Previously, be immoral or harmful business practices. However,

Topic: BusinessComparative Analysis
Sample donated:
Last updated: August 18, 2019

Previously, the pursuit of sustainability initiatives by most companies was largely efforts to maintain and improve their reputation. But increasingly, many companies are becoming aware of the cost-cutting potential of sustainable practices, as well as discovering other benefits.When businesses first started to become interested in the concept of corporate social responsibility, the main reason for pursuing sustainability initiatives was mostly gathering goodwill and attaining a positive reputation with certain stakeholders, who were increasingly concerned with how companies were impacting the environment and their local communities.

Companies had come under an increasing amount of scrutiny from a society that was increasingly alerted to what they perceived to be immoral or harmful business practices. However, this attitude is starting to change among many companies, who are starting to discover the very real business-benefits to investing in sustainability initiatives.Sustainability helps the bottom line When the management consultancy firm McKinsey polled companies on their reasons for pursuing sustainability initiatives, they found that improving operational efficiency has recently replaced maintaining a good reputation as the main motive. Operational efficiency initiatives often involve programs to reduce energy consumption and waste associated with activities such as production and transport. An increasing number of companies are realizing that the opportunities in pursuing sustainability initiatives do not begin and end with PR.

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Instead, these opportunities actually involve real improvements to the bottom line. Many are realizing that the focus on sustainability and the maximizing of profits are not mutually exclusive or conflicting goals.A good example of an effort that, at the same time, maximizes profits and positively impacts sustainability is the efforts of Maersk Line’s Global Voyage Center.

At the center, employees monitor the locations of company ships and use real-time weather data to plan the most fuel-efficient routes. A mere half-percentage decrease in fuel consumption can result in both thousands of dollars in fuel savings as well as less CO2 emissions.Go green and get the best employees Another benefit companies are increasingly stating as a reason for pursuing sustainability initiatives is the positive impact on employer branding. In a time characterized by falling unemployment levels, the workforce is moving up Maslow’s hierarchy of needs, and self-actualization is quickly replacing income level and job security as the most important factor when choosing an employer. People are no longer satisfied with a nice paycheck: Many also want to feel like they are contributing to a better future for the planet. This sentiment among employees stresses the importance of maintaining a socially responsible and environmentally friendly corporate brand when a company wants to attract the best and most passionate talent from the labor-pool.

A competitive edge for the future According to McKinsey, in addition to reputation management, operational efficiency, and employer branding, the biggest reason for companies investing in sustainable initiatives is pursuing opportunities in new sustainable markets and products.The new sustainability market opportunities are especially evident in the automobile industry. Many car manufacturers are now developing electric cars, trying to get a piece of the rapidly growing demand for electric vehicles. In Norway, the world-leader in electric vehicles, almost a third of all new vehicles sold are either fully electric or hybrids. The manufacturers who don’t follow the trend and take advantage of the opportunity now will have a hard time competing in the future. Oil prices will continue to rise and prices for sustainably sourced electricity will keep falling until consumers stop buying gasoline-powered cars and instead opt for electric options.

The economic advantages of first movers are well established: The companies who spent the most time developing their electric cars will be the winners, and those who act late will face difficult-to-overcome barriers to entry in the market of sustainable cars. Just 10 years from now, the companies who were late to take advantage of the sustainability-movement will be left in the dust of the electric car.Many companies still find it difficult to quantify the business value of sustainable initiatives. According to McKinsey, one third still don’t know how much these types of initiatives add to shareholder value. But as we have seen with initiatives such as Maersk’s route optimization, the connection between sustainability and business value is becoming increasingly well defined and easier to quantify. And with that development, more and more businesses will experiment with solutions that are as profitable as they are green. The future of energy is looking cleaner all the time.

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