In short, yes; and those two attributes MUST be able to co-exist in order for a more sustainable future to be possible. This is one of the greatest concerns I see as a consultant for sustainability in business. Some entrepreneurs want to grow a Fortune 500 company and others want to build an NGO or Non-Profit and focus on meaningful change. Regardless of the ambition, a business requires growth and funding to be functional.
In order to make ‘Sustainability’ the norm, we need to develop it into a money making machine.
One of the big misconceptions and barriers to the two co-existing is a deeply entrenched idea that any business focused around sustainability, whether it be environmental or social, cannot be profitable. The idea being that costs are too high and demand is too low.
That notion is false and it’s becoming more inaccurate by the day. Research from the Massachusetts Institute of Technology, shows that sustainability and profit actually co-exist pretty well. 37% of businesses are reporting profit from sustainability and as many as one in two companies have adapted their business model to take advantage of sustainability opportunities.
Yes, a lot of customers are now placing more emphasis on social and environmental values when choosing which companies to support and that consumer behaviour may continue to grow and become more prevalent. That supporting argument has always felt super weak to me though. We should be careful not to generalise and assume this is the case across all demographics. Many of these opinions we have are based around those in our social circles. For example, it would be easy for me to state that sustainability is now more important to customers in general because I studied the field for 5 years and developed my social circle in that area. My family and friends are also of a similar social background to me.
What about those with less money and different buying habits? Different living standards and priorities? Furthermore, what happens if Covid-19 continues to pause the economy or a global recession hits as soon as we leave lock-down? Will Sustainability be so important to customers then or will price and frugality become by far the most important aspect of any product? Important questions to answer for sure and why I believe that leading with customer generalisations is just not enough.
We need to provide a business case for sustainable practice. Even in recession, focus on environment and social values must be the logical choice for a more resilient and profitable business. The problem we face is that society has dropped the ball. We’ve become to short-sighted and somewhere down the line we forgot the importance of being pro-active over reactive.
Covid-19 has been a great example of that. Western economies were never prepared because we’ve been blindly pursuing growth and profit with no clear strategy or means to deal with world-halting events such as pandemics. Unfortunately, this way of thinking has become engrained throughout Western society. Our economies are built on linear models; designing products and materials to be disposed of and depleting natural resources along the way. People want rapid and often unhealthy solutions to losing weight, Get Rich Quick Schemes. It seems we just don’t want to be patient any more, or put in the long-term effort. We’ve become obsessed with the Short-Term.
I’m always careful not to jump on the bandwagon of hopes and dreams that this pandemic will wake us up and result in a global transformation to Utopia. However, one huge lesson that I hope we’ve learned is the merit and importance of being prepared. As the planet becomes more densely populated and globalisation continues to develop with technology and travel; such events are likely to become more of a threat. We need to build society and its systems around being resilient to them. Sustainability and Resilience are best mates.
So how can Profitability join the club?
Funding
Well, many Governments, national and local are now offering incentives for environmentally focused businesses in the form of grants, interest free loans and tax breaks. There are many organisations including the Ellen MacArthur Foundation, WRAP UK and Zero Waste Scotland also providing accelerator and funding schemes for start-ups with a focus on a circular economy or sustainable business models. This means that you may be able to access support and funding for your business that you would have really struggled gaining before; as long as you meet certain environmental or social criteria. It really could be the difference between being successful and running out of fuel.
Policy/Regulations
National and Local Policy is also becoming increasingly significant. Running parallel to these incentives, more strict regulations and taxes are being introduced to discourage commercial waste and extraction of raw materials. What we’re likely to see is a ‘Polluter Pays’ approach, whereby it will become less and less cost effective to to continue ‘business-as-usual’ as you’ll be paying for the waste you’re producing. Say goodbye to profit margins and with regards to business models, it’ll be out with the old and in with the new.
So the question is, do you want to remain reactive, as we have been? Or do you want to prepare and be proactive to ensure the long-term future of your company? Sure, you could ride the wave and hope for the best but that sentence perfectly describes our approach to life during the past few decades and why we’ve been so woefully under prepared for this current pandemic.
Increase Productivity, Reduce Costs
Developing sustainable business practices will bring efficient operation that enhances the productivity of your employees. The reduction of unnecessary emissions in energy through conservation will also reduce costs substantially. Although it can be initially expensive to implement these changes within the organisation, it is evident that the long-term results will go further than just offsetting those costs.
New Revenue Opportunities
A major component of the Circular Economic Model and any business models within it, is that waste should not exist. Everything has a use and if it no longer serves a purpose for your company, it will do for someone else and another product. This means that your waste stream will become an income stream.
Products must be designed around reuse. It should be made from recycled, re-purposed materials and be strong, durable enough to be used more than 100 times over. Once it can no longer function as your product, it can either be re-used by another company or disassembled to be re-purposed by multiple companies. The last resort should be recycling but it is an important feature regardless. The product and its packaging must be entirely recyclable to be entered back into the system as feedstock.
If you’re an existing, well-established company, building sustainable values into the core of your business model doesn’t need to be a gargantuan task. Approach it like you approach working on profits. Run an audit of your entire business model and see where you could make changes to reduce your carbon footprint or to trim the fat from the business model to become leaner. Start with your internal operations and work outwards to your external supply. This exercise, even just on a surface level, will often lead to lowering of costs and improved profit margins.
One of the most important areas of your business to address will be an audit of your supply chain as it is there that you find the majority of emissions associated with your company. Research shows that about 60% of the carbon footprint of a manufacturing company is in the supply chain and for retailers it could be as high as 80%. The supply-chain exposure to human rights and social issues is equally high.