Environmental Sustainability: A Definitive Guide

December 29, 2021

With the increasing focus on the environmental impact of climate change, countries are now shifting their focus on reversing these effects and preventing further damage. The recently concluded United Nations Climate Change Conference of Parties (COP26) in Glasgow last November 2021 has shown the need for organisations to fully commit to environmental sustainability practices to continue building thriving communities and secure their future growth potential.

As the Covid-19 pandemic and the rising number of natural disasters in the last few years upended countries, economies, communities and took its toll on both animal and human life, discussions about the active pursuit and commitment to environmental sustainability have also increased. More and more business leaders and company executives are now seriously considering a sustainability strategy for their firms to remain competitive.

With most governments responding to the climate and ecological crisis through increasing regulatory control and rising consumer expectations on corporate responsibility, companies recognise the need to act on sustainability when it comes to the environment and the greater global community. Publicity and good intentions can only go so far, and decisive action is needed.

What is Environmental Sustainability?

Rapid population growth means an increased demand for food production and manufacturing, resulting in more greenhouse gas emissions, unsustainable energy use and massive deforestation. The world is demanding more, but the resources are finite.

Thus, the definition of sustainability is tied to the collective responsibility of conserving natural resources and protecting the world's ecosystems so that these may continue to support human and biological life cycle and well-being, now and in the future.

As early as 1987, the United Nations (UN) has been spearheading efforts to highlight the need for environmental sustainability practices. The Brundtland Report delivered by the World Commission on Environment and Development during the UN General Assembly that year ushered a new approach to environmental action focusing on the concepts of sustainable development.

A key element of environmental sustainability is its forward-looking nature, mainly because so many decisions made in the present time are not immediately felt but have a more significant impact on the future. The United States Environmental Protection Agency (EPA) defines "environmental sustainability" as "meeting today's needs without compromising the ability of future generations to meet their own needs."

Environmental sustainability standards may vary from country to country and are affected by economic, social and environmental conditions. As an example, the US EPA regulates everything from air pollutants to refrigerants and hazardous waste management. The agency has also set standards for air, water and soil quality, carbon emissions due to fossil fuels, wildlife habitats and more. Violating these standards may result in monetary penalties and legal action.

In 2019, the UN-GA also declared 2021 to 2030 as the United Nations Decade on Ecosystem Restoration, which aims to scale up the restoration of destroyed and degraded ecosystems to fight the climate crisis and improve food security and water supply and biodiversity. The Climate Action Summit in New York focused the spotlight on climate change, with UN Secretary-General António Guterres visiting the country of Vanuatu in the South Pacific, which is considered the most at-risk country due to rapidly rising sea levels.

Promoting accountability and awareness

Since then, more countries have imposed stricter policies and measures to minimise environmental damage. Cities like Madrid and Paris are beginning to set limits on diesel vehicles and older, less fuel-efficient models of cars.

However, recent studies show the need for a broader, global set of regulations and a greater commitment from businesses to achieve environmental sustainability. A study featured in the Harvard Business Review showed that multinational companies do limit emissions in locations where environmental regulations are strict but fail to do so in countries where the policies are more lenient.

At the COP26, private companies representing nearly 500 firms from 45 countries collectively brought forward a "historic" climate commitment, agreeing that climate action to limit global warming can be done, but this would require everyone to do their share – central banks, governments, ESG investors, private sectors, and consumers.

Balancing economic development and environmental sustainability

It is clear that companies have a responsibility to society to pursue and practice environmentally sustainable practices. However, these initiatives do not have to be at odds with business objectives. Done right, environmental sustainability actions can offer profit and benefit the people and the planet.

With the rapid depletion of the planet's non-renewable resources due to unrestricted consumption resulting in increasingly disastrous consequences for human well-being, it is even more imperative that businesses shift their focus in coordinating their enterprise goals towards sustainability.

All these require a long-term outlook and a conscious awareness of the organisation's impact on the environment and how it translates into cost-benefit analyses. Implementing such a strategy is essentially future-proofing one's business in an environment where resources may become scarce and still thrive.

As the terms "ESG" and "sustainability" are used interchangeably, it's worth noting that investors and industry peers more closely look at environmental, social and governance (ESG) strategies. ESG data helps identify risk-adjusted returns. Companies who offer clear-cut measures, strategies and transparent disclosure of their performance on all three pillars of sustainability are given more trust by consumers and better confidence by investors.

