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The Business Case for Sustainability is about Value Creation

Sustainability as a Business Imperative: Driving Profitability, Reducing Risk, and Creating Long-Term Value - Thought Leadership by #SustXGlobal50 Awardee Magali Depras, Canada


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Summary


In this thought leadership article, "The Business Case for Sustainability is about Value Creation" by Magali Depras, Founder & President, Magali Depras Consulting Services Inc, Canada, and a recipient of The SustainabilityX® Magazine Global 50 Women In Sustainability Awards™ 2024 explores the economic advantages of sustainable practices, demonstrating how companies that integrate Environmental, Social, and Governance (ESG) factors into their business models gain a competitive edge. From cost savings and operational efficiencies to risk mitigation and investor attraction, sustainability drives long-term value creation. With insights from leading companies like Unilever, Patagonia, and General Motors, the piece highlights how sustainability fosters employee engagement, appeals to eco-conscious consumers, and secures investment. Business leaders must act now to incorporate sustainability as a core component of their strategy to thrive in an increasingly ESG-driven marketplace.

 

In today’s business environment, sustainability has evolved from a nice-to-have initiative into a strategic necessity. However, convincing leadership to invest in sustainable practices often requires more than appealing to moral imperatives or environmental concerns. Business leaders, tasked with maintaining profitability, delivering shareholder value, while facing fierce competition, need to understand how integrating Environmental, Social, and Governance (ESG) factors into their business strategy can enhance their bottom line.


This article explores the ways in which sustainability can generate economic value for businesses. It delves into some of the challenges companies face, highlight real-world business cases and experts’ research to demonstrate that sustainability is not just a cost, but a long-term value driver.


The economic challenge: Balancing profitability with sustainability


Many businesses face the dilemma of balancing short-term profits with long-term sustainability goals. Leadership often struggles to justify sustainability investments in the face of tight margins, competition, and stagnant growth. For some, the belief persists that sustainable practices come at the expense of profitability. However, this is far from being the truth. Sustainability can lead to new business opportunities, cost reductions, operational efficiencies, and enhanced reputation, all of which can drive profitability.


Building a purpose-driven culture: Enhancing employee engagement


One of the most immediate benefits of embedding sustainability into a company’s culture is the positive impact on employee engagement. Today’s workforce, particularly millennials and Gen Z, values purpose-driven organizations. They want to work for companies that demonstrate a commitment to social responsibility and environmental stewardship.

A comprehensive survey conducted by Deloitte in 2024 (1), including nearly 23,000 respondents from 44 countries, revealed that around 44% of Gen Z and 37% of millennials reported turning down assignments or employers due to ethical concerns, including issues related to environmental impact and social equity​. And about 50% of Gen Z and 46% of millennials actively pressure their employers to address climate change​.

 

Likewise, the 2024 Engagement and Retention Report (2) by Achievers Workforce Institute revealed that 54% of employees say that working for a company with a strong sustainability mission positively affects their job satisfaction.


“People want to work for companies that are making a difference. Unilever’s purpose-driven approach to sustainability has enabled us to attract and retain top talent, which is critical to our business success.” — Paul Polman, former CEO, Unilever

Unilever’s "Sustainable Living Plan" (3) has been a major driver of its success, both in attracting top talent and enhancing operational efficiency. The company’s focus on reducing its environmental impact, improving social well-being, and driving profitable growth has helped Unilever remain a leader in the fast-moving consumer goods (FMCG) sector. The company reports that its sustainable brands, such as Dove and Ben & Jerry’s, are growing 69% faster than the rest of its business.


Employee engagement translates to greater productivity, lower turnover rates, and higher levels of innovation—directly impacting a company’s financial performance.


Attracting consumers: The power of eco-conscious customers


Consumer preferences are rapidly shifting toward Sustainability. According to a 2023 report by McKinsey and NielsenIQ (4), consumers are increasingly making purchasing decisions based on a company’s environmental and social impact. The report found that over the past five years, products making ESG-related claims averaged 28 percent cumulative growth versus 20 percent for products that made no such claims.


