YOUR GUIDE TO SUSTAINABILITY IN BUSINESS
Becoming a sustainable business is not as simple as making better choices. To become credible as a sustainable organisation, you need more structure. Here, we discuss everything you need to know about business sustainability and how it can be structured and with whose help.
The world’s opinion on climate change and sustainability has changed quite a bit over the past few years. What was once a niche topic that seemed to belong in the future has now become mainstream and of immediate importance.
With new regulations being formulated and put into practice seemingly every week, sustainability in business is becoming more relevant than ever. While you do have the option to wait for new regulations to be put into effect that may have an impact on your specific business, it does pay off to be ahead of the curve.
Being ahead of the regulations will ensure you are ready for any sustainability-related challenge that may arise in the near future. It also signals to your stakeholders, including investors, that your business carries a lower risk arising out of such challenges.
But how exactly do you become sustainable? Is it as simple as changing the lamps to LED only or buying appliances with the most energy efficiency stars?
Becoming a sustainable business
While actions like those are still very important steps, to truly become sustainable in your business, your efforts require focus and no small amount of coordination. This is where many businesses and business owners struggle, as their intent to take action is scuppered by the lack of knowledge.
Being a field that is growing in its importance and usefulness, information about sustainability that is also practical is hard to find. That gap in necessary knowledge is what this article will fill, with a comprehensive guide for your journey into understanding and implementing sustainability into your business. We will discuss the most relevant concepts, frameworks, standards and organisations that help bring more purpose to your sustainability efforts.
Whether you are trying to take the first step towards making your business sustainable or looking to become a sustainability professional, this article will be highly useful. It will guide you on what you need to know to implement sustainability in your businesses and careers.
Tools and ideas to achieve business sustainability
There are several organisations, some that will be mentioned below, that provide specific standards and tools that help achieve sustainability in business.
These tools often serve a specific purpose and fulfil a focused set of requirements that will help your business become sustainable in its activities. And the tools are not solely environmental either, evidenced by the SA 8000 standards that focus on the social aspect of business sustainability. There is also the fact that some of these tools and standards were made through the partnership between multiple sustainability organisations. We will also touch upon some regulations, which are tools used by regulatory bodies to drive sustainability within their reaches of power.
Sustainability in business can also be guided by a handful of concepts and theories that are researched and studied by professionals and academics from around the world. These theories and terms are handy for anyone involved in sustainability, be it as a business owner, professional or investor.
Learning and understanding these terms will make sure you are ready to converse in the language of business sustainability. They will prepare you to take simpler steps to further your understanding of how sustainability can be achieved in business, and how you can discuss them. These terms and concepts are the first steps in communicating sustainability for your business.
Ensuring that you as well as all of your stakeholders understand these sustainability terms will help you to more effectively communicate your business’s sustainability efforts through various communication channels. Some of these terms, like ESG for example, find the bulk of their use in specific industries or circumstances. ESG is a term that is primarily used by institutional investors and other finance professionals. Likewise, each term will have its own use that you will do well to understand.
Understanding the use of these tools and the value of these ideas and concepts can be vital in your organisation’s structured effort to become sustainable.
ESG
ESG expands to environmental, social and governance and is a term commonly used in the capital market. They are primarily used by investors who wish to incorporate social consciousness into their decisions.
Each aspect of ESG criteria helps understand how a company performs in terms of its impact on the environment, the social aspects of their business, and the structure of their governance system. They help investors understand the impact a business has on each of their aspects and how sustainable they are.
Here is a comprehensive guide to ESG for investors, business owners and sustainability professionals to understand its importance and use.
Environmental
Environmental criteria include emissions, air and water pollution, deforestation, energy efficiency, waste management, climate change impact, and water scarcity. They refer primarily to the impact that a company’s operations and activities have on the natural environment.
The strong performance of a business in the environmental criteria signals that the company is less likely to run afoul of any environmental regulations. As ecological and environmental concerns continue to gather prominence, especially in government policies and regulations, having your business in this aspect reduces risk to the investors.
If you are a manufacturer that falls within the current regulations for energy efficiency but is not doing as well as you could be, for example, it may signal to investors of a risk of significant future costs. Regulations ensuring improved performance in environmental sustainability are becoming increasingly common and your strong performance will only be a massive strength.
