How to Tell if Your Business Is Failing to Prioritize Sustainability
As the world becomes increasingly aware of the urgent need to address climate change, sustainability has become a key concern for businesses across all industries. Companies that fail to take sustainability seriously risk falling behind their competitors and losing the trust of their customers and stakeholders. In this article, we will explore five signs that your business may be falling behind on sustainability and what you can do to get back on track.
Sustainability in business is not just about doing the right thing for the environment but also about creating value for stakeholders, including customers, employees, investors, and communities. In an age where consumers are more conscious and demanding sustainable practices, and stakeholders are keeping a keen eye on brands, businesses that do not keep up may struggle in the future.
Despite the growing awareness of the importance of sustainability, many businesses still struggle to keep up with the expectations of consumers, investors, and other stakeholders. Here are five signs your business may be falling behind on sustainability:
Lack of a sustainability strategy
A sustainability strategy is an essential component for any business that is committed to sustainability. A sustainability strategy is a roadmap that outlines a business's sustainability goals, targets, and actions. Without a sustainability strategy, a business may struggle to prioritize sustainability, allocate resources effectively, be reactive rather than proactive in its sustainability efforts, and may miss opportunities to create value for stakeholders. Moreover, a sustainability strategy can help a business to align its sustainability goals with its overall business strategy and to create value for stakeholders. In an ideal world, a business should involve stakeholders in developing and implementing the strategy.
Recent research shows that having a sustainability strategy is essential for the success of sustainability initiatives in businesses. A study by MIT Sloan Management Review and Boston Consulting Group found that companies with a sustainability strategy are more likely to achieve their sustainability goals and to create value for stakeholders. The study also found that companies with a sustainability strategy are more likely to report financial benefits, such as increased revenues and reduced costs.
One example of a business that has developed a somewhat robust sustainability strategy is the multinational consumer goods company Procter & Gamble (P&G). P&G has set ambitious sustainability goals, such as reducing its carbon emissions by 50% and sourcing 100% of its renewable electricity by 2030. The company's sustainability strategy, called "Ambition 2030," is based on three pillars: brands that serve consumers and the planet, supply chain that protects the environment and human rights, and society that is inclusive and equitable. P&G's sustainability strategy has helped it to prioritize sustainability, allocate resources effectively, and measure progress toward its sustainability goals. Although this strategy nor all of P&Gs operations are fully sustainable, it is an effort to prioritize sustainability to shift gears across their operations - recognizing the importance of ESG and sustainability practices. The reality is that adopting sustainability and embedding it across your business and beyond is complex and takes time but you have to start somewhere.
A strategy can help businesses to align their sustainability goals with their overall business strategy, create value for stakeholders, and achieve long-term success. If you don't have one, the best move forward is to get curious about how a strategy can elevate your sustainability efforts and your business and start working through a sustainability strategy with your team.
Low sustainability performance
Low sustainability performance is an obvious and very clear indicator that a business is falling behind on sustainability. Low sustainability performance may manifest in a variety of ways, such as high greenhouse gas emissions, poor working conditions for employees, or lack of diversity and inclusion. can be measured through various metrics, such as carbon emissions, water usage, waste generation, and social impact. If a business has poor sustainability performance, it may face reputational damage, regulatory risks, and increased costs. On the other hand, businesses with high sustainability performance can achieve competitive advantages, such as improved brand reputation, access to new markets, cost savings, and access to capital.
Recent research shows that sustainability performance is a pivotal aspect in a business's ability to grow successfully and even have access to talent and capital. A survey by the United Nations Global Compact and Accenture found that 97% of CEOs believe that sustainability is important for the future success of their business. The same survey also found that businesses with high sustainability performance are more likely to attract investment and talent and achieve higher financial returns than their peers.
Businesses with poor sustainability performance may face reputational damage, regulatory risks, and increased costs. On the other hand, businesses with high sustainability performance can achieve competitive advantages, such as improved brand reputation, access to new markets, and cost savings. All recent research suggests that sustainability performance is becoming increasingly important for businesses and that businesses prioritizing sustainability are more likely to achieve long-term success.
Inadequate or no stakeholder engagement
Stakeholder engagement is essential for building trust, understanding expectations, and identifying sustainability-related opportunities and challenges. Stakeholders include customers, employees, suppliers, investors, regulators, NGOs, and communities. If a business does not engage with its stakeholders on sustainability issues, it may miss out on valuable insights, feedback, and support. It may also face resistance, criticism, or boycotts from stakeholders who feel ignored or marginalized by the business or its leaders.
A recent study by McKinsey found that companies that engage with stakeholders on sustainability issues can create more value for stakeholders, including customers, employees, and communities. The study also found that stakeholder engagement can help companies identify risks and opportunities related to sustainability and build trust and legitimacy with stakeholders.
One example of how stakeholder engagement can be realized is the case of Unilever's Sustainable Living Plan. The plan launched in 2010 aimed to make the company's operations more sustainable while also improving the lives of one billion people by 2020. To achieve this goal, Unilever engaged with stakeholders, including suppliers, customers, NGOs, and governments, to identify opportunities and challenges related to sustainability. As a result, Unilever was able to develop innovative products and processes that reduced environmental impacts and enhanced social benefits. While they did not achieve all they set out to achieve, the plan helped Unilever build trust and loyalty with its customers, who increasingly value sustainability and social responsibility.
