SBC is delivering a series of guides on the fundamentals of sustainability, covering topics ranging from sustainability strategies through to nature and biodiversity. As part of this series, we caught up with our members to get their insights on some of the different topics covered in the guides. In this first Q&A, we spoke with Emma Elbaum, Managing Consultant – ESG Strategic Advisory at SLR Consulting to get her thoughts on how to make the business case for sustainability.
Q: We’re in a recession – why should I be focused on sustainability at all? Isn’t it just a nice to have?
A: This may seem surprising, but if your business is working on making a profit year on year, you’re already focused on sustainability (albeit a portion of sustainability). Sustainability is really just looking at everything your business does, including activities that may not appear on a balance sheet, and making choices about how to do it better for the long-term.
Recessions, as difficult as they are, can cause businesses to lose sight of their long-term goals in the interest of short-term gains. However, when (and if) businesses come out the other side of a downturn, those with sustainability strategies tend to fare better (see research on Great Recession here and COVID-19 here).
Importantly, sustainability is something that your business bakes into its strategy, not something that gets bolted on afterwards (which could lead to greenwashing risks). A focus on sustainability can actually help your company through the economic downturns by mitigating risks and reducing costs through operational efficiency, while building resilience. It can also set you up to take advantage of opportunities that may present themselves during upswings.
Q. How will sustainability benefit my business?
A. There are so many ways sustainability can benefit your business:
- Do you have a supply chain? Using sustainability to guide procurement can increase resilience and reduce costs.
- Do you sell products or services to customers? Credibly selling on sustainability can open new markets and attract premium pricing while reducing greenwashing risks.
- Do you get capital from public or private markets? Sustainable companies are more attractive for investors because they tend to generate higher returns.
- Does your business have employees, particularly highly trained employees? Companies with leading sustainability strategies tend to have lower turnover.
- Do you have physical locations/assets for your business, or are you planning capital expenditures? Companies with low-carbon transition and climate adaptation/resilience plans are prepared to minimise risks (and maximise opportunities) related to technological lock-in, climate change-driven damages, and changing market conditions, among others.
The list goes on, but what it boils down to is sustainability is just good business – it’s about understanding how non-financial metrics can affect your business and leveraging that knowledge to improve performance and impact, now and into the future.
Q. So where should a business start?
A. Above all, sustainability should be aligned with your core business strategy, with an aim for integration (as mentioned above). If you haven’t done so already, the best place to start is defining why you’re in business – what are your vision, missions, and values? At SLR, we find that companies who are unclear here tend to struggle with using sustainability to fill the gap.
Next, you’ll need to figure out what issues matter to your business, and, critically, prioritise them. Consider undertaking a “double materiality” exercise to engage stakeholders and understand the financial and non-financial impacts to and from your business. Priority issues vary by company and by industry, but there are many resources available to point you in the right direction (such as the SASB Materiality Finder, now part of the IFRS Foundation).
From there, you can build out a strategy with supporting goals, targets, and KPIs, with ambition levels aligned with the most significant impacts. You only have so much time and resources so it’s essential to allocate those where they’ll contribute most to your business. We often find that there are issues that companies need to monitor and manage, but a few key issues where you’re expected to be bold.
Building a sustainable business may seem like it’s impossible, but the most important part is getting started.
