The economic situation is not what it was a couple of months ago, let alone a couple of years ago. This, combined with a changing political climate, has made companies more cautious in how they talk about sustainability.
Yet, in a pure bottom-line sense, the case for sustainability hasn’t weakened. Sustainability makes sense where it is tied to business operations as a whole. The biggest gains are found when it is a direct piece of a company’s overall strategic plan.
“Sustainability measures more clearly deliver commercial value for business when they are aligned and integrated with operational processes and strategy, rather than approached as a sidecar,” says Mary Parkinson, assistant professor in management, UCD Michael Smurfit Graduate Business School.
The most effective sustainability initiatives sit at the heart of the day-to-day operations of a company. This includes ensuring that working conditions for staff are more than adequate.
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“Human capital is an area where there are clear links, when workers are centred in organisational processes. Good working conditions can support good mental health, worker productivity and retention,” says Parkinson.
Of course, there are more than benefits to consider when it comes to sustainability. There are the risks to fundamental business operations by not engaging heavily in such an approach.
“Climate and sustainability risks will continue to increasingly materialise no matter the political debates. The planet, and Earth systems including climate tipping points, does not care whether a president or business believes in climate change,” says Fabiola Schneider, assistant professor in accounting, UCD Michael Smurfit Graduate Business School.
While the political climate at present means the word sustainability tends to be used less than before, the alternatives are essentially business-coded euphemisms.
“Yet the softening of language tells only part of the story: terms like ‘green energy’ or ‘sustainably produced’ and ‘climate action’ may be giving way to ‘energy security’ or ‘resource efficient’ and ‘resilience’, but the money is still being directed towards the same green practices,” says Schneider.
The key thing to bear in mind is that sustainability, or whatever alternative phrase gets doled out, is about far more than the label. The key aspect is to make sure it helps companies to be better at their core operations.
“For businesses operating under margin pressure, sustainability initiatives need to compete for investment in exactly the same way as any other business project,” says Lisa Sheenan, assistant professor in banking and finance, UCD Michael Smurfit Graduate Business School. “The key question is not whether an initiative is labelled ‘sustainable’, but whether it improves productivity, reduces operational risk or strengthens long-term competitiveness.”
On a practical level, energy management is one of the clearest areas where businesses can gain through sustainable practices.
“Energy management provides a good example as, rather than simply trying to reduce energy consumption, many organisations are implementing structured energy management systems such as ISO 50001, which help firms continuously monitor energy performance, identify inefficiencies, prioritise investments and embed energy management into day-to-day operations,” says Sheenan.
In addition to cost control, sustainable practices also help reduce overall exposure to shocks in the market.
“Supply chain resilience is another increasingly important area as recent disruptions, from the Covid-19 pandemic and geopolitical tensions to extreme weather events, have highlighted the financial consequences of relying heavily on single suppliers, critical transport corridors or geographically concentrated production,” says Sheenan.
Beyond the day-to-day business, being able to show that sustainability is at the heart of operations can aid with access to capital for longer-term projects.
“Financial markets with usable sustainability data and tools are enabled to provide incentives for the green transition of companies,” says Schneider. “For business, sustainability is increasingly not just a risk to be managed but a route to cheaper and more accessible capital.”
The broad appeal of sustainability has its own self-renewing benefit, with more coming out for a business the more it puts in.
“The initiatives that deliver most value for organisations then are ones that improve the resilience of the organisation while also improving the everyday working conditions of the people that work there,” says Parkinson. “To do so, they must integrate with the operational and strategic core of the business, rather than functioning as a costly sidecar.”
