July 16, 2020
Sustainability is no longer a luxury for businesses. Here’s what you need to know.
What’s changing, who’s doing it, why it’s worth doing and how to get started
To be sustainable means to have the ability to survive through change.
The word “sustainability” comes from “sustain” — which can mean “maintain”, “support”, or “endure”.
Since the 1980s, the term “sustainability” has often been used to refer to human sustainability on planet Earth.
For businesses, the concept of “sustainability” for any business covers 3 key areas:
- Economic sustainability of the business and its industry,
- Societal impact on customers, stakeholders (like employees & investors) and the wider community and
- Environmental impact, (like their contribution to climate change, use of water and resources).
At CarbonClick, we’re passionate about enabling businesses to take environmental action. While building our carbon offsetting software we’ve learnt a lot about sustainability and love enabling others to do the same.
In this article we’ll outline:
- What: The top 5 changes happening in sustainability
- Who: A business leading in sustainability and an industry lagging behind
- Why: How sustainability can increase profits and reduce risk
- How: 4 ways to act on climate change and become a sustainable business
What: The top 5 changes we are seeing in sustainability
1) Our climate is changing and the world is taking notice
Concern for the environment is reaching fever pitch. In 2019 we saw 16-year-old Greta Thunberg take U.S. President Trump and the UN head-on, condemning them for their lack of action on climate change. Millions of school children followed in her wake, striking from school and taking to the streets in the Fridays for Future movement.
Climate change really matters to most people. In a recent Reuters study, 69% of respondents, across 40 countries said they consider climate change to be an extremely or very serious problem
2) More consumers are thinking about their environmental footprint
You can now add environmental impact to the checklist of things people think about when they make purchase decisions. It’s influencing the companies people choose to support, power providers they use and the kinds of cars they are buying.
Neilson’s 2018 Sustainability Report found that 81% of respondents agreed: “It is extremely or very important that companies implement programs to improve the environment.” In the same report, Neilson found that 73% of respondents would change their consumer behaviour to reduce their environmental impact.” And they mean it.
3) These eco-conscious consumers are voting with their wallets
In the U.S., 2019 research shows that 50% of consumer packaged goods (CPG) growth from 2013 to 2018 came from sustainability-marketed products in food, drug and mass merchandisers.
Analysing this same data, the Harvard Business Review found that products that had a sustainability claim on-pack accounted for 16.6% of the market in 2018, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from 2013. Most important, products marketed as sustainable grew 5.6 times faster than those that were not. In more than 90% of the CPG categories, sustainability-marketed products grew faster than their conventional counterparts.
4) For businesses, sustainability is no longer a luxury
Businesses who fail to act proactively could end up with core products becoming unpopular or even unsellable, Mckinsey reports.
While hotter temperatures might increase demand for cooling systems, consumers stricken by eco anxiety will prefer eco friendly cooling options. If companies don’t innovate their existing product lines to offer more eco-conscious solutions they could find their customers shopping elsewhere.
The good news is that doing the right thing is no longer at odds with increasing profits and revenue. In fact, they are becoming increasingly interlinked. A 2018 Neilson report found that sales of supermarket products with sustainability attributes grew twice as fast as the weighted average (+5% vs. +2%).
“No matter what, sustainability is no longer a niche play: your bottom-line and brand growth depend on it.” — Neilson 2018
5) Governments are starting to create climate change regulations
While the punters are taking to the street with signs and picking eco-friendly options in the supermarket aisle, government bureaucrats are beginning to regulate.
As part of the Paris Agreement in 2015, governments from around the world committed to reducing their greenhouse gas emissions, so that we can avoid the worst effects of climate change.
In order to meet their obligations under the Paris Agreement, governments will have to start taking action and legislating to reduce their emissions. This might look like:
- Discouraging carbon-intensive activities. This could include increasing the price of emitting through taxation, levies or emissions trading schemes.
- Encouraging clean technology and renewable energy. Clean technologies could be subsidised, businesses with sustainable products and R&D could be funded by green finance
These top-down approaches affect the entire economy — no business will be left unaffected.
Who: As our world weathers these changes, there will be winners and losers
We have seen some businesses take a leadership role in the fight against climate change. On the other hand, those who have delayed, risk being left behind. Here are two examples from both ends of the spectrum.
Sustainability winner: Allbirds
Environmentally friendly footwear company Allbirds has seen an incredible rise to success since its creation in 2014.
Former New Zealand All White Tim Brown founded the company from a New Zealand wool industry research grant, with the desire to make a shoe out of merino wool.
Since its inception, Allbirds has seen a stratospheric rise to success. The company raised $119,000 on Kickstarter in five days, secured $7.25million investment in their first year of business and recently, raised $50M bringing their total valuation to $1.4B. (The fact their shoes found themselves onto Leonardo DiCaprio’s foot probably didn’t hurt either).
What sets Allbirds apart from other brands jumping on the ‘green’ or ‘organic’ bandwagon is the way they have built sustainability into their products.
All Birds follows a 3 step approach: 1) measure, 2) reduce, 3) offset.
- Measure: Allbirds measure the emissions of their products from their raw materials to their end of life. For some products, this is easier than others, but this is the first step towards carbon neutrality.
- Reduce: Next they reduce their impact by incorporating natural and recycled materials. The result? Allbirds’ Wool Runners which take 60% less energy to manufacture and have a 40% smaller carbon footprint than conventional trainers.
- Offset: Even the most sustainable shoe leaves a footprint, so Allbirds use carbon offsets to compensate for any emissions left over. By investing in carbon offsets that capture carbon in soil and plants, Allbirds can ensure their environmental impact is completely neutralised.
A special touch from Allbirds is the way they are educating their customers about their carbon footprint. In fact, they are putting it on their shoes so no one can miss it.
