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Businesses will benefit greatly by tackling sustainability issue

April 4, 2022by

Over the next decade we need to unlock change in a way — and at a rate — that has so far eluded us.

Creating a world in which more than nine billion people can live well and within planetary boundaries by 2050 will require leadership and perseverance across every part of society.

Business has the power to unlock the transformations on which a safe and sustainable future depends.

For business, generating long-term returns requires a transformed model that rewards true value creation rather than value extraction.

Resilience and long-term success mean enhancing a business’ capacity to anticipate, embrace, and adapt to change and disruption. Businesses must move to a mindset in which we build the capacity of our social and environmental systems to heal and thrive.

Businesses have a good reason to worry about sustainability.

A World Economic Forum report last year identified five risks with the highest likelihood in the next decade: extreme weather, climate action failure, human-led environmental damage, infectious diseases and biodiversity loss. They all are sustainability-related risks.

Investors today are demanding more data on a company’s Environmental, Social and Governance (ESG) performance to see how boards consider and assess climate-related issues; how the company’s business model may be affected by climate-related issues and what strategic changes the company might need to make.

Employees today want employers who incorporate ESG into their purpose. A recent study from insurance firm Marsh McLennan indicates that the impact of ESG performance on workforce sentiment can be a source of competitive advantage.

Top employers, measured by employee satisfaction and attractiveness, have significantly higher ESG scores. Satisfied employees work harder, stay longer, and seek to produce better results for the organisation.

ESG performance will become increasingly important in attracting and retaining talent as millennials and Gen Z make up most of the global workforce.

Another study by consulting firm Simon-Kucher & Partners reveals that more than a third of global consumers are willing to pay more for sustainability as demand grows for environmentally friendly products and services.

The study, involving more than 10,000 people in 17 countries, showed that sustainability is increasingly important in purchasing decisions, with consumers seeing themselves and for-profit companies as primary catalysts for change.

Increasingly, governments are creating ESG-related regulations and requirements.

A study of 71 countries found more than 2,000 voluntary reporting frameworks, mandatory reporting requirements, methodologies and protocols.

With many international regulatory bodies working together to accelerate convergence to reduce the number of reporting frameworks, businesses will be under increasing pressure to supply credible ESG information.

Greenwashing will become harder with an increasing risk of backfiring on the perpetrators. Meanwhile, non-governmental organisations and community groups are pressuring businesses for radical transparency with a company’s licence to operate potentially at stake.

Former Unilever chief executive officer Paul Polman recently introduced the concept of a net-positive company: one that gives more than it takes — solving problems that matter and not creating new ones.

Net-positive leadership is about putting others’ interests first, which may require new skills and leaving your comfort zone.

The larger system changes we need can only happen in partnership with groups outside of a company’s control — peers, community members, NGOs, governments, consumers, suppliers, and more. Done right, a network of stakeholders creates multiplier effects that help build something bigger and faster.

 


The writer is chairman of BCSD Malaysia, member of the board of Trustees of ALAM and former science adviser to the prime minister

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