The Business Case for Sustainability

To update my knowledge of trends and best practices, I’m taking a Corporate Sustainability course through Harvard Business Extension. This week, our Professor tasked us with considering the Business Case for Sustainability. Why should companies make an effort to be more sustainable? And what’s holding them back?

Of course, Harvard has already made the case and so has MIT. In fact, as MIT points out, many, many, many people have made the case for sustainability time and time again. In summary, the case goes something like this: investments in sustainability have been proven to increase both profits and revenue. Profits go up when waste is decreased and worker productivity is increased, two common by-products of sustainability initiatives. Revenue grows when consumers see you’re investing in things they can feel good about. Things like fair wages, good working conditions, the environment, and social causes. In fact, studies have shown that companies who show good performance on environmental, social, and governance (ESG) issues demonstrate stronger stock performance than those without. Sounds like a win for everyone. So what gives? Why isn’t the business case for sustainability strong enough to inspire action?

A 2009 study by MIT and BCG found companies face 3 primary challenges for embracing sustainability:

1. Mismatched timelines

2. Difficulty understanding and measuring success

3. Difficulty planning for uncertainty associated with sustainability

Mismatched timelines – Successful sustainability initiatives rarely fit into a neat 1 – 5 year timeframe. For many companies, truly embracing sustainability would involve a huge shift in thinking, a total overhaul of their operations. Plans and investments should be made over decades, not months, and the return on investment (ROI) may not be obvious right away. Although clearly valuable in the long term, it isn’t easy to take the first step.

Difficulty understanding and measuring success – Typically, company success is measured by tangible, quantifiable information. Stock prices. Profits and revenue. Dollars and cents. And while sustainability initiatives may demonstrate some results in this way, often times “success” is a little less obvious, particularly to those in the business world. Investing in environmental and social initiatives is good, yes, but how good? Reducing our carbon footprint is great, of course, but how great? To what extent did these investments contribute to our bottom line? It’s hard to say, exactly.

Difficulty planning for uncertainty associated with sustainability – As hard as it can be to measure the success of sustainability initiatives, it can be even harder to predict what the future holds. Sure, consumers love sustainability now, but what about in 5 years? Environmental regulations are focused on carbon now, but what will happen 10 years from now? It’s tough to say. And, because it’s tough to say, it’s understandably difficult to want to take this on, to tackle the mismatched timelines and uncertain success measurements.

Although 2009 seems like a long time ago, many of the same trends held true in a 2017 study by the same group. It seems companies today are still struggling to fully embrace sustainability for primarily the same reasons they were over 10 years ago.

The business case for sustainability is clear, but it’s not easy. This is often the case with important and impactful things. While it can be hard to take the first step, and to continue stepping towards a distant and daunting goal, it will be worth it in the end. In the year ahead, I hope more businesses will be brave enough to start this journey. Although it's difficult now, it's unlikely to get any easier.

"The best time to plant a tree was 20 years ago. The second best time is now."

- Chinese proverb