Environmental sustainability vs environmentalism

Understandably, many businesses are still hesitant to pursue sustainable practices due to the perceived high costs of implementing changes and how they may affect their supply chains' sourcing and operations. On the other hand, fear of negative feedback that may affect their reputation is also a factor.

However, over time, it has been proven that companies who take a proactive approach towards resolving any ESG issues raised by activists and environmental advocates can reap the benefits of their actions. They are lauded for awareness and taking action and being held up as role models for others in the industry. A business that takes a stand for sustainability may become a catalyst and spur change and progress.

Some companies have set the bar in their respective industries, and others follow suit. Athletic brands Nike and Adidas have focused on reducing waste and creating greener supply chains. The companies and their peers have also recycled plastic and fabric waste and incorporated them into their footwear and apparel to create more sustainable products.

Retailers like Walmart, Ikea and H&M are moving toward more sustainable retailing by ensuring that their supply chains reduce waste, optimise material usage, and are taking steps to address labour conditions in countries where they employ workers.

Financial institutions such as banks also implement sustainability initiatives in their business processes and company culture. Vehicle manufacturers are accelerating their strategies on reducing pollution and increasing energy efficiency with the development of hybrid and electric vehicles.

The challenge of environmental sustainability in businesses

A 2018 article from the UK newspaper the Guardian tackled the issue of whether big businesses and the environment can get along.

The article notes that while environmental NGOs like Greenpeace may target specific companies or brands, not many CEOs will continue to put sustainability higher on their agenda. Most will only go far as their customers demand or will only act on making environmentally beneficial decisions if these have the added benefit of reducing costs.

There is undoubtedly more to adopting and practising environmental sustainability in a business than just reaping good publicity for their efforts. As governments create stricter regulations about businesses' ESG disclosure data, more questions are also being asked from customers, employees, and - more importantly – insurers, lenders, and investors. Not only will environmental sustainability practices affect a company's bottom line, but it is now seen as an essential part of keeping that bottom line green and healthy for the long term.

The merits of sustainability are based on the fact that company executives and business leaders will always need to deal with the costs of natural resources, public relations problems, regulatory obstacles, and increasing environmentally-aware consumers.

Does sustainability result in increased investor confidence?

Financial institutions and business owners are now drawing a bigger lens on ESG as a significant factor in their business and investment decisions. ESG is fast becoming a necessary framework that financial institutions and investment firms must report. Still, it is a crucial element that every sector looks into – from government regulators and company employees to suppliers and partners in the supply chain ecosystem and stakeholders and shareholders. It is necessary to employ solutions like Traceability and Visibility tools to provide clear and objective insights and consolidate all the needed supplier data into a comprehensive data framework that is easy to access and validate.

When businesses adopt sustainable practices throughout the organisation, the effects are felt not only by their leaders, executives and employees but also by their business partners, investors, supply chain partners and ultimately, their consumers.

The three pillars of sustainability

Sustainability is a three-pronged approach focusing on the economic, social and environmental responsibilities and benefits.

1. Economic sustainability

This is the stronghold of businesses and communities, and they are encouraged to use their resources responsibly and efficiently. Economic sustainability is designed to support long-term economic growth without harming the global community's environmental, social, and cultural aspects.

2. Social sustainability

This refers to how living sustainably can affect individuals, families, communities and countries. Practices such as utilising renewable energy sources can reduce droughts as these require less water and energy to maintain. In turn, these will result in clean air and healthier living, which means less money spent on unnecessary healthcare. Sustainable development aims to ultimately reduce hunger, poverty and provide a better global quality of life, promoting fairly distributed education and healthcare.

3. Environmental sustainability

This shines the spotlight on the planet and encourages all individuals to live in a way that creates minimal waste and promotes the regeneration of resources.

The pillars of sustainability are among the key concepts that form the 17-point United Nations Sustainable Development Goals (SDG), designed to be a "blueprint for a better and more sustainable future for all." The SDGs were established in 2015 by the UN General Assembly (UN-GA) and are targeted to be achieved by 2030.