Social
Social criteria include factors such as customer satisfaction, gender, human rights, diversity, employee engagement, data protection and privacy, community relations and labour standards, among others. They pertain primarily to how well the business manages its stakeholders besides the investors and owners.
Being a business that incorporates important measures like equal opportunity employment will allow you to score highly in this aspect. Other aspects like ensuring data security and privacy may only seem like moral decisions at first, but to the investor, they are necessary steps to avoid future lawsuits and legal trouble.
Likewise, ensuring human rights to the employees and working with stakeholders that ensure it, is necessary for attracting the socially conscious investor.
Governance
These criteria speak directly to how a company is governed and how it can be improved. Factors that impact how well a company does in this criteria include board composition, lobbying, corruption, bribery, executive compensation and its disparity with the average compensation of employees, political contributions, audit committee structure, etc.
They help the investor understand how ethical the company’s governance and directors are. Having the business engage in any form of corruption, for example, is a massive red flag that may turn away investors. Similarly, significant disparities between the executives’ compensation and that of the average employee may indicate a business that may face issues in employee retention.
Implementing ESG
It is key for any business to take the necessary actions to perform well in each aspect of ESG. As investors grow more conscious and aware of the impact of their decisions and regulations continue to rise, strong performance in ESG will be vital. Events like the VW Emission Scandal have turned the attention of investors toward companies that offer limited risk through implementing sustainability, as governments and regulatory boards around the world tighten their grasps.
The sustainability professional will be key in ensuring the business does well in incorporating ESG in its operations as the company grows and attracts investment. This applies to all businesses that seek investment, from the billion-dollar firms that trade in stock exchanges to the newest young tech startup.
Understanding each aspect of ESG is vital and implementing it will take considerable action. It will also require reporting of data that will be essential to measure a company’s performance in each of them. Thankfully, there are already several reporting standards that are designed to assist a company’s sustainability efforts.
Sustainable Development Goals
Sustainable Development Goals are a set of 17 goals set by the United Nations to be achieved in the sustainability efforts of businesses, NGOs and governments worldwide.
The goals are varied and range from environmental concerns to human rights and food security, among others. While some of the goals may seem ambitious and some others seem too easy, it is clear that achieving these goals will be key in ensuring a sustainable future for all of us. These goals are important for your sustainable business along with other non-business organisations.
Life Cycle Assessment
LCA or a Life Cycle Assessment is one of the most comprehensive steps a business can take towards sustainability.
An LCA analyses the entire life cycle of a product to look for sustainability impacts at each stage. The impacts which may include factors like resource use and any form of environmental damage is quantified.
While the data collection and analysis for an LCA is substantial and will make this one of the more expensive sustainability steps a business can take, it is also one that offers a very high return. LCA helps identify any hotspots for environmental or ecological damage in the life cycle of a product. By identifying the areas for improvement, the business can take action to improve its ESG performance and become more sustainable.
There are also different approaches you can take to conducting an assessment. An LCA can be comprehensive, looking for all kinds of environmental impact, or it can be focused on any one issue, such as carbon emissions. While an LCA is a highly effective tool, it is also very resource-intensive to conduct and will require strong coordination of several business functions within an organisation.
SA 8000 by SAI
They are a set of standards formulated by Social Accountability International (SAI) and are globally accepted, including by firms like Disney and Home Depot.
They offer a social certification program designed to help improve the standards of the workers in an organisation. Being certified to comply with SA 8000 ensures a business conducts its activities fairly and decently for the workers. It is also unique in that it promotes continual improvement rather than a one and done checksheet.
They offer benefits to both the employer and employee, making them an attractive standard to comply with for companies that want to do well in the social aspect of ESG. Benefits to employers are improved productivity, better relationships with stakeholders, higher employee retention, and enhanced reputation, among others. Benefits to the employees include factors such as ensuring their safety, fair wages, and increased satisfaction, among a variety of others.
GHG Protocols by WRI and WBCSD
Green House Gas (GHG) protocols have been established through a long-standing partnership between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).
