Reductions in resource use, emissions, and waste production are key strategies for corporate success. Sustainability is crucial, says Lux Research, a Boston-based technology development and advisory company.
Sustainability is crucial
For a long time, the business community has belittled sustainability. It was supposed to be a hype that would go away. A marketing tool. But the tide has turned. Stakeholders, from shareholders to employees to consumers, are increasingly demanding that companies comply with sustainability requirements – not just by way of greenwashing, but in all respects, from strategy to execution. Sustainability is crucial, says Lux Research in its latest report Making Sense of Sustainability.
Why sustainability matters
First of all, according to Lux Research, sustainability is crucial because it is good for business as such. Companies with a high ESG score (Environment, Social, Governance) perform better than average; and companies with low scores perform much worse. Shareholders become aware of this and demand from business leaders to get their sustainability scores straight. Secondly, consumers increasingly care for sustainability. Companies can go bankrupt if they don’t pay attention to this (remember General Motors, that didn’t want to produce the small energy efficient cars the public asked for, and went bankrupt as far back as 2009?). Finally, many employees – probably the most creative and productive people – want their company to be sustainable. ‘Attracting and retaining top talent requires taking values like impact and inclusion seriously,’ says Lux Research.
How to do it
Then, companies should focus on translating sustainability into actionable goals, says Gihan Hewage, lead author of the report. They can do so for instance by using less water, energy or raw materials. They can switch to the use of renewable energy or biobased resources and thereby emit less greenhouse gases. They can shift to sustainable packaging that is multiuse or does not use single-use plastic. Or reuse materials to curtail the impact of manufacturing. Sometimes, a complete overhaul of the production process is the most productive strategy overall.
How to incorporate it into strategy
‘All companies can work to manage the impact of their factories, offices, and logistics, often finding financial benefits to doing so,’ writes Lux Research. They can invest in the development of a circular economy by addressing end-of-life issues where possible. They can recycle plastics and other waste products, use food waste as a form of feedstock, and offer solutions for batteries. Companies can also help corporate and private consumers to reduce their impact. The value proposition here is to protect or grow market share – or even gain first-mover advantage – as downstream demand shifts to prioritize sustainability. And finally, companies can invest in opportunities that are emerge due to the sustainability trend. Like in plant-based protein products that can substitute meat consumption. ‘Lux recommends that all organizations tap into new business opportunities fuelled by the sustainability trend.’
Diederik van der Hoeven