Sceptical about sustainability? That’s healthy.
It could be said that Sustainable Business is having a moment. And as the IoD continues to shine a light on the topic of the day, IoD member and co-founder of Obliquity Group – a tech-for-good organisation developing technology to make sustainability simpler, fun and rewarding – Simon Kelly, shares his view on why businesses should sit up and take notice.
Stop me if you’ve heard this before: ‘Sustainability is critical for business success’ and those who cannot keep up with rising expectations will be boycotted in ever-growing numbers.
As strategic leaders in business your reality might be at odds with this mantra. The global market is still yet to ‘decouple’ carbon emissions from economic growth and our economy is actually becoming less – not more – ‘circular’.
You could be forgiven for being sceptical about the impact sustainability has on your business. Is sustainability a fad or is it an opportunity? What really are the consequences of failing to act?
Why you are right to be sceptical
Whilst sustainability is now ‘centre stage’ why it is being practiced remains unclear. Is it about transformative change to business models or a vehicle to sell more goods and services? 87% of business leaders struggle to tell the difference.
There’s no shame in this. Even sustainably experts struggle for certainty. Despite an increase in public reporting on ESG metrics (the accepted Investor term for sustainability), the correlation between rating agencies is weak. So weak they cannot agree whether Exxon or Tesla is more sustainable than the other.
In this context, how are consumers supposed to reward sustainable behaviour? Especially when it has been demonstrated that the majority of claims have been ‘greenwashed’ i.e. a stretching of the truth to convey an image that does not reflect reality. In addition, consumers are confronted with over 460 eco-labels, each competing for attention, and all with different standards and methodologies.
Can consumers be expected to make informed decisions in such circumstances? And to what extent do they really care? Whilst they say they are willing to pay more for a ‘sustainable’ good, purchase behaviour suggests they remain influenced by price and convenience. There is a significant gap between their stated values and how they act aka ‘hypothetical bias’.
Given these challenges, it might come as no surprise that Bain & Co found only 2% of sustainability change programmes meet or exceed their stated ambitions. Yet whilst there is doubt about chances of success, there should be none about importance. From the World Economic Forum to business governance and regulations, sustainability is here to stay – and like Odysseus’ sirens, its appeal is tantalising and seductive.
How it Delivers Value
There is undisputed value to sustainability – even if it initially appears intangible. Responsible business practices have been found to deliver greater reputation, loyalty in the workforce and improved risk management. What is more, the future will not resemble the past – we’re reaching the ‘tipping point’ such that whilst sustainable goods make up only 16.6% of the market they account for 50.1% of market growth.
In 2020 alone, we have seen bold, science-based targets from Microsoft, JetBlue and Sainsbury’s (amongst others), and Iceland, Patagonia and Nike have enjoyed sizeable returns for their outspoken and somewhat controversial campaigns. The rewards are there for those bold and brave enough to take them.
Similarly, whilst consumers might be slow to purchase they are quick to punish. Whether it’s BP, VW, Facebook or Uber (the list could go on), once an organisation is perceived to have ‘broken’ the social contract – their licence to operate is revoked with serious consequences.
Is sustainability an opportunity or challenge?
Like anything worth pursuing it is, of course, both. Despite what is pumped out ad nausea from marketing departments, successful sustainability initiatives remain a significant challenge. For every journal finding a link between sustainability and profitability, there is another to challenge this. For every successful Nike, Iceland or Patagonia campaign there are less heralded attempts e.g. Lush, BrewDog or Gillette.
Yet there can be no doubt about the direction of travel. Investors and employees are now demanding action and will speak out publicly against this – just ask Google or Amazon. Moreover, whilst you might be able to bend a consumer’s values you will pay for breaking them. Once trust is broken, they retaliate in numbers and it requires significant time and money to repair.
There might be no better indicator than the fact that Goldmann Sachs, JP Morgan Chase and Morgan Stanley have all publicly changed course. They know where the market and returns are heading; sustainability is less ‘business being good’ and simply ‘good business’.
Alluringly, the challenges present significant barriers to entry, which makes the opportunities all the sweeter for those able to overcome them. Questions, queries and scepticism remain critical, but should be aimed less at why you do it, and more towards how it is practised, measured and communicated.
If you are interested in learning more about the practical challenges/opportunities business leaders face, you can join us at Kings College London on the 6th February for a free, open and inclusive forum about this topic. (As this event is being held on Kings College Campus is entrance by named participant only. To register for a place contact