The financial case for sustainability

September 3, 2020
Article

Consumers want to buy from brands that value social and environmental responsibility.

Financial case for sustainability

For companies squeezed for time and resources, thinking about how to spin up and manage a sustainability team or practice can seem daunting. But did you know that becoming a sustainably-minded company has financial benefits to your business? 

Socially and environmentally responsible brands outperform the stock market by 134 percent. Global sustainable investment funding has more than doubled in the last six years, amounting to $30.7 trillion or a third of managed assets worldwide. 

A 2019 McKinsey study links sustainability to: 

  1. Business growth by attracting more customers and gaining access to resources
  2. Reduced costs through lower water and energy consumption
  3. Regulatory and legal benefits that provide greater freedom to operate through deregulation, and access to subsidies and government support that rewards sustainable practices
  4. Boosted productivity, leading to employee engagement and the ability to attract world-class talent
  5. Enhanced investment returns and capital expenditures by thinking long-term

And even more evidence from McKinsey shows that consumers are willing to pay more for sustainable products and services, leading to more profit share. 

Profits

The adage that people make their voices heard with their pocketbooks is true—younger generations flock to brands that take responsibility for people and the planet.  

According to a Meaningful Brands study, environmentally and socially responsible brands outperform conventional brands. They also attract and retain more customers than their competitors and can charge more for their products. On top of that, 90 percent of sustainable consumer packaged goods outperform their conventional equivalent. A 2018 Nielsen study found that sustainable chocolate, coffee, and bath products outsold the same traditional products to an alarming degree. It also found that sustainably-marketed products delivered over 50 percent of new market growth while representing just 17 percent of the total market share. 

Cost savings 

Market incentives aren’t the only reasons to start creating a more sustainable business—resource efficiencies produce near-immediate cost-savings. When businesses identify waste sinks, they save big on utilities, waste management, and more. Resource- and cost-saving better positions your company for future growth and leads to a healthier planet and downstream economic and social dividends. 

Brand affinity 

There are massive growth opportunities based on how consumers relate to brands. Millennials and Gen Z are incredibly concerned about climate change and wealth disparity and buy from brands that do good for the planet and people. This expanding customer base doesn’t just buy a product; they buy the brand, its actions, and its identity and are fierce brand loyalists. And risk mitigation is key to protecting your brand. A transparent and sustainable value chain can help avoid potential PR nightmares you may have never otherwise discovered. 

Recruiting

Becoming more sustainable is a terrific way to show job seekers you are in business to save the world and help you attract and retain top talent. Millennials make up the largest workforce, and their affinity for brands carries over to where they aspire to work. Millennials and Gen Z want to work at companies that share their values. If businesses want to attract the right talent—and sell to the right demographic—they must become purpose-driven and share that message. 

According to the Cone Millennial Employee Engagement Study, a company’s sustainability efforts play a significant role in determining whether a Millennial will work there. When Millennials look for a job,

  • 64 percent consider a company’s social and environmental commitments and will not work at a company that does not have firm social or ecological commitments 
  • 83 percent are willing to take a pay cut to work for a socially and environmentally conscious employer 
  • 70 percent of those that see advertisements with a purpose-driven message say they would like to work for the company 

Why you need sustainability reporting software

Good intentions alone don’t make a company sustainable. In truth, it is not even enough to reduce waste, become more efficient, and make positive strides towards helping the natural environment. Companies need to document their sustainability journey to convince stakeholders they are making a difference, access tax incentives and grants, and comply with impending government regulations.  

Sustainability that pays dividends takes work, consistency, and transparency. The Deloitte Millennial Survey shows that younger consumers want to buy from brands that value social and environmental responsibility, and they want brands to prove it. Getting started in sustainability can be confusing, especially for small and medium sized businesses. Sustain.Life is tailored for small and medium businesses starting their sustainability journey. It offers a one-stop-shop to identify, set, and crush sustainability goals, and then amplify by sharing progress with stakeholders.  

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Author:
Sustain.Life Team
Tags:
Employee engagement
Sustainability
Business strategy
Values
Key takeaways

• Socially and environmentally responsible brands outperform the stock market by 134 percent.

• 90 percent of sustainable consumer packaged goods outperform their conventional equivalent.

• A company’s sustainability efforts play a significant role in determining whether a Millennial will work there.