This article is part of the “Business case for Sustainability” series on the Zerwaste blog. In this post, we will try to establish the contribution of sustainable growth in the business case for sustainability.
Welcome back to the Business case for Sustainability Journey!
Some studies from the Harvard Business Review and McKinsey seem to show that sustainable companies tend to grow and generate additional revenue as they experienced:
- Significantly higher mean sales growth, return on assets, profit before taxation, and cash flows from operations;
- Lower cost of debt by 40-45 basis points;
- No meaningful declines in share price compared to their industry peers during crises.
1. Drives Internal Innovation
Making the switch to sustainable business practices provides new business opportunities to:
- Grow new, innovative ideas;
- Develop sustainability-related products/technologies to fill the needs of customers/company (R&D function)
- Redesign products to meet environmental standards or social needs
- Integrate digital transformation
2. Composition of Business Portfolios
Nowadays, investors can track high ESG performers but also correlate financial and ESG performance. This nonfinancial information is used to inform investment decisions and to prove sustainable return on investment.
If you can justify the ROI of your sustainable practices, it will also guide investment/divestment decisions at the portfolio level, internally and externally.
3. New Markets
In a competitive market, any way to increase your market share and differentiate your product and brand from the competition is valuable.
That’s why it is key to have a better understanding of opportunities related to sustainability and to use it as a competitive advantage to reach new market segments/geographies and stand out. It is especially the case when bidding on a contract. Indeed, more and more requests for proposals require sustainability information and proof of commitment from competing vendors.
If your competitors haven’t made the switch to sustainable practices yet, you will be considered a trend-setting leader in sustainability.
“The leaders, the firms who are driving real change and reaping the benefits of being first-movers are often as motivated by a driving desire to make a difference as they are by the wish to make money,” Henderson says in Sustainable Business Strategy.
See you soon for more information on the sustainability business case!