What is Sustainability? For Businesses and Investors
Everything you need to know about how businesses today can – and must – become more sustainable
What is Sustainability?
In its purest form, it means maintaining a specific rate or level over time. Today, it encompasses various aspects, including the preservation of natural resources and biodiversity. It emphasises the avoidance of resource depletion. Fundamentally, it promotes responsible practices that ensure long-term environmental, social, and economic wellbeing for all.
Achieving sustainability involves balancing the needs of the present with those of future generations. By embracing sustainable business practices, we can strive for a harmonious coexistence between human activities and the planet.
Pillars of
Sustainability
3 Pillars of Sustainability
There are three fundamental pillars that form the foundation of sustainable practices:
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Environmental protection - focuses on minimising harm to natural resources and ecosystems.
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Social equity - aims to achieve fairness, justice, and inclusivity.
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Economic viability - ensures the long-term financial stability and prosperity of individuals and organisations.
Environmental
Environmental sustainability, or environmental protection, is the practice of maintaining a harmonious ecological balance in our planet's natural environment. This includes conserving and responsibly managing natural resources. It aims to support the wellbeing of both present and future generations with practices that:
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Minimise harm to the environment
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Preserve biodiversity
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Reduce pollution
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Mitigate climate change
Social
Social sustainability, or social equity, refers to the proactive management of a business's impact on people. This includes both positive and negative aspects. It emphasises the significance of nurturing strong relationships and engaging effectively with stakeholders.
By prioritising ethical practices, community involvement, and fair treatment of employees, companies can foster a socially responsible environment that contributes to long-term societal wellbeing.
Economic
Economic sustainability, or economic viability, involves adopting strategies that foster long-term economic growth while also preserving the social, environmental, and cultural aspects of a community. It highlights that it is possible for organisations to achieve economic prosperity without compromising the wellbeing of society, the environment, or cultural heritage.
Organisations today have a huge responsibility to contribute to the long-term welfare of the planet and its inhabitants. This responsibility has been broken down into a comprehensive framework of Environmental, Social, and Governance (ESG) obligations.
Sustainability vs ESG
ESG (environmental, social, governance) refers to a comprehensive set of criteria that assess a company's impact on the world. Sustainability, on the other hand, is the broader concept of maintaining balance between environmental preservation, social responsibility, and economic prosperity.
While there is some overlap between the two concepts, the key difference lies in their respective scopes and focuses. ESG evaluates specific factors relating to a company's operations, while sustainability is about the long-term ability to endure and thrive.
Sustainable investing
Sustainable investing, also known as socially responsible investing (SRI) or ESG investing, considers both financial returns and the impact of investments on the environment and society.
Investors who prioritise SRI look beyond profitability, incorporating factors like the company's:
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Commitment to renewable energy
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Labour practices
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Diversity
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Ethical governance
By integrating ESG criteria, investments can generate positive change while pursuing long-term financial growth.
Examples of Sustainability in Business
Renewable energy adoption
In 2017, Google set a goal to run on 100% renewable energy. At that time, they announced that they had already achieved 100% renewable energy for their global operations. Since then, the company has invested in numerous wind and solar projects to power its operations.
Waste reduction and recycling
In 2015, Unilever implemented a "Zero Waste to Landfill" programme across its manufacturing facilities. Unilever focuses on waste reduction, recycling, composting, and other sustainable waste management practices to achieve this goal.
Sustainable supply chain management
In 2011, Nike established the "Nike Materials Sustainability Index" to evaluate the environmental impact of different materials used in their products. The aim was to guide Nike's designers and product teams in making better material choices and reducing the overall environmental footprint of their products.
Water conservation
As early as 2004, Coca-Cola began implementing comprehensive water stewardship programmes to conserve water resources. As a beverage company that relies on water for its products, Coca-Cola recognised the importance of water conservation. They established the goal to replenish the equivalent amount of water used in their global sales volume. Activities include water conservation measures, community water projects, wastewater treatment, and promoting responsible water use throughout their operations and supply chain.
Social responsibility and fair labour practices
Patagonia, the outdoor clothing and gear company, is known for its commitment to social and environmental responsibility. They actively promote fair labour practices, support conservation initiatives, and donate a percentage of their sales to environmental causes.
