In recent years, many companies have put the issue of sustainability or ESG (Environment, Social, Governance) on their agenda and have already instigated numerous positive changes. While this was mostly done out of conviction, the current crisis in particular shows that it also makes business sense to adopt a sustainable approach. This is also supported by the recent study conducted by Commerzbank’s Entrepreneurial Perspectives initiative, according to which the companies surveyed see a wide range of opportunities arising from pursuing sustainability, from better handling of resources and assuming social responsibility to increasing employer attractiveness. Let’s take a closer look at the most important reasons for becoming sustainable and their impact.
1. Assuming social responsibility
More and more companies want to shoulder their social responsibility. They feel an obligation to the environment, to people and to future generations. This involves, for example, fair working conditions for their own employees as well as fairness towards external parties, suppliers and producers along the entire supply chain. This also entails keeping an eye on how companies within the supply chain treat their own workforce in terms of health, safety and ethics. All of this can lead to healthier working conditions, which are not only desirable for ethical reasons, but also contribute to healthy, sustainable productivity from a business perspective.
2. Conserving resources
The energy and climate crisis is making it even clearer how important it is to use resources wisely. Water, gas, wood and other raw materials are not available in unlimited quantities. At the same time, high levels of consumption have an impact on climate change. These are already good reasons to conserve resources. If there are additional shortages due to bottlenecks, there is also the question of whether and how business activities can be maintained under these circumstances. This not only affects manufacturing or processing companies; in our increasingly digital world, office activities also depend on energy availability. Lower consumption therefore contributes both to ensuring business operations can continue and to protecting the climate, and it also has an impact on costs.
3. Increased employer appeal
In these times when skilled workers are in short supply, attractive salaries and generous benefits are no longer enough to convince applicants. They are increasingly attaching importance to the purpose of the company and their own work. The extent to which an employer contributes to sustainability is thus becoming an important factor in attracting candidates and also influences how willing the existing workforce is to change. In addition to a “green image” with which employees can identify, a sustainable outlook also has an impact on everyday working life. Leaner processes or the option of mobile working, for example, do more than just reduce emissions. They also reduce the workload of employees and can improve their work-life balance, which can have a positive impact on productivity and satisfaction.
4. Strengthened customer loyalty
Customers are also increasingly asking about sustainability. End consumers value sustainable and fair products, production methods, and supply chains. In the B2B environment, companies are even obligated to select business partners based on their sustainability performance, either through internal guidelines or, in the future, through reporting requirements as part of the Green Deal. Consequently, sustainability is becoming more and more relevant for establishing new business relationships and for customer loyalty.
5. Promoting innovation
The shift in thinking in terms of sustainability also has an impact on the strategic orientation of the entire company. It opens up new business areas and business models, new products, sales and distribution opportunities. Processes are being rethought and realigned. All in all, there is great potential for innovation here, enabling companies to adopt a sustainable and, at the same time, forward-looking approach in a business sense.
6. Securing funding
Be it innovation or core operations, companies need stable financing for all their business activities. Sustainability becomes interesting in this respect when one looks at the preferences of credit institutions and investors. Investors are increasingly giving preference to green companies and technologies in their investments because they are seen as forward-looking. Banks are required by BaFin to check sustainability risks in terms of ESG when granting loans, e.g. whether a borrower has an excessively high ratio of fossil fuels in energy consumption. Those who meet the sustainability criteria therefore have a better chance of obtaining funding.
7. Enabling ethical conduct
If companies comply with ESG standards, they create the framework for sustainable and ethical conduct. This begins with data protection and extends to digital ethics, which, for example, makes it possible to comprehend the decisions of AI-based applications. Defined processes for handling resources – which also include data – make it easier for employees and business partners to handle them ethically and sustainably.
Implementing sustainability sustainably
There are many more reasons why sustainability is relevant for companies. The important question though is how can sustainability and ESG be implemented? Many companies are already putting isolated measures in place, as the study mentioned at the beginning shows: recycling, reducing CO2 emissions, or converting production facilities are a few examples. What the study also shows, however, is the frequent lack of a joined-up strategy: only 40% of companies have a sustainability strategy today, which is actually 3% fewer than in 2020. By contrast, isolated measures are implemented pragmatically. However, these alone make it difficult to ensure a sustainable direction that will continue to have an impact in the future. The reporting required by the EU’s Green Deal also requires a holistic approach in order to meet the comprehensive criteria with as little expense as possible. Companies that dovetail their business and sustainability strategies will find this easier. A holistic approach makes it clear where there are relevant KPIs, which areas and processes influence each other, and how synergies can be created during optimization. It is also interesting to see how such companies collect and refine their KPIs: they make targeted use of data and AI, for example, to create transparency, generate forecasts and manage measures. Since digital transformation is on the agenda of most companies in any case, it is possible to start here directly and take sustainability into account. If this is done, strategies and measures can interlock and ensure sustainable success.
Where do you stand when it comes to sustainability and ESG, and what questions do you have about implementing these aspects? Our sustainability specialist and ESG consultant Dr. Michael von Papen and his colleagues will be happy to assist you and discuss your strategic approaches and possible solutions: you can get in touch with them here.