Andrew Winston «The Mandate and Business Case for Sustainable Business»

Over the last few years, questions about the role of business in society have exploded. Multinationals now must take a position on major issues such as climate change, inequality, LGBTQ+ rights, democracy, misinformation, and much more. And companies are facing mounting pressures from stakeholders to go beyond statements and improve their actual environmental and social performance, helping solve our shared challenges. We’re seeing…

• Customers favoring brands that align with their values
• Business customers demanding higher performance from their suppliers
• Employees seeking purpose-driven organizations
• Communities asking companies to minimize their environmental footprint and contribute to local development
• Regulators introducing stricter rules and policies on transparency and performance
• Investors integrating environmental, social, and governance (ESG) factors into their investment decisions and demanding transparency

(A note on terms: ESG is mainly the language of investors who look at a business and its risk from environmental and social issues, while sustainability is a broader idea about how a company impacts people and planet and whether it contributes to a better world.)

As stakeholder expectations have grown, the idea that companies should manage their environmental and social impacts – both for their own benefit and the world’s – has moved from being a nice-to-have to a strategic business imperative. If you want to stay viable and relevant today, you have to engage on sustainability.

And yet, most business leaders still question the “business case” and assume sustainability must cost more. At the societal level, it should be obvious that protecting the planet’s ability to keep us alive, and investing in people so they are educated and healthy, are worthwhile investments for humanity and business. But for now, obsession with short-term profits, and a narrow view on business value, still drives an antiquated discussion about the business case.

For those inside companies, or building new companies with sustainability at the core, it’s important to have this foundational logic and argument ready at hand to make the case to investors, supporters, skeptics, and many others. So let’s do a quick review of some of the core elements of business value from sustainability.

1. ATTRACTING AND RETAINING TALENT

Today’s workforce, particularly millennials and Gen Z, clearly prioritize purpose and social responsibility in their career choices. A new global survey by Deloitte shows that more than half of younger workers research a company’s environmental impacts before taking a job, and many say they have changed jobs or sectors on climate concerns alone. As Deloitte summarizes, “the ability to drive change on social issues overall has the potential to make or break the recruitment and retention of these generations.” Then, once hired, employees are more engaged and motivated when they feel their work contributes to a greater good – and engaged people outperform.

2. DRIVING INNOVATION IN PRODUCTS (MORE REVENUE) AND OPERATIONS (LESS COST)

At the core, a business exists not just to profit, but to solve a problem for somebody. Our shared challenges, like climate change and inequality, obviously create massive problems and thus new opportunities. It’s good business to innovate to create more sustainable products and services that either help business customers manage their impacts or meet the demands of increasingly concerned consumers. And on a more tactical level, using a sustainability lens to look at the business and its value chain will uncover large opportunities to save money on energy, water, and much more.

3. LOWERING RISK AND BUILDING RESILIENCE

Climate change has moved from being a model people debate to a reality that’s already damaging businesses and their supply chains (with enormous human costs). Extreme weather events, supply chain disruptions, and regulatory changes have profound impacts on operations and profitability. A sustainability lens helps companies proactively identify and mitigate risks. For example, investing in energy-efficient technologies reduces carbon emissions and lowers energy demand, reducing the organization’s risk from volatile energy prices. And diversifying supply chains and reducing dependence on scarce resources makes a business more resilient.

4. ENHANCING BRAND REPUTATION AND CUSTOMER LOYALTY

In an age of radical transparency and viral social media, a company’s reputation is more fragile than ever. By being open and taking action to back up public statements, companies build trust and strengthen brands. Aligning their values with customers creates a deeper connection. A brand is a story, and if your story is true and shows a commitment to positive change, you earn powerful loyalty.

These four areas of business value make a powerful case for embracing sustainability. But in the end, these are a foundation, not the mountain to climb. The real goal is to create organizations that already know there’s a business case and move, with speed and scale, from why to how. The leaders will build net positive businesses that improve the well-being of everyone they impact, helping build a thriving world.

AUTHOR: ANDREW WINSTON

Manager Winston Eco-Strategies, LLC

Andrew Winston is a globally-recognized expert on megatrends and how to build companies that thrive by serving the world. Named to Thinkers50 list of the top management thinkers in the world, his views on strategy have been sought after by leading companies, including 3M, DuPont, J&J, Kimberly-Clark, Marriott, PepsiCo, and Unilever. Andrew is the author of the bestsellers Green to
Gold and The Big Pivot. His latest book, Net Positive: How Courageous Companies Thrive by Giving More than They Take (co-authored with renowned CEO Paul Polman), is one of Financial Times’ Best Business Books of the Year. Net Positive has been called an “electrifying strategy for business success and unlike any other book you’ve read” by Merck Chairman Ken Frazier, a “wonderful rallying call” by Sir Richard Branson, and “pure heresy” by Arianna Huffington. Andrew is also a respected and dynamic speaker, reaching audiences of thousands at executive meetings around the planet. He received degrees in economics, business, and environmental management from Princeton, Columbia, and Yale.