The Increasing Importance of a Sustainable Business Model

We have seen a rise in the importance of environmental, social, and governance (ESG) in recent years due to an increase in focus from consumers, investors, and regulators on the impact of businesses on society and the environment and the demand for more transparency and accountability from organisations. This increased focus has led many businesses to incorporate ESG factors into their business strategies. 

One of the main drives of the rise of environmental, social, and governance is the worldwide battle against climate change. Businesses heavily contribute towards greenhouse gasses and are under increasing pressure to reduce their carbon footprint and implement sustainable practices. As a result, many organisations have brought in initiatives such as reducing energy consumption, increasing renewable energy sources, and minimising waste.  

As well as being advantageous to the fight against climate change and the future of our planet, this increased pressure and focus around climate change can bring significant benefits to leaders and their organisations. Sustainability is not an issue that will go away; it will play an important role in the future of leadership. So, what are the benefits of sustainability in business? 

Benefits of a Sustainable Business Model 

Attraction and Retention of Talent 

In Deloitte 2021 Millennial and Gen Z survey, they found 44% of Millennials and 49% of Gen Zs are making decisions based on their personal values, such as climate change, inequality, and discrimination, and 40% of Millennials have chosen a role due to a business's sustainability commitments, compared to 25% of Gen Z and 17% of baby boomers. 

These findings show a generational shift in the prioritisation of business sustainability, and therefore an organisation's commitment to its environmental impact must form part of its talent strategy. 

Furthermore, if a company wants to remain competitive in the jobs market and have a license to operate, in that case, they must consider its sustainability efforts and how this is portrayed through its mission, culture, and values to aid the attraction of new talent and to increase workforce satisfaction. 

Keep in Line with Government Targets and Regulatory Demands

The rise of public awareness of environmental issues and global climate gatherings such as Cop 27 and the Paris Climate Agreement has increased pressure on governments to prioritise their commitment to lower carbon emissions and the planet's survival. Nations such as the UK, Japan, Australia, and Canada committed to reach net zero by 2050. Due to their environmental impacts, businesses are changing their practices to support their respective governments in achieving this goal. 

We are seeing a rise in regulations to ensure businesses do their part in increasing their business practices. For example, Switzerland recently passed the Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security. The act will require all companies to be net zero by 2050, based on indirect and direct emissions. Likewise, Nigeria has introduced the Climate Change Act with the aim of companies achieving net zero between 2050 and 2070. Any businesses that fail to meet these targets will be subject to fines. 

Increases Customer Loyalty 

For all businesses, customer loyalty is vital. As we have seen with Millennial and Gen Z employees, the younger generations are leading the fight against climate change and increasing the pressure on businesses to provide more sustainable products, services, and practices. In the UK, for example, 53% of Gen Z consumers are happy to pay more for brands running their businesses more sustainably. 

A business showing a clear commitment and transparency and actively taking steps to reduce its environmental impacts, such as using renewable energy or waste reduction, builds a positive reputation and trust among a market growing in social and environmental awareness and seeking brands that align with their values. The more a business can demonstrate these values, the more likely the consumer will return. 

Gain a Competitive Advantage 

In a highly competitive market, any method of helping you stand out from the crowd is vital. With the increased focus and interest in environmental issues, especially from the younger generation, leading the way with sustainability efforts will set you apart in both your consumer and talent markets.

As the focus on the environment intensifies, for many consumers and employees, the main reason for using or joining a brand may be its sustainability efforts. As we have seen, these efforts are already increasingly crucial to Gen Z and Millennials. 

Constantly evaluate your competitors and their environmental practices and ensure you continue to innovate to stay ahead. Your practices and transparency around them could be the difference between a consumer buying a product or service or an exceptionally talented individual joining your business over a rival.  

How Leaders can Implement a Robust Sustainability Strategy

Change Starts at the Top

As with anything in business, embracing the concept of becoming a sustainable and more environmentally friendly company starts with the leadership team. The CEO, C-suite, and all managers must be genuinely onboard with the sustainability strategy and ready to support it. 

