Sustainable development and business – the advantages of being an early adopter

This is the first in a series of articles looking at different aspects of sustainable development and how it is applied to businesses.

Do customers research a company’s environmental performance before deciding to purchase?

Businesses today are bombarded with confusing terminology about their future development. They should become sustainable, zero carbon or net zero businesses, taking part in the low carbon economy of the future and above all green.

A sustainable business is one that adopts strategies and ways of working that meet the needs of its stakeholders (shareholders, employees and customers) today without using and/or causing harm to all of the human and natural resources that will be needed in the future. As we emerge from the Covid-19 pandemic there is an expectation that businesses will become more sustainable. This is encapsulated in the UK Government’s policy to promote the recovery:

‘Building back better, greener and faster. [1]

Why should a business become sustainable?

The demand for businesses to become more sustainable is coming from three different directions:

1. Customers
In a recent survey of 2000 consumers [2]

72% look to see if the company acts in an environmentally friendly way.

65% think it is important that the products or services they purchase are not harmful to the environment.

80% will be more likely to purchase goods or services in the future from a company that is environmentally friendly.

2. Regulations

The UK Government has been highly active in passing regulations and developing policies that require businesses to become more sustainable. On the 27th of June 2019, the UK became the first major economy in the world to pass legislation to achieve net zero by 2050. This means that the production of any green house gas emissions would need to be offset by schemes to remove the equivalent amount of gases from the atmosphere. Examples of offsetting schemes include planting trees and using carbon capture and storage.

To ensure businesses meet the 2050 net zero target the government has published several policy initiatives such as the UK’s decarbonisation strategy [3]. This gives advice to UK business on how to transition to a net zero economy by 2050. A net zero hydrogen strategy to reduce emissions from the gas grid and transport will be published sometime in the summer of 2021.

3. Investors

Investors are increasingly asking questions about the environmental performance of the companies that they own. In 2020 Morgan and Stanley [4] reported that investors are embracing sustainable investing. Increasingly companies will only be able to attract investment funds to grow and develop if they have a sustainable business model.

Why should you be an early adopter of sustainable development?

As we emerge from the global pandemic and the economy recovers if your business is green, trading without harming the environment, it will give you significant advantages in the marketplace. An early adopter business will also have more time to consider the implications of future legislation and have more time to implement the regulations.

Early adoption of sustainable principles will, therefore, place your business in a stronger competitive position than your non-sustainable rivals.

The next articles in this series will look at how a business can become sustainable.

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Paul Beers
July 2021

Sources

[1] Build Back Better our Plan for Growth. HM Treasury March 2021 (www.gov.uk/official-documents)
[2] Renewable Returns: How SMEs can Benefit from the Green Economy. E.ON 2021 (Benefiting from green recovery | Shaping SMEs | E.ON (eonenergy.com)
[3] Industrial Decarbonisation Strategy. UK Government March 2021
[4] Sustainable Signals Morgan Stanley May 2020 (Sustainability Investing on the Rise | Morgan Stanley)

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