Progress on climate action and sustainability could be a casualty of the COVID-19 coronavirus crisis, according to a new report from the World Economic Forum. But incorporating green programmes into recovery plans also presents an opportunity to rebuild better.
The pandemic has forced many organisations to rethink strategies and business models with more focus than ever being placed on impact, purpose, and sustainability, to build organizational resilience, competitiveness, and performance.
Sustainable businesses are designing business models that create value for all stakeholders, including employees, shareholders, supply chains, society, and the planet. Michel Porter and Mark Kramer pioneered the idea of “creating shared value,” arguing that businesses can generate economic value by identifying and addressing social problems that intersect with their business.
In a recent Bloomberg interview, Alan Jope, CEO, Unilever, highlighted that impact, which is deeply rooted in the company’s model is still at the foundation of business decisions amidst the pandemic and acts as the guiding compass of Unilever’s strategies. “We truly believe that by positioning our brands on doing real good, by running our supply chain in a sustainable way, by being a responsible employer and creating great opportunities for people, a by-product will be better financial performance.”
Companies are investing in sustainability as a risk management tool. Mars, Unilever, and Nespresso have invested in Rainforest Alliance certification to address threats along their supply chain. The Alliance helps farmers deal with climate volatility, reduce land degradation, and increase resilience to drought and humidity—all of which ensure the long-term supply of their agricultural products. Certification also improves productivity and net income: According to an independent study by COSA, Rainforest Alliance reported that certified cocoa farmers in Cote d’Ivoire, for example, produced 1,270 pounds of cocoa per hectare, compared with 736 pounds per hectare on non-certified farms. Net income was also significantly higher on certified cocoa farms than noncertified: $403 versus $113 USD per hectare.
Investing in sustainability can drive innovation, as redesigning products to meet environmental standards or social needs offers new business opportunities. Nike embedded sustainability into its innovation process and created the $1 billion-plus Flyknit line, which uses a specialized yarn system, requiring minimal labour and generating large profit margins. Flyknit reduces waste by 80% compared with regular cut and sew footwear. Since its launch in 2012, Flyknit has reduced 3.5 million pounds of waste and fully transitioned from yarn to recycled polyester, diverting 182 million bottles from landfill.
In addition to the financial benefits that accrue from increased competitive advantage and innovation, companies are realizing significant cost savings through environmental sustainability-related operational efficiencies. Moreover, investors are now able to track the high performers on ESG (environmental, social and governance factors) and are correlating better financial performance with better ESG performance.
Sustainable Advantage provide sustainability consultancy and support. We help set your ESG strategy, working with you to understand what ESG means to your organisation. We create processes to gather data, help set metrics to measure improvement and to build your annual ESG Impact Report. To find out more contact us