Research by the United Nations Global Compact has found that stakeholder engagement is a key driver of sustainability performance. The study found that companies that engage with their stakeholders are more likely to identify sustainability risks and opportunities and are more likely to implement effective sustainability initiatives. Stakeholder engagement is a critical success factor for sustainability initiatives and progress; it's an essential component of ESG. Engaging with stakeholders can help businesses identify opportunities and challenges related to sustainability, build trust and legitimacy, and create shared value for stakeholders.
Lack of transparency and reporting
Transparency is a key element of sustainability, and it is essential for businesses to be open and honest about their environmental and social impact. Greenwashing and Greenshushing have made consumers weary of brands that do not tell their true story or their story at all. A recent study published in the Business and Society Journal found that transparency is one of the most important factors in building trust with stakeholders, including building a trustworthy and ethical culture within a business. The study found that companies that are open and transparent about their sustainability efforts are more likely to be trusted by consumers and investors. Conversely, companies that are perceived to be secretive or opaque about their sustainability practices may face reputational damage and loss of business.
Transparency in the form of sustainability reporting is a crucial aspect of sustainability management, as it provides stakeholders with information about the company's sustainability performance and progress. However, some companies may not prioritize sustainability reporting, either because they do not see it as a priority or because they are concerned about the costs and effort involved. This can create a perception that the company is not serious about sustainability and may lead to reputational damage and loss of business.
Research by the Global Reporting Initiative (GRI) has found that sustainability reporting is becoming increasingly important to stakeholders. The study found that 80% of consumers, investors, and other stakeholders believe that sustainability reporting is essential for understanding a company's sustainability performance. Furthermore, companies that disclose sustainability information are more likely to be trusted by stakeholders and may enjoy a competitive advantage.
If your company is not transparent about its sustainability practices, it may not be serving its stakeholders. Customers and stakeholders are increasingly demanding transparency from businesses, and companies that fail to provide it may be viewed as untrustworthy or even unethical. Some businesses may be hesitant to disclose information about their sustainability practices for fear of negative publicity or legal repercussions. Don’t fall down the ‘GreenHushing’ Trap. This lack of transparency can be a red flag for investors and customers, who may question the company's commitment to sustainability.
To address this issue, consider developing a sustainability report that outlines your company's environmental, social, governance and impact. This report should be easily accessible to stakeholders and should include information about your sustainability goals, strategies, and progress. Also, consider how you can transparently and genuinely engage your internal stakeholders, such as employees and investors, in your sustainability journey.
Lack of employee engagement
Employee engagement is essential for successful sustainability practices. If your employees are not engaged with your company's sustainability goals, it may be difficult to make progress. When employees are disengaged, they are less likely to be committed to the company's sustainability goals and initiatives. A lack of engagement can indicate that the company is not doing enough genuinely to communicate its sustainability values or provide employees with the tools and resources they need to make a positive impact.
Employee engagement can truly breakdown your efforts even if you have a great plan and well meaning commitments. According to a study by Cone Communications, 64% of employees consider a company's social and environmental commitments when deciding where to work. Research by Gallup has found that employee engagement is a key factor in driving sustainable behavior in the workplace. The study found that engaged employees are more likely to adopt sustainable practices and are more committed to the company's sustainability goals. On the other hand, disengaged employees may not see the value in sustainability efforts and may be less likely to participate in sustainability initiatives.
These findings suggest that businesses that fail to engage their employees in sustainability may struggle to attract and retain top talent or achieve their sustainability efforts. Without the support and involvement of employees, sustainability efforts are unlikely to be successful.
Making your employees part of the journey is a critical aspect in your success in your sustainability efforts. Consider developing a sustainability training program for your employees. This program should educate employees about your company's sustainability goals and strategies, why you are pursuing this priority and why it's important for your business and for the world. Additionally, provide strategies and activities that every employee feels ownership and engagement with the training and the priority. A meaningful training program should provide them with the tools they need to contribute to these efforts effectively.
An Effort For The Future
Embedding sustainability throughout your business, living the ESG path, and then reaching the goals you set out for yourself as a business is a long and complex path. There is not one thing you can do that will solve all the issues or suddenly elevate your brand to sustainable hero status. We have seen companies develop world-leading sustainability plans and reports without true stakeholder engagement and then fail to meet their ambitious commitments. Consider how all these aspects work together, don't ignore your stakeholders because sustainability efforts don't end in the board room.
Sustainability is an increasingly important issue in the business world, and companies that fail to keep up with the trend may find themselves falling behind. Lack of transparency, employee engagement, sustainability strategy, stakeholder engagement, and general low sustainability performance are all signs that a business may be falling behind on sustainability. However, there are steps that businesses can take to improve their sustainability performance, such as investing in sustainability strategic planning and setting goals and commitments, reporting, engaging employees and stakeholders, and prioritizing sustainability throughout the organization. By taking action to improve sustainability performance, businesses can create value for stakeholders, reduce costs, and contribute to positive social and environmental impact. Ultimately making a business more sustainable and more resilient with a competitive advantage for the future.