Additionally, 8 out of 10 consumers declare that they would pay up to 5% more for sustainably produced goods, according to PwC’s June 2023 Global Consumer Insights Pulse Survey.(5)


Patagonia, the outdoor clothing company, is a leading example of a business that has successfully leveraged sustainability to build customer loyalty and create economic value. The company’s commitment to environmental protection - using recycled materials, funding conservation initiatives, and advocating for environmental policies - has allowed it to command premium pricing and grow its customer base.


Effectively communicating the sustainability benefits and value proposition of their products can help companies justify the additional price tag.

 

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Operational efficiency: Reducing costs through Sustainability


One of the most significant misconceptions about Sustainability is that it increases costs. In fact, sustainable practices often reduce operational costs by improving resource efficiency, minimizing waste, and lowering energy consumption.


General Motors (GM) has implemented numerous energy efficiency initiatives which led to substantial cost savings. By focusing on reducing energy use in its factories, GM has cut its energy consumption by 40%, resulting in millions of dollars saved annually. Furthermore, GM’s commitment to waste reduction has also produced economic benefits. The company has diverted more than 90% of its waste from landfills, saving on disposal costs and improving resource efficiency.

 

“Sustainability is not just about doing the right thing, it’s smart business. Companies that adopt energy-efficient and waste-reduction strategies see almost immediate cost savings, leading to better profitability and a competitive advantage.” — Michael Porter, Professor at Harvard Business School

Data from the Carbon Trust, a UK based consultancy specialized in decarbonation and energy efficiency advisory services, suggests that businesses adopting energy-efficient technologies can reduce energy costs by as much as 20%, making sustainability a direct contributor to improved profitability.(6)


Risk Mitigation: Managing environmental and regulatory Risks


In addition to reducing costs and boosting profitability, Sustainability also serves as an effective risk management strategy. With the increasing prevalence of environmental regulations and growing pressures from investors and consumers, companies that fail to act on Sustainability face significant risks. For example, climate change-related disruptions to supply chains, fluctuating resource prices, and stricter environmental regulations can negatively impact a company’s financial health. By proactively embedding Sustainability into their operations, businesses can mitigate these risks.


"For companies to thrive in the future, they need to address sustainability at the core of their operations. Transitioning to low-carbon energy sources is essential not only for environmental reasons but for business survival." — Fatih Birol, Executive Director, International Energy Agency

 

British Petroleum (BP), historically a major player in the oil and gas industry, has committed to becoming a net-zero emissions company by 2050. Recognizing the long-term risks associated with fossil fuel dependence, BP is investing heavily in renewable energy and transitioning away from carbon-intensive operations. This move not only mitigates regulatory and environmental risks but also positions BP to take advantage of the rapidly growing renewable energy sector.


Attracting Investment: ESG as a factor in capital access


Investors are increasingly integrating ESG factors into their investment strategies. According to BlackRock (7), the world largest asset manager, companies that prioritize Sustainability are more likely to attract investment and secure lower borrowing costs. The firm notes that sustainable companies often demonstrate better governance and lower risk, making them attractive investment opportunities.


In 2020, BlackRock announced that it would prioritize ESG factors in its investment decisions. This move has reshaped how companies approach sustainability, as firms failing to meet ESG standards risk losing access to capital.


“2023 saw sustainable funds return to their long-term trend of outperforming their traditional peers. Overall, sustainable funds generated median returns of 12.6%, almost 50% ahead of the 8.6% returns of traditional funds” – Jessica Aslford, Morgan’s Stanley’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing.

As investor interest in sustainability continues to rise, companies that fail to adopt ESG principles will find it increasingly difficult to secure the investment needed for growth and innovation.


Is ESG woke?


The term "woke" originally was used to describe an awareness of social injustice, particularly in relation to racism and inequality.


The recent backlash against Environmental, Social, and Governance (ESG) criteria, labelled by some as "woke," is a contentious shift in the perception of sustainable business practices. Critics argue that ESG initiatives prioritize social justice and climate activism over traditional business objectives, claiming they divert focus from shareholder value. This backlash has gained traction among certain political and corporate circles in the US, leading to legislative proposals aimed at restricting ESG investments.