Carbon footprint reduction
Microsoft has pledged to be carbon negative by 2030. They are investing in carbon capture and storage technologies, purchasing renewable energy, and focusing on energy-efficient practices.
Employee wellbeing and diversity
Salesforce emphasises employee wellbeing and diversity. They offer generous employee benefits, promote work-life balance, and strive for an inclusive workplace culture.
8-Step Corporate Sustainability Strategy
Organisations that need to reevaluate their business practices in favour of sustainable ones, should take the following steps:
1. Conduct an assessment
Assess your current operations, practices, and impacts to identify areas of improvement and opportunities for sustainability. This assessment can include analysing energy usage, waste generation, water consumption, supply chain impacts, and social responsibility aspects. You can take a free ESG assessment here.
2. Set clear goals
Define specific and measurable sustainability goals that align with your organisation's values, industry, and stakeholder expectations. These goals should address environmental, social, and governance aspects relevant to your business.
3. Develop a strategy
Create a comprehensive sustainability strategy that outlines the actions, initiatives, and targets necessary to achieve your goals. Incorporate fundamental elements such as waste reduction, renewable energy adoption, diversity and inclusion, and community engagement.
4. Engage stakeholders
Involve key stakeholders, such as employees, customers, suppliers, investors, and communities. Seek their input, communicate your sustainability efforts transparently, and collaborate with them to drive positive change.
5. Implement the strategy
Put your strategy into action by integrating sustainable practices throughout operations.
6. Measure and monitor progress
Establish key performance indicators (KPIs) and measurement metrics to track your progress. Regularly monitor and report on your performance against these metrics to identify successes, areas for improvement, and opportunities for innovation.
7. Engage in continuous improvement
Sustainability is an ongoing journey. Continuously review and update your practices, strategy, and goals based on emerging trends, new technologies, and evolving stakeholder expectations. Seek opportunities to innovate and stay ahead.
8. Foster a sustainability culture
Build a culture of sustainability within your organisation. Encourage employees to contribute ideas, participate in initiatives, and embrace desired behaviours in their work and personal lives.
By following these steps, organisations can position themselves as leaders in environmental and social responsibility.
Monitoring and Reporting
Several countries have implemented government mandates around sustainability reporting for businesses. These mandates aim to ensure transparency and accountability regarding the ESG performance of companies. Here are a few examples of such mandates:
European Union (EU) Non-Financial Reporting Directive
The EU introduced the Non-Financial Reporting Directive (NFRD) in 2014. It requires large public-interest entities (such as listed companies) with over 500 employees to disclose non-financial information, including environmental and social matters, diversity policies, and bribery and corruption issues.
United Kingdom Modern Slavery Act
The UK Modern Slavery Act, enacted in 2015, requires companies with a total turnover above a certain threshold (currently £36 million) conducting business in the UK to produce an annual statement outlining their efforts to prevent slavery and human trafficking in their operations and supply chains
Sustainability Accounting Standards Board (SASB) Standards
While not a government mandate, the SASB has developed industry-specific sustainability accounting standards that help companies in the United States report on material ESG issues relevant to their industries. These standards are designed to provide investors with comparable and decision-useful information. Learn more: Materiality
Task Force on Climate-related Financial Disclosures (TCFD)
The TCFD, established by the Financial Stability Board, provides recommendations for voluntary climate-related financial disclosures. However, some countries are considering making TCFD reporting mandatory, such as New Zealand, which has announced plans to implement TCFD reporting requirements.
These examples highlight the growing trend of governments and regulatory bodies pushing for increased transparency in corporate ESG practices.
60-second takeaways
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Sustainability promotes responsible practices that ensure long-term environmental, social, and economic wellbeing for all, now and into the future.
Sustainable investments are based on financial returns as well as impact on the environment and society.
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Environmental protection, social equity, and economic viability form the basis of sustainability initiatives.
The first step in developing a sustainability strategy is conducting an assessment: You can take a free ESG assessment here.
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Sustainability and ESG are separate but linked concepts.
Several countries have implemented government mandates around sustainability reporting for businesses.