As glaciers retreat, sea levels rise and temperatures increase – it’s clear the world needs more green companies. So, why are there not more businesses on the path to net zero? In part, the answer lies in mistruths and perceptions that to be a sustainable business you have to do so at the sacrifice of financial performance. The challenge of either/or but not both!
However, and thankfully, there is a new breed of companies like Patagonia, IKEA, Unilever and Interface demonstrating that this couldn’t be further from the truth. turns out that acting responsibly (in terms of your impact on the environment and society) AND achieving your desired financial performance and profit margins is entirely possible and can, in fact, lead to significant returns on investment.
Here’s three reasons why ‘Greening’ should be on the top of your radar:
1. Consumer demand for sustainable products and services is on the increase and people are willing to pay more for them.
In summer 2020 there was a 4,550% increase in google searches related to “how to live a sustainable life” with evidence showing that consumers are prepared to pay more for socially responsible products.
In a survey conducted by YouGov, consumers in different markets were asked how likely they are to pay more for products that are good for the environment. Looking specifically at household grocery shopping, the research found that many consumers worldwide are willing to pay more to address their environmental concerns. Their International FMCG/CPG Report 2021: Consumer goods in a crisis reports, “three in five (60%) grocery shoppers in Germany agree they’re willing to bear the additional expenses to buy products that are better for the environment. Other markets where more than half of grocery shoppers show a similar inclination include the US (58%), UK (57%) and Australia (53%).”
2. Investors are putting their money into businesses that are tackling the climate challenge.
As far as investors – both institutions and individual savers – are concerned, ESG (Environmental, Social and Governance) is here to stay. The 2021 ESG Investor Insights Report from Natixis, the French banking group, reports that 60% of savers surveyed say they want their investments to consider the impact on people and the planet.
According to an opinion piece in Money Week, ESG investing is becoming the default. The Natixis report found that more than 70% of institutions are now “all systems go” on ESG. The number saying they integrate it into their processes was up from 19% to 48%.
If this doesn’t win over the cynics then consider this… data shows that sustainable funds outperformed both traditional funds and indexes, on average, according to a 2021 report by Morningstar.
3. Being better for the planet helps you to hire better people.
A growing body of evidence suggests that employees want to work for sustainable companies. People (and especially millennials) are more climate aware than ever and want to buy from and work for businesses that are aligned with their values. Being a green business means you’ll attract (and keep) top talent.
With the carrot-and-stick approach archaic, research by Dan Pink in his book Drive shows that people are motivated by three things:
i) Purpose – a sense that they are contributed to something bigger than themselves
ii) Mastery – developing and honing skills
iii) Autonomy – the ability to control their own activities
Incorporate sustainability into the purpose of your business and your chances of retaining people will be much greater.
While some businesses are just starting to get plans in place for becoming net zero, others are already paving the way to carbon negative. The Sustainability Leaders survey report published by Globescan and The SustainAbility Institute concluded that sustainable business models and strategy are the strongest drivers of recognized leadership. In 2021, experts said that putting sustainability at the very core of the business model is the most important reason they recognise a company as a leader.
Whilst you may not want to be the leader in your industry, one thing is for sure: if you’re not on the path to net zero yet you need to get started.