Despite this pushback, the fundamental goals of ESG remain critical. Companies increasingly recognize that integrating ESG factors can enhance long-term resilience, mitigate risks, and drive innovation. The backlash, while presenting challenges, also underscores the need for clearer communication about the value of ESG initiatives. Business leaders must articulate how these practices not only contribute to societal well-being but also align with financial performance.


As the debate continues, companies may need to reassess their ESG strategies, ensuring they resonate with broader audiences while staying true to their commitment to sustainability. The challenge lies in navigating the polarized landscape while fostering genuine, impactful ESG efforts that withstand political and social scrutiny, ultimately reinforcing the business case for sustainability in a rapidly evolving marketplace.


Reporting Value Creation through Sustainability


Reporting on Sustainability should go beyond mere compliance; it should showcase how these initiatives drive economic, environmental, and social benefits.


Firstly, companies should adopt recognized frameworks such as the International Sustainability Standards Board (ISSB), the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB) to ensure transparency and consistency. These frameworks, provide rigorous guidelines for measuring and disclosing sustainability performance, allowing stakeholders to assess a company's commitment to sustainable practices.


Secondly, organizations must quantify their impact. This involves utilizing key performance indicators (KPIs) that reflect both financial performance and sustainability outcomes, such as reduced carbon emissions, waste reduction, health and safety, or community engagement. Measuring is key – you cannot manage what you do not measure - and providing timely, transparent and accurate information is paramount.


Furthermore, effective stakeholder engagement is vital. Companies should involve employees, customers, and investors in the reporting process, ensuring their concerns and expectations are addressed.


By adopting robust reporting practices, companies can illustrate their sustainability efforts’ tangible value, fostering trust and enhancing their reputation in an increasingly eco-conscious market.


The Business Case for Sustainability: A long-term strategic business advantage


Incorporating Sustainability into a business strategy is no longer optional; it is a critical pathway to achieving long-term success. By embedding ESG factors into their core operations, companies can not only generate economic value but also enhance employee engagement, attract eco-conscious consumers, reduce operational costs, mitigate risks, and access capital from forward-thinking investors.


Sustainability is not merely a moral obligation or a compliance issue; it is a powerful driver of innovation, profitability, and competitive advantage. Leadership must recognize that the question is no longer whether Sustainability makes economic sense, but how quickly they can integrate these practices to stay ahead in an increasingly sustainability-conscious market. The time for businesses to act is now!

 

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About The SustainabilityX® Magazine


The SustainabilityX® Magazine is an award-winning, digital, female-founded, and female-led non-profit initiative bringing the environment and economy together for a sustainable future through dialogue, and now transforming the environment and economy for a sustainable future through the power of women's leadership. Founded on May 8, 2016, and inspired by the United Nations' Sustainable Development Goals by Canada's Top 30 Under 30 in Sustainability Leadership awardee, Supriya Verma, the digital media initiative focuses on approaching the world's most pressing challenges with a holistic, integrated, systems-based perspective as opposed to the traditional and ineffective siloed approach with a single lens on interdisciplinary topics like climate and energy. This initiative ultimately seeks to explore how to effectively bring the environment and economy together through intellectual, insightful dialogue and thought-provoking discussion amongst individuals across sectors taking an interdisciplinary and integrated approach to untangling the intricate web of sustainability while championing women's leadership in sustainability.


The SustainabilityX® Magazine is built upon the four foundational pillars of sustainability: Environmental Stewardship, which emphasizes the importance of improving environmental health; Economic Prosperity, which promotes sustainable economic growth that transcends traditional capitalist models; Social Inclusion, which focuses on equity, diversity, and inclusion (EDI) for BIPOC, LGBTQ, and other marginalized or vulnerable communities; and Just Governance, which highlights responsible leadership, the equal application of the rule of law, and the creation of fair systems for all.


As we expand our mission to align with the Women's Empowerment Principles (WEPs), we continue to explore the diverse and interconnected factors that influence sustainability. By recognizing how these elements interact across local, national, and international levels, we aim to accelerate progress toward sustainability goals. In essence, this aligns with The SustainabilityX® Magazine's vision of integrating environmental and economic progress for a more just, inclusive, and sustainable future through thoughtful dialogue.


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