It’s no secret that consumers are valuing corporate sustainability more and more each year – a recent study showed that nearly 80% of consumers consider sustainability when making purchases¹. If you’re a business, you’re wanting to meet this demand – but why should you care? How will it benefit your business financially, beyond consumer approval? Here’s the strategical side of sustainability and how your business could benefit from ESG (Environmental, Social, and Corporate Governance).

1. Reduced Costs

As our earth’s materials deplete, prices skyrocket. Implementing resource efficiency not only promotes sustainability, but also keeps costs down. A study by McKinsey found a significant correlation between a company’s resource efficiency and the strength of its financial performance². The same study also found that reducing resource costs can improve operating profits by up to 60%³. Additionally, sustainable practices can earn a company tax incentives and subsidies, including the 179D deduction, electric vehicle credit, alternative energy credit, and ENERGY STAR credits and deductions.

2. Investor/Stakeholder Approval

According to a 2020 study, 85% of investors considered ESG factors in their decisions⁴. Investors have already recognized the financial benefits of sustainability, and many firms, such as BlackRock, have upheld ESG frameworks in their investments. A FTSE Russell study conducted in 2022 revealed that 72% of asset owners agreed that climate and sustainability standards will have improved or more stable long-term returns⁵. The same study found that 86% of all asset owners are globally implementing sustainable investment in their investment strategies (76% in 2021)⁶.

3. Risk Mitigation

The same FTSE Russell 2022 study revealed that the top reason for implementing sustainable investment among investors continues to be long-term investment risk⁷. Regulatory interventions can prevent a corporation from operating to its full potential and optimizing their freedom to strategize. McKinsey reports that one-third of corporate profits are typically at risk from state intervention and for automotive, aerospace, defense, and tech sectors, the value at stake can reach as much as 60%⁸.

4. Competitive Advantage

When combining the 3 factors above, a corporation has a much greater business value, and in turn, competitive advantage. A 2020 Accenture study found that companies with a high ESG rating had average operating margins that were 3.7x higher than those of low ESG ratings⁹. Meeting consumer demands drives business and creates advantage over other companies, and 63% of Americans want corporations to adopt sustainability¹⁰.

Conclusion

Sustainability is so much more than a strategy, but it is important to understand the benefits that it can have on a business so that we may all benefit from sustainability. As the numbers show, sustainability is only becoming more of an attractive business quality, and I expect these benefits to go exponentially in upcoming years.