It supplies the world’s most widely used and recognised accounting standards for reporting on greenhouse gases. Used by over 90% of all Fortune 500 companies that report to the CDP, its value as a tool to control your business’s greenhouse gas emissions is clear to see.
Principles of Responsible Investment
Principles of Responsible Investment (PRI) aims to help drive business sustainability through investors and their investments. It is supported primarily by two UN organisations, namely the UN Global Compact (UNGC) and the UN Environment Program Finance Initiative (UNEP FI).
PRI presents 6 principles to be adopted by its members while conducting their investment activities to help drive business sustainability.
EU Taxonomy
EU Taxonomy is primarily a tool to help investors identify sustainable business within the European Union.
Its goals revolve around environmental sustainability in businesses and provide a classification system that will help investors identify whether a business and its activities could be considered sustainable. The use of EU Taxonomy as a tool is primarily for the benefit of investors. It creates an easier system for investors across the EU as well as those who wish to invest in EU businesses to see which businesses are sustainable.
It is being rapidly formulated and put into effect with a view to accelerating the adoption of environmentally sustainable practices among businesses in the EU.
Dow Jones Sustainability Index
Dow Jones Sustainability Index (DJSI) serves the interests of investors who wish to incorporate ESG concerns into their investment decisions.
DJSI World represents the top 10% most sustainable businesses among the largest 2500 companies in the S&P Global Broad Market Index. It helps investors identify which of the world’s largest and most successful companies are the most sustainable.
IFC Performance Standards
International Finance Corporation (IFC), while not necessarily an organisation focused on sustainability, offers certain standards that do contribute to the cause.
IFC Environmental and Social Performance Standards are to be met by all organisations that wish to source debt through the organisation. The 8 standards enforce sustainability in business by ensuring the businesses pay close attention to all environmental and social risks with a project. These are especially relevant as a tool that drives business sustainability in developing countries in new projects.
Equator Principles
Equator Principles are a framework that helps the Equator Principles Financial Institutions (EPFI) to identify, assess and manage environmental and social risks in projects they provide funding to.
EPs are primarily a tool for the use of financial institutions to integrate environmental and social concerns into their investment process. It helps financial institutions such as banks to achieve their ESG and sustainability goals.
ISO 26000
A tool from one of the most recognisable standards organisations in the world, ISO 26000 guides businesses to become socially responsible.
But unlike other ISO standards, you cannot get certified under ISO 26000. Its purpose is not to issue certificates, but to guide businesses to become socially sustainable with the help of resources that will help them also align with the UN SDGs. The seven core subjects of ISO 26000 encompass all areas of business sustainability, including environmental, governance and social issues.
Impact Investing
“Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”
The definition by the Global Impact Investing Network (GIIN) perfectly describes the use of the idea of impact investing as a tool to drive sustainability. It is rapidly gaining more traction among larger investors from all over the world. And impact investors continue to see benefits of adopting the practice as well, with over 88% of impact investors reporting returns that met or exceeded their expectations.
Renewable Energy Certificate
REC is a Renewable Energy Certificate and it is issued when one Megawatt Hour of power is generated from a renewable energy source and delivered to the grid. It is relevant for companies that take steps into generating renewable energy by using methods such as rooftop solar panels. RECs are primarily relevant to firms in the USA, although they are gaining prominence in other parts of the world.
Organisations that help achieve business sustainability
Global Reporting Initiative
Global Reporting Initiative (GRI) is a non-profit organization that was founded in 1997 with one of the founders being the UN Environment Programme. It offers standards for reporting sustainability-related data that aim to help businesses and organisations understand their impact on the environment, society and other important aspects.
They offer comprehensive resources and guidelines on how the standards can be used by businesses. To add to that, most of the resources are available in several global languages, further adding value to what they offer, especially considering every resource is free of charge.
To understand how the GRI helps report your sustainability performance, access the linked article.
The CDP
Formerly known as Carbon Disclosure Project, the CDP is another non-profit organisation that aims to help understand and measure the environmental impact. What distinguishes them from the others is their scope, which stretches to investors, companies and even cities.
CDP promotes reporting climate-sensitive data on your business through them to contribute to their comprehensive dataset that promises to make the transition to sustainable business practices smoother for all.
