Why Should Firms Invest Strategically in Sustainability?

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Why Should Firms Invest Strategically in Sustainability?

Businesses are increasingly implementing sustainability in their operations. However, some executives remain somewhat reluctant to put sustainability at the heart of their business strategy, mainly because the business case for sustainable business can still not be made according to them. In other words, they believe that the costs of doing business in a sustainable way outweigh the benefits of doing it.
However, integrated sustainability efforts can create a positive impact on organizational performance. Whelan and Fink (2017) aim to support the business case for sustainability by drawing up following list of reasons to invest strategically in sustainability:

1. STAKEHOLDER ENGAGEMENT: Traditional organizations aim to create value for their shareholders, often at the expense of other stakeholders. On the contrary, new business models aim to incorporate all stakeholders of the business. This includes employees , supply chains, society and nature. It also aligns with the idea of Porter and Kramer of generating 'shared value', where economic value can be created by detecting and addressing social or environmental issues related to their business. The strategic value for sustainability comes from considering all stakeholders, and interacting with them on a regular base. Through continuous and regular dialogue with them, organizations are able to better position themselves and foresee changes on all dimensions when they arise. Falling short of considering the needs, concerns and desires of your stakeholders increases the chance of conflicts and reduces stakeholder collaboration. This in turn affects an organization's overall performance. In that way, the aim for sustainability is in an organization's own interest rather, than just being just an act of CSR.
2. IMPROVING YOUR SUPPLY CHAIN, PRODUCTION PROCES AND DIMINISHING ORGANIZATIONAL RISKS: Supply chains nowadays are far more complex than before; they often involve multiple organizations and cross national borders. This implies that they are vulnerable to risks like climate change, national disasters, and other types of environmental, social and economic risks. Risks that manifest over the longer term, that are outside's an organization's control. They can disrupt supply chains and whole manufacturing and other production processes. Addressing social and environmental threats is needed to increase an organization's ability to prevent and/or react on those risks. And this makes a case for sustainability, as it builds on long-term capacity and adaptive strategies.
3. DRIVING INNOVATION: Investing in sustainability means investing in innovation when it leads to the redesign of invention of new products to meet social and environmental needs also lead to new business opportunities.
4. FINANCIAL PERFORMANCE: Investments in sustainability can foster financial performance, for example by increasing competitive advantage. This may sound as a surprise, because it has long been the perception that sustainability cannot go together with financial improvements. But increasing the degree of sustainability can actually lead to costs reductions through increasing operational efficiencies (for example by better managing natural resources) and reducing waste. A focus on sustainability may also open opportunities for improved logistics and process efficiencies. There are plenty of other examples of sustainable investments driving financial performance.
5. CUSTOMER LOYALTY: Consumers' interest is shifting towards more sustainable interests: honesty and transparency are central values that are considered when choosing between products or services. Besides this, product performance of sustainable products is generally is high.
6. EMPLOYEE ENGAGEMENT: Investments in sustainability with the aim of increasing environmental, social and governmental performance can increase statistics on employee retention, engagement and morale. Even more if we consider that employees emphasize moral purpose more than ever.

These six points will surely be helpful if you need to develop a business case for making sustainability a core value in the culture of your firm or a key part of your company's business strategy.

⇒ Can you think of an additional reason to invest strategically in sustainability? Please share your ideas and help making this business case complete…

Source: Whelan, T. and C. Fink (2017) "The Comprehensive Business Case for Sustainability" HBR October 2016

		Comments by date▼ Comments by rating Rating
		2 D P BABU Strategy Consultant, India
	Sustainability Management is Key for Corporate Existence Sustainability safeguards corporate existence from potential threats in the overall business environment by way of strategic investments to improve strengths and reduce weaknesses. It is just like taking antibiotics to boost your body's defense system.

		2 Gregory Johnson Coach, United States
	Why Strategic Sustainability I agree with each of the six (6) reasons for investing strategically in sustainability. Through my executive leadership work I encourage total integration to sustain a business as a long-term investme...