Sustainability has become part of your culture, values, and goals. Striving for this change has to become part of a leadership team's everyday roles, as through their influence, it will become embedded in the workforce, and together the brand can become a more environmentally friendly, transparent, and attractive company to the consumer and the talent market. 

Increase Transparency to Build Trust 

To build consumer and talent market trust, a company has to be transparent in their efforts and steps around sustainability. Business leaders should ensure this is carried out as part of their sustainability strategy. 

Part of this transparency is reporting to the team, the wider community, and sometimes the government about your efforts and changes that the business is implementing. These open and two-way conversations allow people to understand what the business is doing and build trust. 

As business leaders, we must make our reporting measurable and quantifiable. When you begin to make changes and shift your company towards a more sustainable model, you need to be able to measure and hold people accountable at every level for making it happen. 

Engage Stakeholders 

When developing a sustainable strategy, involving internal and external stakeholders in its planning and development is vital. By engaging with stakeholders, including employees, customers, suppliers, and investors, you'll gain critical insight into their views and expectations around the business's environmental impact. These insights will allow for highlighting new opportunities for business innovation and the enhancement of consumer and employee engagement and the company's reputation. 

Here are steps that leaders can take to engage stakeholders:

• Identify and prioritise stakeholders - Identify the significant stakeholders that impact your business and prioritise them based on their level of interest and influence. 

• Develop a communication plan - Develop a communication plan of how you will engage with stakeholders regularly and keep them up-to-date with the business's sustainability efforts. Consider channels such as public forums, social media, newsletters, town hall meetings, and employee engagement surveys to promote communication. 

• Collaboration with stakeholders - Engaging with stakeholders in the decision-making process can help build trust and create a sense of commitment and ownership of sustainability efforts. This can include working with local communities to address social issues or working supplies to increase waste reduction. 

• Measure and report progress - Leaders should establish and set clear sustainability goals and measure their progress regularly. This allows the development of progress reports that can be shared with stakeholders to provide transparency, demonstrate the company's commitment and efforts around sustainability, and show the impact of their collaboration. 

• Seek continuous improvement - Stakeholder feedback allows you to review and improve sustainability practices continuously. These changes can involve updating strategies, adjusting goals, and investing in new technologies and processes to increase social impact and reduce the company's environmental impact. 

Using the Power of Technology 

With technology becoming more accessible and advancing at an incredible rate, leaders should evaluate how new and emerging technologies can streamline their operations and make their business models more sustainable. For example, technologies such as cloud and AI to automated vehicles and renewable energy can support the development of a sustainable business model.

Here's an outline of three key examples of how to use the power of technology to make your business model more sustainable.

• Renewable energy - Technology can support businesses in transitioning to renewable energy sources such as wind and solar. By generating renewable energy, businesses can reduce their carbon footprint and become more energy independent.

• Data analysis - Additionally, technology helps businesses to analyse data to identify areas where sustainability improvements can be made. For instance, data analytics can help highlight areas of high energy consumption, enabling businesses to develop solutions to reduce this impact. 

• Efficiency and productivity of operations - Technology can help to increase efficiency and productivity, resource consumption, and reduce waste of business operations. For example, using electric vehicles in operations increases productivity while reducing pollution.

Discover how Businesses Adapt to Tensions in Talent Planning

Increased government and societal pressure around the environment and sustainability is just one area that has impacted business practices, operations, relationships with consumers, and talent strategy.  

Further events such as the War in Ukraine and the cost of living crisis have made business planning increasingly difficult. As a result, the future holds many uncertainties, leading to tensions for businesses. To deal with these tensions, it is therefore vital that companies adopt a flexible approach to their workforce planning and talent strategy.

If you're a c-suite leader committed to building a sustainable business model, then it's crucial to understand the strategic vs. operational tensions in talent planning. To help you navigate this complex issue, we’ve created a comprehensive insight as part of the Armstrong Craven Review that explores the challenges and opportunities of aligning talent strategy with sustainability goals. Download the whitepaper today to gain valuable insights into this critical topic and take the first step towards building a more sustainable and successful business.