Moreover, by disclosing to CDP, businesses have the opportunity to be ahead of the curve and the regulators when it comes to implementing sustainability into their operations. It is especially useful if we count the advantages such as boosts to reputation, boosting competitive advantage and uncovering any sustainability-related risk or opportunity in a business.
There are various benefits you can gain through disclosing environmental data with the CDP. These benefits can also be availed by non-business organisations such as cities.
Value reporting foundation
Sustainability Accounting Standards Board guides the reporting of ESG sensitive info by companies to their investors.
Their standards put a strong focus on sustainability information that is also financially material i.e; likely to impact the financial performance of a typical company in an industry. This focus is especially useful as strong performance in the reports will make the company or business very attractive to potential investors.
The Value Reporting Foundation, founded through the merger of SASB with the International Integrated Reporting Council (IIRC) is what now guides the SASB standards that can be used by your business to report sustainability data.
Climate Disclosure Standards Board
Climate Disclosure Standards Board is a consortium of businesses and NGOs that offer a framework for reporting environmentally relevant information about a company or business.
Their framework promises to ensure that the investors are better informed and other internal and external benefits. Internal benefits such as understanding the impact of the company’s activities on the environment and how it may affect future cash flows are especially useful. In addition to that, external benefits such as offering a set framework for reporting that regulators can rely on make CDSB’s offerings one of the most useful sustainability tools in this list.
The focus is on climate data that is high impact for a business, with various use cases such as companies, investors, accounting firms and stock exchanges.
Task Force on Climate-related Financial Disclosures
Task Force on Climate-related Financial Disclosures (TCFD) provides recommendations concerning four primary areas of focus: governance, strategy, risk management and metrics & targets, to be followed by organisations. The goal is to improve and increase the reporting of climate-related financial information through its recommendations.
These recommendations are already widely used and accepted. Countries like New Zealand have already begun mandating disclosures in line with the TCFD recommendations, making the TCFD one of the most important climate organisations in the world.
United Nations Global Compact
United Nations Global Compact is the largest corporate sustainability initiative in the world.
Having over 13000 companies from 161 countries signed up to the call to take action, the organisation and its success will be vital in ensuring the sustainable transformation of corporate businesses from around the world. It calls on businesses and corporates to take action directed towards achieving the SDGs.
Becoming a member of the UNGC gives you access to the local networks that are designed to support you in your efforts to implement the 10 principles into your business. The principles of UNGC help guide corporate sustainability for businesses from all over the world.
World Business Council for Sustainable Development
World Business Council for Sustainable Development (WBCSD) is a global CEO-led organisation that aims to create a sustainable world by the year 2050, without making any sacrifices to the living standards.
The organisation is significant in size, as its member organisations represent over 19 million employees worldwide. It also offers several resources for businesses that wish to become sustainable, with the likes of CEO Guides.
World Resources Institute
World Resources Institute (WRI) is a global non-profit organisation that works to find solutions that help businesses, cities and governments become environmentally sustainable.
Their work is first and foremost in the field of research. And the findings from their research is often used by regulatory bodies to inform their decisions on environmental sustainability.
Accounting for Sustainability
Accounting for Sustainability works with finance leaders from all over the world to drive sustainability in business through accounting and finance.
It works with three core aims that pertain to driving environmental and social sustainability in businesses. It helps sustainability make sense for businesses in the context of the numbers with the help of finance and accounting.
Make sustainability work to your advantage
Becoming a sustainable business must not require you to make any sacrifices.
It should not cost you any more than the benefits it would bring. And it does bring benefits.
Benefits that go beyond the simple PR value that being a sustainable business might provide. Adopting sustainability can actually save you money today. And it can be a strong tool for hedging risks. And it’ll help you have a stronger, more satisfied and engaged workforce. And it makes you more attractive to investors.
Sustainability in business is becoming less of an effort to convince a handful of concerned people, and more of a necessity for any business that wants to continue being successful.
And we believe that all of these benefits can only be enjoyed with active communication between your business and all of its stakeholders. And that is why we focus our efforts on the communication of sustainability in business.
Sustainability has to make sense. It has to make sense in the numbers for your business. And it has to make sense to your stakeholders. We can definitely do the latter, and we can help with the former. Connect with us today.
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