Sustainability has gained attention in the business world. An increasing number of customers feel that businesses should be held responsible for their impact on the environment. And many customers make purchasing decisions based on whether a business is eco-friendly.
Staying informed on business trends, including sustainability, is essential to your success as a small business owner. To keep you up-to-date, we’ll answer the following questions about sustainability for business:
- What is sustainability in business?
- What is a sustainable business?
- Why is sustainability important in business?
- How can your small business be more sustainable?
What Is Sustainability in Business?
While “sustainability” may seem like a buzzword, it’s much more than that. In a business context, sustainability focuses on a company’s long-term impact, value and lifespan—all of which become intertwined. When organizations create a sustainable mission, their business practices shift toward low- to no-harm operations. For example, they may shift their manufacturing process to produce less carbon emissions. Many eventually go a step further, creating environmentally sustainable missions that actually improve the environment and community.
In a time when consumers are more aware and mindful of their own environmental impact, people often seek out like-minded sustainable businesses. Your company’s approach to sustainability may even become a competitive edge in a crowded marketplace.
What Is a Sustainable Business?
Sustainable business initiatives look different depending on the company and its industry. Some choose to reduce their environmental impact by focusing on more energy-efficient facilities or moving entirely to renewable energy. Others may look for efficiencies in their supply chains. For instance, businesses may choose logistics providers that transport cargo with a fleet of energy-efficient hybrid and electric vehicles. Or they may audit their suppliers and work more with ones that maintain a lower carbon footprint.
Sustainability initiatives often go hand-in-hand with a company’s values and goals. Take LEGO Group as an example. According to its mission statement, LEGO aims “to be a global force for learning through play.” With this child-focused mission, it makes sense that the company wants to maintain a healthy world for children’s futures.
LEGO uses a multi-pronged approach to environmental sustainability. Their strategy includes manufacturing with sustainable materials, promoting LEGO brick donations to encourage a circular economy, eliminating single-use plastic packaging by 2025, eliminating waste, and reducing their carbon emissions by using more renewable energy and globalizing manufacturing to move closer to its customers.
In fact, LEGO selected its first U.S. factory location based on three criteria, all of which tie to sustainability:
- Close proximity to major markets
- An ability to build a carbon-neutral factory with a nearby solar farm
- Access to a skilled manufacturing workforce
As LEGO demonstrates, business sustainability can go beyond environmental practices to include the longevity of a talented workforce. This is why some sustainability initiatives also focus on workforce diversity and equity. The idea is that diverse perspectives bring a wealth of valuable ideas that can benefit a business. When businesses treat employees equitably, they’re more likely to retain great talent.
Why Is Sustainability Important in Business?
Most people feel businesses have a social responsibility to their communities. Businesses that ignore this responsibility often prioritize short-term profit over long-term impact. These companies are more likely to suffer from poor public relations which can eventually hurt their bottom lines. On the flip side, socially responsible businesses can gain a competitive advantage that improves their financial performance.
Research backs this up. You may have heard of ESG ratings: ESG stands for environmental, social and governance. The ESG metric helps measure and track a company’s societal and environmental impact. The higher the score, the more socially responsible an organization is.
McKinsey’s global survey found that investors and C-suite leaders consider companies with higher ESG ratings to hold more value. In fact, many say they would be willing to pay a 10% premium to buy a company with a positive ESG record over a negative one. This could be due to the fact that companies that are highly rated for sustainability enjoy higher operating margins and annual shareholder returns, according to Accenture research.
Employees also appreciate working for businesses with sustainable practices. According to the National Environment Education Foundation, nine out of 10 employees who engage with their company’s sustainability goals say they’re more satisfied at work and have more positive feelings about their employer.
All considered, your business can reap the following rewards by working to be more sustainable:
- Growing more attractive to investors, customers and employees
- Improved operating margins and financial performance
- Gaining a positive public perception
- Maintaining compliance with national and local environmental laws and regulations
- Serving a higher purpose
How Can Businesses Be More Sustainable?
Companies have found various ways of implementing sustainable practices that fit their business models. As you brainstorm ideas, consider how your business’s actions and output will impact not just your profits but also people and the planet.
Follow these steps to land on the right sustainability initiatives for your business.
- Ask your employees, customers and other stakeholders what changes they would like to see to make your business more sustainable. They may share some great ideas and will likely feel more engaged after you ask for their opinions.
- Evaluate your current state of sustainability. Look at your hiring practices, whether and how you give back to your community, ways to reduce your carbon emissions, and the types of waste created by your current operations. Doing so may uncover some ways to improve.
- Consider which sustainability initiatives best align with your business’s overall goals, values and customers’ values.
- Once you decide on a direction, clearly define your sustainability goals and communicate them to all stakeholders to make sure they understand and agree with them.
- Create achievable, quantifiable goals for improving sustainability with a plan for measuring success against a defined timeline.
- Communicate milestone steps towards achieving those goals to help engage your employees and track your progress along the way.
- Regularly measure and report on your progress as your business works towards its sustainability goals.
- As you reach your goals, review the effectiveness of your plan and set new targets.
Common Questions About Sustainability in Business
Below are answers to some frequently asked questions about sustainability in business.
How can blockchain be used to support sustainable business practices?
Some enterprises use blockchain technology to achieve greater transparency in their supply chains. This transparency not only helps them track raw materials from origin through production and consumption, but can also help uncover opportunities to improve sustainability efforts such as reducing waste, incentivizing recycling and improving energy efficiency.
How does sustainability impact profit?
Sustainability initiatives can result in cost savings—and lower expenses yield higher profits. For instance, a company that installs more efficient windows and motion-sensor lighting will spend less on energy. Consumers and businesses alike may also be willing to spend more to work with sustainable companies. This is why many sustainable businesses perform better financially than their peers.
How can I make my small business more sustainable?
Many small business owners improve their business sustainability by looking for ways to reduce their energy consumption, especially as energy costs rise. Consider renewable energy sources and look for ways to make your facilities and shipping practices more energy efficient.
Other ways small businesses can achieve sustainability goals include:
- Using less paper and lighter shipping materials
- Launching recycling initiatives
- Allowing work-from-home days to keep employees’ vehicles off the road
- Using earth-friendly products such as chemical-free cleaners
- Stocking reusable mugs and cups in staff kitchens
- Donating to environmental causes
- Sponsoring employee volunteer events such as tree planting and park clean-ups
- Hiring eco-friendly vendors
Next Steps: Want to get more tips on running your business? Sign up for the Small Biz Ahead newsletter to receive a weekly roundup of the latest tools, trends and resources.