and B2B (business-to-business) tenders.
Meanwhile, the social aspect of sustainability is a broader, more complex, construct and the way forward can seem less obvious. While the urgency for action in this area is just as present, it’s harder to pinpoint the business opportunities. Certainly the solution needs to include a greater rebalancing of resources between the rich and the poor. What that looks like and how we get there, is sadly less clear compared to climate action, which receives a higher sense of urgency and attracts more capital.
And finally, governance: if the ESG discussion is to gain traction, it needs to be driven by those at the top of the corporate hierarchy. Boards are interested in the topic and they are seeing the benefit, but the key for organizations is to set out their priorities, decide where to play, and take action. Internationally at least more and more business leaders step in and take a stand on socio political issues which may however have unintended consequences.
In any case, now is not the time for excuses but for action by businesses raising awareness and exerting their economic influence. There are a number of opportunities that solution-oriented organizations can capitalize on, and taking action before regulation is implemented can have a positive impact on a company’s reputation and influence. A good example from the roundtable came from the leader of a publicly-listed organization, which used its size and influence to take on the role of industry leader to achieve an agreement on sustainability standards within an industry group where governments had yet to act.
By taking the initiative and leading the way forward, your organization can distinguish itself from other players in the market and achieve a positive outcome for both your industry and your stakeholders.
What are you waiting for?