Sustainability and profitability may seem challenging to balance in business, but ESG efforts often translate into improved employee morale and healthier bottom lines. But successfully doing well by doing good means sharing a well-communicated plan with the entire company. If you need to start incorporating sustainable, responsible corporate practices, here are a few places to start.
Over the past 20 years, sustainability has become a major focus in the wider corporate conversation, and for good reason. New technology, corporate responsibility mandates, and a more informed workforce are all leading us toward new opportunities in the way that we structure our practices and profits to last.
Though “sustainable” and “profitable” can seem like tricky concepts to balance, the effort to do so is increasingly rewarded in today’s economy. In the era of ESG mandates and the Great Resignation, the sustainable thing often translates to the right thing, in terms of both financial gain and staff longevity.
When it comes to making sustainability profitable, a well-communicated plan and details about how this plan will benefit your company are imperative. Here are a few places to start:
- Tackle upcoming ESG mandates proactively.
Building profits through sustainable practices means being proactive. ESG mandates are increasing in volume and scope every year, and Deloitte predictsthat ESG-mandated assets will represent half of all professionally managed investments around the world by 2024. Proactively focusing on sustainable efforts will not only help meet these standards before they become requirements, but it will also prevent overloading your team at mandate crunch times and keep up with the ever-growing demands.
Developing a strategic plan and communicating that plan with both employees and investors before changes occur can further prevent any possible tension or adjustment time when new ESG mandates are rolled out. Joining the worldwide conversation about corporate responsibility, in today’s rapidly changing economy, can only serve to increase competitiveness within your industry. It’s not a coincidence that firms with high ESG scorestend to outperform those without. - Boost morale — and hiring — by being environmentally responsible.
Profitable sustainability also means appealing to a younger workforce that cares deeply about corporate responsibility. Almost two-thirds of Millennials, the largest growing demographic in the workforce, say that strong corporate responsibility ethics are a primary factor in deciding where to work, and a WeSpire study described Gen Z as “the first generation to prioritize purpose over salary.” “A strong ESG proposition can help companies attract and retain quality employees, enhance employee motivation by instilling a sense of purpose, and increase productivity overall,” McKinsey research by Witold Henisz, Tim Koller, and Robin Nuttall found. Morale is 55% higher at companies with a sustainability focus, and 83% of Millennials say they’re more loyal to companies promoting social and environmental issues. With companies fighting for employees amid the Great Resignation, it pays to look to the future and champion sustainability in the here and now. Put simply, you can boost morale, loyalty — and even hiring — by being environmentally responsible. - Show investors you can make a profit by doing the right thing.
Gallup found that nearly half of investors are interested in ESG-focused companies, but most need more education and contacts to move forward. Sustainable investments hit record highs in 2020 — and showed good returns. Investors and other stakeholders need you to show them how your sustainable efforts get you from A to B (profits). Developing a strategic sustainability plan and goals, communicating that plan to both employees and investors early and often, and providing clear metrics to measure the success of these initiatives, are critical in showing investors how powerful social and environmental responsibility can be in terms of revenue. On the consumer side, well-communicated corporate responsibility plans have been shown to confer a “halo effect“ that works to increase a customer’s familiarity and positive associations with a brand. - Get the board on your side.
Companies are largely “graded” on their returns on investment, and these metrics can’t be ignored when considering sustainable changes, so it’s imperative to ensure that the company’s board understands your vision of sustainability as a profit driver.“The problems occur when sustainability is counter to the maximum profitability or return on investment. Many companies view this as an either/or scenario,” says Larry Clarke, CEO of Nanoguard Technologies. “The ability to find a more sustainable pathway is sometimes due to entrenched thinking or older technology. Typically, this is why the board of directors is required to ‘inspire’ the management to find new ways of doing business that has minimal negative impact to the bottom line or, as found in many cases, improves the bottom line.”
Therefore, according to Clarke, the key is to get the company’s directors on board with the plan: “The board has the unique authority to provide the incentive or eliminate roadblocks.” Communicating that a companywide push is occurring prior is a way to prevent any tension between sustainability and profitability goals, he adds. And, of course, the plan must be clear and with measures and metrics for the employee to understand and communicated just as clearly.
Creating sustainable, responsible processes in the workplace isn’t easy: It takes time, attention, focus, and a tight management team, all of which tend to be precious resources. But evidence shows that the effort put into starting sustainable, responsible corporate practices early is not wasted. In the past two years, sustainable investment assets have grown by 42% here in the U.S., and that growth is being seen in almost every region in the world.
As ESG mandates increase and the Great Resignation continues, sustainability isn’t just a noble concept; it’s a real opportunity for growth, profitability, and longevity — an opportunity not to miss.
Written by Rhett Power.
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