At a Glance
- Many companies now consider sustainability practices at a much earlier stage because they create value from the outset, opening doors to a wider range of financing options and increasing value creation.
- Business leaders who integrate sustainable business practices into their operations can meet regulatory requirements and stakeholder expectations.
- The value of sustainability can be demonstrated through the effective implementation of key ESG initiatives and the achievement of set targets, and by integrating climate change and ESG risks into the company’s risk management framework.
Sustainability has long been viewed as a checkbox exercise – a compliance or a reporting requirement. But today, companies find themselves at a sustainability tipping point. Early adopters who have integrated environmental, social and governance (ESG) practices into their business model are reaping the rewards. These benefits go beyond environmental and social impact, as they are also seeing a boost to their bottom line. Those who are still on the fence risk falling behind and missing opportunities.
Leading companies that have embraced sustainability recognise that it is not just about doing good for the planet and people, but it is about creating value for all stakeholders. By understanding their sustainability practices, laggard companies can better articulate their business values and join the ranks of these sustainability champions.
Sustainability as a value-creation tool
More attention is being paid to sustainability as a value-creation tool. For most companies, sustainability practices are being considered at a much earlier stage because they create value from the outset. By embarking on a sustainability journey, a company can increase its stakeholder value and access to a wider range of financing options, as they appear to be more attractive to lenders due to a lower risk profile.
Many companies are also re-evaluating their ESG risks and opportunities to identify and manage their material vulnerabilities and liabilities. They have realised that with a little more focus, they can identify growth potential or opportunities to add value through ESG earlier in the process and set their strategy up for success from the outset.
Business leaders must now consider ESG risks and opportunities alongside operational and financial performance. Those who have integrated sustainable business practices into their operations can meet regulatory requirements and stakeholder expectations. They also reduce the risk of financial penalties for non-compliance with ESG regulations.
Next steps for creating value with sustainability
Engage stakeholders, identify value of sustainability
There is mounting pressure from regulators and government due to changing regulations, while consumers and clients are demanding more action on climate change. Senior management must change their mindset and take action to align with these intentions.
How do you identify and incorporate multistakeholder view? Take a systematic approach to stakeholder engagement and materiality assessment. It is essential to identify key internal and external stakeholders.
Make sustainability value tangible
Quantifying the intangible value of sustainability initiatives remains a challenge for many companies. Data-driven reporting demonstrates tangible outcomes. It is important to gather qualitative and quantitative data from the outset to demonstrate all ESG-related initiatives implemented during the year. This allows companies to continuously link these initiatives and progress to company’s overall performance.
However, early-stage sustainability efforts require a different approach. For example, companies need to communicate to shareholders and stakeholders the potential sensitivities of climate change risks and estimate the financial impact of these scenarios.
The value of sustainability can be demonstrated by effectively implementing key ESG initiatives and achieving the targets set. Embedding climate change and ESG risks into the company’s risk management framework can have a positive impact on financial performance.
Value chain collaboration
A company’s sustainability impact is shaped by its supply chain. The activities of vendors, suppliers, and distributors can influence a company’s environmental and social performance. A supply chain’s carbon footprint is an indicator of the work required to achieve positive environmental outcomes.
Leading companies are more likely to prioritise sustainability in procurement and vendor management. They work closely with suppliers to monitor their environmental and social activities, focusing on areas such as energy and water consumption, and human rights.
Develop a strategic, focused approach
A tailored, sustainable and focused strategy that takes into account the organisation’s current needs and trajectory is the key. Move beyond generic statements and develop an actionable roadmap. Set measurable targets and key performance indicators (KPIs) to track progress.
Want to make sustainability a value driver for your business but not sure where to start?