		1 Dr. Vishal Dilip Chavan Professor, India
	Investing in Sustainability for TBL Sustainability is investing today for future to address the Triple Bottom Line (TBL). What is sustainable today will not be a sustainable game plan for future. Stakeholders need to really understand ...

		0 JWendy Darquee Project Manager, United States
	Why Should Non-profit Organizations Invest Strategically in Sustainability? It's agreed that the six points highlighted are good for the profit sector. However, in the non-profit sector sustainability is threatened each time new technology is presented. Non-profits can't aff...

		3 Francis Joseph United Kingdom
	Partnerships between Businesses and NGO's in Strategic Sustainability I welcome the term "Strategic Sustainability". The ability to maintain sustainability development and progression of a developmental trend of such activities cannot be pursued in isolation without eng...

		2 Ronald Ainsbury Coach, New Zealand
	Sustainability or Sustainable Business? Maybe the term sustainability is alien to good business? Sustainability - that's a government's job, or maybe an NGO's? Being a sustainable business - that's what most business owners want. How do we...

		1 alfredo menendez Lecturer, Spain
	Social Responsibility and Sustainability It's a matter of words. Sustainability or sustainable development means ensuring the needs of the present without compromising the needs of future generations. It is a global concept. Therefore, a c...

		2 Jaap de Jonge Editor, Netherlands
	Corporate Sustainability Includes Environmental and Social Responsibility @Alfredo menendez: Indeed, that's why our Summary (of corporate sustainability) starts with: "Corporate Sustainability refers to the business approach by companies to consider not only economical need...

		1 Nick Shepherd, Canada
	Sustainable Capitalism Great discussion and some well thought through ideas and suggestions. I agree with Ronald Ainsbury (UK) about the broad based desire for business to be sustainable i.e. able to continue? Knowledge bu...

		3 Tanja de Jonge Director, Netherlands
	Embedded Sustainability How sustainable is sustainability when it is only a strategic approach that lacks an ethical base in which shared believes, values and goals of an organization are embedded and are seen as the true dr...

		1 Abb Soma Analyst, Trinidad and Tobago
	Invest in Knowledge and Incorporate this in Organization's Philosophy @Dr. Vishal Dilip Chavan: I agree with you that what is sustainable now may not be sustainable in the future. And this can possibly stem from the fast pace in innovation and technology which causes g...

		2 Maurice Hogarth Consultant, United Kingdom
	It's Time for Actioning Sustainability Do we do what is right or do we ignore the consequences of our actions, in hopes of a magic wand later? How will we account to our descendants for our sins? Absolution is unlikely and will not restore...

		3 Jaap de Jonge Editor, Netherlands
	Sustainability is Contributing to 9 Mediating Factors that Drive Financial Results Sustainability strategies can improve a firm's financial performance. But calculating how much is hard, because of the difficulty of measuring intangible benefits among other things. That's why Whelan...

		-2 Patrick Henderson Consultant, United Kingdom
	A Little Contrite The points raised here do not show methodology or substantive process or procedure lots of the usual blah management language sustainability, stakeholders, but does not show where the financial gains ...

		1 Sam Cookey Jr CEO, Nigeria
	Business Case for Sustainability Thanks for this article. For me, one of the important elements in the business case for sustainability is the way it changes the way in which one approaches the business, and fulfillment of its purpo...

		1 Maurice Hogarth Consultant, United Kingdom
	Sustainable Needs Sustain-ability Most enterprises are set up with a view to a long term future (agreed some are set up as short term enterprises for a specific niche). If an organisation is to have a long term future then, by defini...

		1 Gautam Mahajan CEO, India
	The Value of Sustainability Sustainability is an essential part of business and should increase your profit. To do so, it has to be a profit center. Then your company and its people will look at it differently. We'll see the va...

		2 Paramathmuni srinivas Kumar India
	Values of Sustainability Initiatives are not Only Financial A delivery mechanism needs to consider the contribution to the present and future of mankind as an element apart from the financial benefits, as well as those for the employees, demand management, etc...