The issues surrounding environmental sustainability

According to an article written by Knut Haanaes, a professor at the International Institute for Management Development (IMD), companies who desire to address sustainability issues in their operations need to bridge two critical gaps:

  • The "Knowing-Doing" gap: Haanaes referenced a study by BCG/MIT that he was part of wherein out of 90% of the executives who found sustainability to be necessary, only 60% incorporate sustainability in their strategy, and an even lower 25% had sustainability included in their business model.

  • The "Compliance – Competitive Advantage" gap: The writer mentioned that only 24% of companies see sustainability as a competitive advantage, despite that it is imperative that all companies need to be compliant.

Management, he says, should address these gaps separately and not combine them. Companies that address these deficiencies stand apart from their industry peers and have evolved from knowing to doing, from compliance to competitive advantage. These firms know all too well of the risks of misapplying these sustainability strategies, such as promising but not delivering or addressing material issues without fully being solid on compliance.

Incorporating Sustainability in Business

As with every company, there is no one-size-fits-all solution for sustainability. The solutions that will work best with each organisation are the ones that are suited to its business goals and operations. Simply put, sustainability is a holistic process encompassing all the functions in a business, from production to logistics and retail.

It's worth noting that there is a difference between "going green" and being sustainable, despite being related. Manufacturing a green product made of recycled materials is one thing. Still, if the product is made overseas and transported using environmentally harmful means such as fossil fuels, it would not be adhering to sustainable principles.

Companies that embrace sustainability reap more benefits than those that do not. The advantages are felt throughout the organisation and its partners and directly benefits the end consumer.

1. Lower energy-related costs

High energy and water costs are always a concern for any business. By focusing on improvements in reducing energy and water use, organisations will see bigger annual savings instead of quicker, short-term cost reductions.

One good way is to use energy-efficient lighting and make adjustments on lighting levels depending on production schedules. Regular equipment inspections and maintenance minimises the risk of facilities breaking down and delaying operations. Changing packaging products and materials can also free up space in warehouse facilities. And yes, recycling and going paper can save thousands on supply costs.

2. Attract new customers and increase sales

Modern consumers are now more attuned and aware of their impact on their community and the world. Their decisions are aligned with their lifestyle preferences and personal ethics. A company that highlights its sustainability initiatives to the public can reach out and tap into a new market, resulting in increased sales. For manufacturers seeking government contracts where green manufacturing standards are an essential requirement, this poses a huge advantage.

By leveraging modern platform solutions, organisations can quickly highlight areas in their operations where their sustainability practices are best implemented. With the help of technology and social media, businesses can then communicate their sustainability efforts to their audience, gain approval and benefit from their goodwill.

3. Obtain tax incentives

Many governments now offer tax credits and rebates for businesses that proactively implement sustainability initiatives in their operations. These are often based on specific criteria depending on the sector or industry. Reduced tax rates mean more significant savings for organisations and a better bottom line.

4. Boost employee morale and productivity

Just as there is no single solution for companies to embrace sustainability, it also requires an entire organisation to adopt these practices and put them into action. When employees see their company executives taking the organisation's sustainability initiatives seriously, they are also motivated to work together and follow the example set by their leaders. It also fosters a culture of teamwork and a sense of pride in both their individual and collective stewardship to fulfil these sustainable goals. By internally communicating the importance of change and their impact on the business and environment, companies will positively influence their corporate culture.

Encouraging employees to discover and make suggestions on improving the company's environmental sustainability efforts can also spark innovation. From simple solutions such as creating composting bins on the workplace premises to encouraging the maximum, These may lead to a breakthrough new product, process, or additional ideas for more efficient operations.

5. Societal impact

In addition to boosting profitability, adopting and actively implementing environmentally sustainable initiatives creates a smaller carbon footprint for companies and reduces toxins released into the atmosphere. Future generations ultimately benefit from improved air and water quality, resulting in lower healthcare costs, fewer landfills and more renewable energy sources.

The ultimate challenge is for businesses, environmentalists and consumers to view the issue of environmental sustainability as a highly critical issue that concerns everyone, not just a few select sectors of society or the industry. Sustainability should benefit everybody, and business leaders - who wield huge influence as company profits drive their decision-making process -should work hand in hand with their investors, partners and markets to fulfil this collective responsibility.

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