Global Sustainability 101: What is it and why should I care?
We no longer have to choose between making a profit and saving the world. In fact, saving the world is turning out to be quite profitable. The world has evolved, and one of the most positive steps is the snowballing force of global sustainability that provides each of us with the opportunity to take actions daily that will reduce the numbers of starving children as well as solve the myriad of existential challenges facing our society, all while improving our own lives or businesses.
So, what is global sustainability? There are a couple of ways to look at global sustainability. It is a way of looking at the broader impact on the world of your actions – whether the “you” represents an individual, a family, a community, a business, a non-profit, or a government. It is a strategy that an organization can adopt to achieve its goals through the proactive solving of society’s challenges (hunger, health/environment, poverty, etc.). It is a complete change in mindset of focusing on the self first and the world last into a mindset that is focused on the world first as a means to bettering our self and our own interests. It is ultimately a design challenge how to innovate new operating processes, services, and products that will solve world challenges while benefiting us.
Sustainability is commonly referred to as a policy that takes into consideration an entity’s impact on the environment, society (people), and the community or corporate governance. ESG. More specifically, environmental criteria address how companies perform as stewards of the natural environment in the communities where they operate and in those of their suppliers. We all impact the environment on a daily basis – whether we are a manufacturing facility discharging dirty wastewater, a government utilizing a fleet of vehicles or setting land use policies, or a consumer choosing between an energy efficient light bulb or a regular one.
Social criteria examine how companies manage their relationships with their employees as well as those in their supply chain. This includes, for example, ensuring that they are not purchasing supplies made with child labor in China. It means ensuring that the organization has diversity throughout its operations – both on the ground level as well as the c-suite and boardroom. This includes gender diversity, racial diversity, and thought diversity, among others. It means ensuring that the people paid at the lowest rung of the organization are earning a livable wage. If they are not, then the price of the good or service that the organization provides does not reflect the true cost of production and needs to be adjusted.
Economic or governance criteria are framed in a couple of ways. It includes a company’s impact on the community in which it operates. Does the company benefit the community by providing livable-wage paying jobs, helping develop the local education system, providing good training for its employees? Or, does it pay next-to-nothing to people desperate to earn anything to feed their family? Does it go into a community, drain the resources out of the community (trees, minerals, agricultural, clean rivers, etc.) and send all of the profits out of the community, leaving only destruction and poverty in its wake? Governance criteria boil down to integrity. It is how a company deals with its leadership, executive pay, audits, internal controls, and shareholder rights. Is the board of directors committed to not harming the environment? To diversity? Does it tie the compensation of its leadership to improving the company’s impact on the environment, or diversity, or any other sustainability factors?
Big business has already figured out the importance and value of sustainability. Of the world’s 250 largest businesses, 92% report on sustainability measures. Eighty-eight percent of the S&P 500 companies report on sustainability. This is up from 20% five years prior in 2011.
Why do these large businesses care? It’s more than wanting to make the world a better place. It actually makes business-sense to do so. Three stakeholder groups are driving the push for more sustainability: investors, employees, and consumers.
Investors look to sustainability performance as a sign of strong management and governance and long-term thinking. There are dozens of stock exchanges worldwide dedicated to sustainable companies. Globally, there are now over $22 trillion of assets being professionally managed under responsible investment strategies, an increase of 25 percent since 2014. Sustainable investing is an investment approach that considers environmental, social and governance factors in portfolio selection and management. A 2014 research study by the firm CDP found that corporations that are actively managing and planning for climate change (one of the issue areas that ESG considers) achieve an 18% higher return on investment than companies that aren’t planning for climate change, and 67% higher than companies that refuse to disclose their emissions.
As for employees, millennials want to work for a company that has sustainability policies in a job that is fulfilling. Eight in ten millennials think the private sector has a very important role to play in achieving global sustainability. And, by 2025, 75% of the workforce will be millennials. This is six years away. Companies that want to attract and retain top talent would be wise to commit to sustainability or they risk losing out on the best and brightest employees.
Consumers are also driving the push for more sustainability in the purchases they make. A 2017 study showed that 87% of consumers will purchase a product if the company advocated for an issue they cared about, and 75% would refuse to purchase a product if the company represented an issue the consumer opposed. In fact, over 50% of the study participants had boycotted a company within the preceding year for bad business practices.
Smaller and mid-sized companies that are engaged in B2B supply chain sales with larger companies are starting to be required by those larger companies to adopt sustainable practices in order to continue doing business. Furthermore, it will only be a matter of time before these larger companies start asking their service providers (lawyers, accountants, marketing companies, etc.) to commit to sustainability in order to continue to serve the company.
Not only will a commitment to sustainability attract investment, top talent and sales, but it will also naturally cut costs, as organizations seek ways to be more efficient, both in processes as well as utilities including water and energy. Some may protest and say that it costs more to be environmentally friendly. The issue is not whether there are upfront costs to become more efficient. There might be. The challenge is to identify which upfront investments in process and product efficiency will pay off in the long run. The challenge is to invest in innovation that has the potential to solve world problems while providing a new product or service to the marketplace, the sales of which will more than recoup the cost of investment.
Which brings us back to the mindset shift that needs to occur in order for sustainability to thrive. We need to expand our thinking, broaden our horizons, and truly believe in the mutual reciprocity of the Earth and its people with our individual and collective actions.