“The businesses that are prepared now are the ones that are going to win in the long run. So it’s part for the good of everyone and it’s part for the good of the business” — Tim Brown
Sustainability Loser: The Oil Industry
Fossil fuels like coal and oil are still the backbone of world production and transport, and many companies selling them are still enjoying considerable profits. But business as usual, however, could leave the industry in murky waters.
CNBC host Jim Craner stated on live television in January that oil stocks are now in the ‘death knell phase,’ likening them to “the new tobacco”. Craner explains that even though these companies might still look like attractive investments, in the long term these companies are heading out to pasture. ON CNBC’s news show Craner bluntly stated “Look at BP; it’s a solid yield, very good. Look at Chevron; they’re buying back $5 billion worth of stock. Nobody cares.”
“This has to do with new kinds of money managers who frankly just want to appease younger people. That they (younger people) believe a fossil fuel company can’t ever make themselves sustainable” Craner explains.
Here is a perfect example of an industry that is feeling the heat because they are falling behind the curve. Fossil fuel companies have a long history of obstructing the change our world needs to see for the sake of short term benefit. For them, it simply makes business sense.
Yet, big oil’s stubbornness to change has left them ‘weaker than ever’ says the Guardian.
There is a lesson here for any business. Sustainability matters.
Why: The benefits of sustainable business
Done right, sustainability can increase profitability.
John Elkington, the world authority on corporate responsibility and sustainable development, writes: “the goal of sustainability requires a more extended timeline for return on investment (ROI) but once initial investments are made, they can actually lead to increased profitability”.
Imagine a tech company that uses lots of energy (and carbon) to cool its data centres through traditional air conditioning units. By investing in a ‘free cooling’ system that uses fresh outdoor air to cool the data centres, the company could save money long term by increasing their efficiency.
Similar investments in sustainability may initially cost money but typically mean that the company is a more attractive place to work. 86% of millennials would consider taking a pay cut to work at a company whose values align with their own, according to LinkedIn’s 2018 Workplace Culture report.
In a storm of climate change risk, a green umbrella helps.
Remember the hordes of protestors taking to the street, demanding climate action? They are the consumers fretting about their personal environmental impact and are looking for environmentally savvy products and services.
And don’t forget those government regulators trying to ease themselves of the public and international pressure they are facing. That means a higher carbon price, stricter regulations on polluting and more green investment.
Companies that take action early can reduce the risk that climate change poses and be better prepared for a changing world.
How to get started with sustainability
Carbon neutrality is one way to rise above the tide
Carbon emissions are the main culprit in the climate crisis. The way we are going to beat the crisis is by getting to ‘carbon neutral’.
Carbon neutral means that through measuring emissions, reducing those emissions and offsetting any emissions leftover. The result: net zero carbon emissions. These 3 steps are vital for all of us to transition away from a climate crash course and towards a better future.
For more information on going carbon neutral, check out our article: Carbon neutrality: What it means and how your business can get there
Designing by sustainability is another smart way to go green
Companies can literally design sustainability into their products and business strategy.
In the “design by sustainability” approach, new products are designed to minimize waste and to be broken down for resume or recycling. Climate-smart business strategy means aligning business interests with climate change mitigation and adaptation, just like Allbirds have.
For some inspiration, check out Siemen’s with its dedicated “environmental portfolio” of carbon-efficient products or Saint-Gobain, the construction and packaging giant, which is putting sustainable housing technologies at the core of its product development strategy. For more on sustainability design, check out McKinsey’s article How Companies can Adapt to Climate Change.
Every company wants to capitalise on its sustainability investment. ‘Greenwashing’ is what happens when they capitalise more than they should be.
It can be tempting to focus on getting the sustainability page top-notch and pumping out the slickest sustainability comms we can muster. It’s understandable to want to capitalise on their efforts.
But just remember, this is a fight to literally save the world. In a world charged up by doomsday climate change headlines, consumers will take great relish in publicly shaming greenwashing on social media.
At the very worst it can lead to a PR disaster. Remember the Volkswagen emissions cheating scandal? Volkswagen released an ad campaign to green up diesel’s dirty reputation, claiming that it used a technology where it emitted fewer pollutants.
Later, it was revealed that the company rigged 11 million diesel cars with technology designed to cheat emissions tests. So how bad were they cheating? Their vehicles were emitting pollutants at levels up to 40 times the U.S. limit.
Not only did Volkswagen have to pay $14.7 billion in a lawsuit, but their backfire was plastered over newspapers all over the world.
And, finally, let’s not forget to practice what we preach.
It can be tempting with a problem like climate change to always be focusing on the macro; sustainability plans, rolling out electric car fleets, carbon neutrality and the like.
It’s also tempting to think that cycling to work or starting a compost heap don’t mean much in the scheme of things. I’ve been guilty of this kind of reasoning myself.
But no matter how small these actions might be, they make us feel empowered. Taking action puts the power back in our hands. It relieves us of our sense of impending doom in the face of a global crisis we can’t touch or prevent by wearing a facemask. It puts the power back in our hands as citizens, consumers and members of our community.
The best part for businesses is, these personal actions make the best sustainability stories too. If your team is out planting trees, and you’ve got colleagues that are travelling and eating sustainably, this is the kind of thing everyone can relate to. Showing the world you and your team members riding their bikes to work proves that you are really living by your values.
In Greta’s words: “I know we need a system change rather than individual change. But you can not have one without the other.”
CarbonClick makes it possible for consumers to reduce their environmental impact with a click of a green button at the checkout.
For businesses, it’s carbon offsetting they can trust. Now getting a carbon offsetting program is simple, painless and affordable.
Get in touch to find out more — email [email protected] today.
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