Practicing corporate sustainability and attention to environmental, social, and governance (ESG) issues are now critical for all companies across all industries. The latest McKinsey Global Survey shows that 83% of investment professionals and C-suite executives believe ESG programs can generate more shareholders in five years than today. In Accenture's research on responsible leadership, companies with good ESG performance enjoyed better-operating margins than those with lower ESG performers. Shareholders also received improved annual shareholder returns, which outpace poorer ESG performers.
Sustainability is a business approach to developing long-term value by considering how their operations affect ecology, society, and the economy. Sustainability is built to create strategies that foster company longevity.
Transparency becomes more prevalent as the expectations of corporate responsibility increase. Companies are being recognized for their acts on sustainability. Good intentions and professional communications are no longer enough.
To address sustainability properly, companies need to bridge two crucial gaps:
The knowing-doing gap: While 90% of executives believe sustainability is important, only 60% of companies incorporate it in their strategy, while 25% have sustainability incorporated in their business model.
The compliance-competitive advantage gap: Companies now understand that sustainability is an area of competitive advantage. All companies need to be compliant and apply corporate sustainability practices. Management must address these topics separately instead of meshing them together. Compliance must be holistic and "must do."
Practical corporate sustainability recommendations
There is no "one right solution" to sustainability, but the best solution will depend on the aim and stakes of a company. Here are a couple of practical actions to improve sustainability practices.
Align strategy and sustainability. Management must ensure that the company strategy and sustainability efforts are aligned. Divergence is prevalent, which makes the sustainability efforts fragile, lacking prioritization and commitment. A good example is Unilever's Planet Positive initiative, designed to give more than the company takes from the planet by helping regenerate 1.5 million hectares of land, forests, and oceans by 2030. By 2025, the company claims any plastic used in its packaging will be eco-friendly and recyclable.
Compliance before competitive advantage. Companies must address waste management, pollution, energy, and human rights/labor responsibility compliance. Investors are also concerned with compliance. Investors increasingly shy away from businesses with compliance risks. The 2021 EY Global Institutional Investor Survey reveals that 74% of institutional investors said they were more likely to divest from companies with inadequate sustainability performance, while 90% would pay more attention to a company's sustainability performance for their investment decisions.
Reactive to proactive: Many large companies leading sustainability like Unilever, Coca-Cola, Nike, IKEA, and Nestlé have stepped in response to a crisis. Startups and SMEs must be proactive with corporate sustainability practices before customers notice.
Transparency matters. This is vital to review and enhance sustainability practices. Judging fairly without transparency is impossible as it builds on the idea that an open environment in the company and the community will boost performance. Transparency can only be achieved via open communications with all key stakeholders, information disclosure, and accuracy.
Engage the whole organization. Let's cite Salesforce, a company fully committed to making every employee and department accountable to corporate sustainability, including it into its core values. The company can leverage its resources to make proactive actions and further include sustainability in all business aspects.
Corporate sustainability is a major business challenge that affects the global community. A reassuring number of companies are starting to become forward-thinking sustainability champions. It's not a matter of "if you need it" because you "must."
