Why sustainability is the driver for profitability

Why sustainability is the driver for profitability

As businesses become increasingly aware of the potential threats that global sustainability challenges pose to their continued operations, many are at the same time becoming more creative in adapting and grasping new opportunities from addressing these threats. Companies are being challenged on multiple fronts – economic, societal, geopolitical, technological, and environmental and they need to respond to a changing global business landscape, but faced with the scale of the challenges there is also a pressing need to radically rethink the current business models.

 

Additionally, from a financial perspective, there are many commercial reasons to embed sustainability in a company’s business to become future-ready, gain competitive advantage, and anticipate growing demands from customers for more sustainable products and services that are good for the environment and society.

 

 

How?

Many businesses have historically responded to environmental or social challenges by donating a proportion of their profits to a charity or by starting community projects that may be largely unrelated to their core business. But what if they could find a way to benefit more directly from their actions too?

This is where the concept of creating shared value (CSV) comes in. Shared value is a management strategy first outlined by Harvard Business School Professor Michael Porter and co-founder and Managing Director of non-profit consulting firm FSG, Mark Kramer. The purpose of shared value is for companies to find a way to turn social problems into business opportunities that help to solve those social problems in the process. It is about creating value for both the firm (in the form of profits) and society (through various mechanisms such as job creation, training and development initiatives, and economic growth). Shared value is not simply about “doing the right thing” by donating money to causes, but it is about empowering individuals and communities while simultaneously functioning as a profitable enterprise.

 

 

Apart from the usual challenges of remaining profitable, protecting brand reputation, providing better offerings than competitors, cutting costs, and managing cash flows, businesses are faced with an unprecedented amount of pressure to incorporate sustainability into all aspects of their operations and offerings. Business as usual is no longer an option. If companies are not to over-exploit the resources provided by our planet, contribute to social well-being and to stay afloat in this increasingly volatile and competitive market, constant innovation and adaptation has to be the norm.

 

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