Sustainability in Business –Importance, Benefits, and Challenges

Competition, trade practices, channel partners, policies, and regulations are the usual business environment factors. From the CEO of a large corporation to the individual business owner, monitoring and managing these environmental factors takes up most of their working hours.

For a moment, take your mind off the microenvironmental factors of a business and focus your thoughts on the larger picture of the macro-environment - our universe, our society, our economy. Do they (macro factors) have a connection with business?

Yes, of course, businesses use or manipulate natural resources to produce items and services to satisfy our demands; companies cannot exist without people who constitute society. But does a business consider the wellness of the two critical categories on which its (business's) survival depends? That leads us to the crucial topic of this article, sustainability in business.

Business Sustainability

What does sustainability mean? Are we affected and benefited by sustainability in business? Is there anything we can do to help the cause of sustainability? A sustainable business cares about environmental, economic, and social issues and considers them in making business decisions.

This article analyses the cause of business sustainability in the natural environment, a top global concern today.

Sustainable practices are specific to an organisation, and each company integrates its programs with the organisational objectives. However, a few standard practices use more renewable energy, reducing greenhouse gas emissions, the desired level of effluent treatment and waste management, eco-friendly packaging, and eliminating water wastage.

Importance of sustainability

Besides helping the green light for a pollution-free environment, sustainability can bring operational success to a company. Research studies have indicated that consumers prefer to use products of companies actively practising sustainable initiatives. In addition, several investors use critical environmental and social metrics to judge an organisation’s sustainable and ethical practices.  Let us find out some of the key benefits.

Benefits of Sustainability

1. Improves brand image

A business is all about customers; when they (customers) show their preference on a brand (or a company), it signals good times for the brand! On the contrary, if customers move away from a brand, it spells doom and can even lead to the death of the brand (closure).

It is common to see advertising campaigns by companies talking about water conservation, reducing carbon emissions, or selling tea in a biodegradable bag and using recycled paper packaging.

Some of these facts (water conservation, recycled packaging) are projected as USPs by the respective companies, clearly indicating a strategic attempt for creating a favourable impression with their customers.

2. Impacts costs and production

Using energy-efficient lighting or bio-fuel for the furnace leads to a direct saving in operating costs for a company. In a large manufacturing setup, such savings can be substantial. Similarly, treating factory effluents before discharge (to the disposal system) can save a company from legislative penalties.

In the long run, such measures help improve the place's micro-environment (factory), leading to improved productivity.

3. Attracts Investments

Funds are critical to business, and enterprises are always on the lookout for funds for expansion. Beyond the usual funding route by banks and financial institutions, many companies, particularly the large ones, approach investors. Financial experts have found that companies with sustainable business practices attract investors more (than companies that don't).

But why do investors prefer such companies? A possible chain of thoughts perhaps will explain;

Companies with sustainable practices care about the environment and society; These companies are forward-looking; and therefore, better business managers;

Such companies take better care of their products and services (superiority over competitors)- customers will prefer such products- the business will grow -  return on investments will be better.

4. Help retention of employees

Several surveys have indicated that people prefer joining organisations with a corporate sustainability agenda. In addition, companies practising such programs gain by way of better retention of employees.

5. Easy Compliance

Environmental issues are a significant concern globally; increasing pollution, plastic hazards, global warming, diminishing water resources, climate changes affecting agriculture are pressing problems for most countries worldwide.

Increased awareness of these issues and exchanging ideas/action plans among nations leads to stricter legislation in most countries. From mining to waste disposal, many companies had to modify their operations at a considerable cost to comply with the requirements.

Many companies fail to meet the new guidelines and have to pay penalties. However, enterprises that have considered sustainability issues earlier and have made it a part of their policy can comply with the revised regulation and are beyond the scope of penalties.

Limitations of Sustainability

1. Cost involvement

Going green is expensive and will need a high investment. In addition, companies may find it challenging to organise the initial funding to meet sustainability requirements.

2. Managing corporate transition

Practising sustainability means doing things in a different way for a company, deviating from the usual practice. Along with the common objectives and targets, the employees now have to meet ecological requirements as well.

Restructuring of operational plans is necessary for effective implementation of the `new order’; suitable training, education, and guidance of all employees for a successful transition may be expensive, time-consuming, and may even disturb the regular operations.

For example, imagine a large company decides to go paperless, manage data and communication digitally- think about the extent of training necessary before the entire team is on the same platform.

Companies with weak balance sheets or without a proper organisation may find it difficult to arrange money and time to manage such a corporate transition.

3. Management of Sustainability Programmes

Integrating the changes in the operational system of a company may turn out to be a different challenge for businesses. Therefore, sustainability is expected to be monitored at the top management or the business owner level as a corporate issue.

Monitoring performance for sustainability is a crucial task – instruments, measuring parameters can be a tough challenge for most companies ( for example, It is not easy to regularly measure the carbon emission level).

4. Generating reports

Reports are a vital element of the monitoring process. Companies need to design suitable reporting methods for regular follow-up of sustainable initiatives. At present, it is common for enterprises to include sustainability issues in the financial reporting, which may lead to a diversion of focus.

5. Difficult to find industry experts

Being a new and evolving subject, finding the right consultant may be difficult. In addition, the absence of experts may delay the entire process for a company.

Conclusion

Rising global concerns on the environment are forcing enterprises to act responsively. As a result, sustainability is gradually figuring in the mission statements of many companies indicating a transformation, from a mandatory business requirement as perceived to an opportunity to move ahead.

Despite challenges, sustainability can help a company become stronger and healthier (profitable) because of consumer preferences. The world will benefit immensely when every business looks at sustainable practices as a responsibility and not an imposed task.

Also read:

1) How small business promotes industrialisation?
2) Impact of Lockdown on Indian Economy
3) GST: Is this a benefit to the Economy?
4) How funding boosts Startups to redefine Indian Economy?
5) OkCredit: Simple, Paperless & Secure solution for businesses

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FAQs

Q. How can sustainability help small companies?

Ans. Sustainability is gradually getting into the business practice of companies. Several MNCs operating in India has already made it mandatory to adhere to specific environmental issues.

For example, a printing ink supplier has to ensure that colours are heavy metal-free. Companies in the food processing business are insisting only on organically produced agricultural items. Small companies will have to follow sustainable practices as the entire industry will adopt similar measures.

Q. How can startups benefit by following sustainability practices?

Ans. It is established that consumers and investors prefer companies practising sustainability. For a startup, it is relatively easy to include sustainability measures into the operation plan right from the beginning. It may push up the initial investment slightly, but subsequent benefits will more than compensate.

Maintaining digital accounts can minimise bookkeeping and, in turn, facilitate easy accounting in an eco-friendly way. Several fintech firms are offering digital account services online. OkCredit is a reliable company in digital accounting with a long list of satisfied customers.

Q. As a small business owner, how can I implement sustainable measures if others are not continuing with the existing system?

Ans. A small business may face initial problems d to start the process due to financial and market constraints. But for a strategy to be victorious, some time is required. If your business demands packaging materials, it may be good to start using eco-friendly materials. First, however, you have to plan for the revised costing (initially may be higher) and consider some promotion to inform your customers about the change. Industry trends indicate a clear preference of consumers for such initiatives.