In today’s business landscape, sustainability is a non-negotiable. Sustainability is critical due to pressing issues like climate change, resource depletion, deforestation, and social inequities. Organisations that embrace sustainable practices address these issues directly and take a proactive approach to reducing the adverse effects on the environment, society, and governance (ESG). It allows businesses to adapt to changing environments, reduce risks, improve their reputation, contribute to a greener future and increasingly has become a competitive advantage (1).
In this blog, we explore the importance of sustainable business operations and the inherent challenges of implementing them.
The Importance of Sustainability
Sustainability is crucial for organisations now and in the future due to environmental, social, and economic factors influencing the business landscape. Climate change, deforestation, loss of biodiversity, resource depletion, pollution, and other ecological challenges can disrupt organisational supply chains, and increase operational risks, thus increasing costs and insurance rates (1). Social factors such as social inequality, fair labour practice, and human rights are significant concerns for companies as they will likely influence employee attraction, retention rates, and customer preferences. Similarly, economic factors such as a company's profitability, innovation, and operational efficiency are critical to consider when attempting to contribute to sustainability positively. These three dimensions are interconnected, encapsulating the key pillars: people, planet, and profit. Failing to address these issues in today's climate can damage a company’s reputation, bring negative attention to the company, and reduce customer loyalty (2).
The Drivers for Sustainable Business Operations
First and foremost, organisations that prioritise sustainable business practices can reduce potential harm to the environment, relationships with stakeholders, and economic stability. Sustainable business practices can improve an organisation’s reputation as they demonstrate accountability and ethical commitment, thus enhancing their competitive placement. Additionally, implementing such sustainable practices can save expenses through ethical sourcing, increased energy efficiency, and waste reduction (3).
An example of an organisation that has gone above and beyond with its commitment to sustainability is IKEA. The European retail brand has not only reduced its environmental impact but also developed strong relationships with stakeholders, improving its brand image, gaining recognition for its ethical practices, and achieving a competitive advantage in the industry. They have a comprehensive sustainability strategy, using renewable energy and more sustainable resources, reducing their environmental footprint. Since 2009, IKEA has been said to have invested EUR ~1.7 billion in renewable energy to produce as much renewable energy as they consume. As a result, they own and manage 416 wind turbines and have installed around 900,000 solar panels in their shops and buildings (4). IKEA has also embraced a circular economy approach in-store, with a buyback service for pre-loved items, which are then repaired, recycled, and ready for reuse. Benefiting the customer and the planet (5), IKEA now sees sustainability as a competitive advantage, not a cost centre.
Strategies for Building a Greener Future
To accelerate progress toward a greener future, leaders are being asked to assess their current practices and establish clear sustainability targets, which are often made publicly available.
The following suggestions may guide an organisation’s initial steps:
Efficient and renewable energy systems: This may include prioritising renewable energy systems such as solar, wind, geothermal power, or green technology adoption. Investing in energy-efficient technologies, upgrading new equipment, replacing insulation, and transitioning to LED lighting, as well as implementing simple energy-saving practices such as turning off equipment or heating when not in use (6) are also avenues of renewable energy.
Waste reduction: Like IKEA, leaders can adopt a circular economy mindset while emphasising the continuous use of resources by recycling and reusing materials. Minimising waste production could include using technologies to help monitor, sort, and recycle waste more efficiently while spreading awareness and educating stakeholders (7).
Sustainable sourcing: Ensure suppliers use eco-friendly materials that are responsibly sourced; for example, using local or natural resources. As well as prioritising ethical operations and fair labour practices, ensuring safe working conditions and equality of pay (8).
These suggestions are closely aligned with the key ESG principles. By implementing these recommendations, organisations can work towards decreasing their carbon footprint and environmental impact. Additionally, these can lower overall operating and energy costs, contributing to sensible governance practices by efficiently managing the use of resources. Subsequently, this enhances their public image and commitment to positive social outcomes, and if executed correctly - increasing profit margins.
Measuring and Reporting Sustainability
To help build a more sustainable and greener future, measuring and reporting sustainability efforts is critical to ensuring organisations remain accountable and transparent. Organisations can identify areas for improvement, track their progress, analyse the effectiveness of their sustainability practices, and manage their risks.
The Global Reporting Initiative (GRI) and the International Organisation for Standardisation (ISO) 14001 are popular sustainability reporting frameworks that allow organisations to collect and analyse data on their sustainability efforts. They provide a range of guidelines and metrics that can help monitor carbon footprints, resource use, and social responsibility (9).
Other specific tools to help visualise data may include Microsoft Excel, Google Charts, or Zoho Analytics to help you track consumer preferences or revenue after implementing sustainable practices (10). Before we can manage it, we have to be able to measure it.
Challenges and Obstacles
It is crucial to recognise that businesses may face various challenges when transitioning to more sustainable and greener practices. These may include regulatory challenges and having to understand, abide by, and stay informed on all sustainability regulations. It can also be costly to implement and switch to sustainable practices as it requires an initial investment in new technology, infrastructure, and employee training (11). Therefore, as operational, and organisational costs climb, this will directly impact the price a customer pays, potentially losing out on demand and sales due to that price increase. Additionally, it can be challenging to encourage involvement and educate employees about the company’s sustainability goals.
Nevertheless, these challenges should encourage organisations to take responsibility and make more sustainable choices. By taking a proactive approach and focusing on the long-term benefits, organisations can successfully embrace sustainability, positioning them for a more prosperous and healthy future.
The Future of Sustainability in Business
The future of sustainability in business is continuously changing and evolving. It is influenced by various factors such as consumer preferences, regulatory shifts, technological advancements, and the growing awareness of environmental and social issues.
The switch to renewable energy sources is gaining increasing momentum while advances in technology are increasing in efficiency and effectiveness. Additionally, as concerns surrounding environmental and social issues grow, so do the expectations for more rigorous sustainability regulations in the future.
The driving force behind these sustainability initiatives and efforts is organisational leadership. They possess the vision, insight, authority, and responsibility to tailor an organisation’s approach for a more sustainable and ethical future. Therefore, the need for proactive leadership with strategic thinking is significant to ensure an organisation anticipates and prepares for sustainability demands.
IIn conclusion, sustainability is no longer a choice but an increasing organizational imperative. To thrive and contribute to a greener and fairer future, companies must address interconnected environmental, social, and economic factors. Prioritising strategies like renewable energy systems, waste reduction, and sustainable sourcing can foster a positive impact. IKEA's success in renewable energy and ethical sourcing serves as a prime example.
While challenges may arise, organisations should focus on the long-term benefits and the responsibility of embracing sustainability if they want to stand for a better future for future generations.