A Primer on Business Sustainability

Abstracted symbols of environmental impact including a bicycle, trees, and wind mills.

Sustainable businesses have the opportunity to create profit for their stakeholders, protect natural resources, and improve the lives of customers. According to the World Commission on Environment and Development, sustainable development “meets the needs of the present without compromising the ability of future generations to meet their own needs.” Far from being a passing trend, business sustainability is becoming a necessary practice for organizations that seek to remain competitive in the modern, global marketplace.

More and more businesses have prioritized sustainability as a way to innovate and reimagine company operations. “The most forward-thinking and progressive businesses today are seeing environmental issues as an opportunity to innovate … how they develop new products, and how they relate to stakeholders in the marketplace,” an expert from GreenOrder told Yale Insights. A closer look at the definitions, benefits and implications of business sustainability can help clarify just what the complex topic means for organizations.

About Business Sustainability

As environmental concerns become part of mainstream culture, businesses across various industries have begun to incorporate sustainability into long-term strategy. This requires striking a balance between adjusting existing practices to become more sustainable and ensuring the changes make good business sense. Overall, sustainable business is “characterized by environmentally-friendly practices initiated by a company for the purposes of becoming a more sustainable organization,” Chron says. “These companies aim to reduce their environmental footprint through initiatives that cut down on waste, poor environmental stewardship and unethical environmental practices.”

Best practices vary by industry and may be specific to a company and the services it provides. This means that there is no single right approach to business sustainability. Common practices include introducing paperless billing, evaluating potential partners based on their sustainability efforts, and implementing more sustainable production processes, Chron says.

The Benefits of Sustainability

While businesses implement sustainable practices as a way to do their part to mitigate environmental concerns, Fortune points out that “a growing number of examples—from diverse industries—show that sustainable business practices can be good for business from the bottom-line up.” This may be part of why a McKinsey survey of 340 investors found that more than a third of respondents said sustainability was a top three priority, with one in five companies in the S&P 500 having explicit, long-term sustainability goals.

In addition, a study for the Harvard Business School found that developing a corporate culture of sustainability may be a source of competitive advantage in the long run due to higher return on equity and assets for higher-sustainability companies. Fortune makes the point that “the evidence is building not only that sustainability initiatives work, but that they are an important factor in creating long-term value.”

According to Environmental Leader, the following are some of the key advantages of business sustainability.

  • Improved brand image and competitive advantage: Because sustainability has become an important social issue, consumers now consider a company’s environmental impact before they choose to buy, Environmental Leader says. A survey of 53,000 U.S. consumers by the Natural Marketing Institute found that consumers are “more likely to purchase from companies that practice sustainable habits.” For businesses, improving brand reputation through environmental initiatives is one way to boost engagement and reach.
  • Higher productivity and lower costs: Sustainable business practices often increase efficiency, saving on resources and boosting employee productivity. “Reducing cost also encompasses energy conservation strategies that can be as simple as turning off unnecessary lights and insulating walls to more sophisticated efforts such as installation of geothermal heating and cooling systems,” Environmental Leader says. While higher-impact changes are likely to be more expensive, they are associated with better long-term results.
  • Regulation compliance: Government entities at both the state and federal level are introducing stricter environmental protection regulations. As these policies continue to ramp up, implementing sustainable business strategies helps organizations stay ahead of the game.
  • Attracting employees and investors: Just as society as a whole is prioritizing sustainability, potential employees and investors are interested in working with companies that have sustainability initiatives in place. As Environmental Leader puts it, “Show your company as respectful of the environment and … it will attract the caliber of people whom you want to employ and the funds your business needs to expand.”
  • Increased profits: When McKinsey researched 40 companies for its 2014 report, “Profits with Purpose: How Organizing for Sustainability Can Benefit the Bottom Line,” the survey found that “companies with high ratings in environmental, social, and governance factors outperformed the market in medium and long range terms.” Specifically, the article cites data showing that “an investment of $1 at the beginning of 1993 in a value-weighted portfolio of high-sustainability companies would have grown to $22.60 by the end of 2010, compared to $15.40 for the portfolio of low-sustainability companies.”

More Than Green: The Three Pillars of Sustainability

It is important to note that the term “sustainable” can’t be used interchangeably with “green.” Truly sustainable businesses do more than recycle: They create long-term strategies and plans that align business success with “positive environmental and societal continuity,” according to The Times. The Environmental Protection Agency defines sustainability as creating and maintaining the conditions under which humans and nature can exist in productive harmony to support present and future generations. It is a three-pillared approach that consists of economic, social, and environmental factors. For a business to truly be sustainable, each of these pillars must be addressed effectively.

In short, sustainable business strategies are transformative, attempting to change mindsets and business culture overall. Being “green” is more tactical and focuses on one-off efforts like switching to energy-efficient lightbulbs. While being “green” is a move in the right direction, businesses that truly want to make a positive environmental impact should seek large-scale sustainability.

As mentioned above, that may mean different things depending on the sector of the business world, but good starting points include setting measurable targets, completing a cost-benefit analysis, and developing ongoing incentives that fit in with a business’ overall sustainability goals. Businesses can treat sustainability as an ongoing process, increasing their efforts and challenging themselves to do more over time.

Sustainability in Action

Implementing sustainable business practices takes commitment and buy-in from the top down. Executives and leadership can implement a comprehensive sustainability plan, while employees help ensure its success. As Environmental Leader puts it, “If your business can do it, morale and productivity will improve even as sales increase and costs decrease. It’s the ultimate win-win achievement for the shareholders, the consumers, and the employees.” Organizations that are able to include sustainability as a key part of business models moving forward will reap both environmental and financial benefits.

Sustainability is a global issue that is relevant to organizations across industries. Lesley University’s online Bachelor of Science in Business Management prepares students to be thoughtful, conscious leaders who can come up with innovative solutions to real-world problems. The curriculum emphasizes the development of effective, ethical, and creative management skills that will benefit graduates in any business setting.