Increasing awareness of environmental problems leads to a growing demand for businesses to adopt environmentally-friendly practices. Research has shown that companies are influenced to implement these practices thanks to various stakeholder groups. These include environmental organizations, financial institutions, legislators, suppliers, employees and management.
Despite business owners and managers having earnest pro-environmental attitudes, adopting environmentally-friendly practices is often still low. One reason is compartmentalizing personal beliefs about the environment from business practices. Another is being unaware of the environmental impact of their businesses. Or they may simply be unsure of how to take steps to improve their company's environmental performance.
Having a high environmental awareness is necessary for socially conscious companies. That is if they aim to achieve financial success and positively impact society and the environment.
Implementing Sustainable Business Practices
Mere sustainability reports and other standard environmental, social, and governance (ESG) practices are not enough for companies to attract investors. According to George Serafeim of Harvard Business School, companies must integrate ESG efforts into their business strategy and operations to succeed.
The challenge for many business leaders is that they are not sure how to improve their ESG performance:
They don't understand where to focus.
They don’t know how to communicate their ESG efforts.
Many executives mistakenly believe that simple actions will suffice: improving ESG disclosures, publishing a sustainability report or hosting a sustainability-focused investor relations event. Some companies do not see the benefit of these actions and become disappointed or frustrated. In some cases, they face criticism and adverse reactions from investors.
Why “Greening” Matters
While it is important for everyone to act in a socially responsible manner, companies that prioritize ESG issues can reap significant rewards. These benefits go beyond increased employee engagement and productivity. They can also include increased sales due to more loyal and satisfied customers.
Lowered Capital Costs and Improved Valuations
As more investors seek to invest in companies with better environmental awareness, these companies gain access to a larger pool of capital. This has been found to occur not only in the stock market, but also in the loan market. Nowadays, some banks tie lending rates to sustainability performance. For example, in 2017, ING demonstrated this by lending $1.2 billion to Philips, an innovator in health technology and consumer products.
Protect Valuations with Mandates on Stricter ESG Disclosures
Regulatory agencies across the world are keeping up. The European Union (EU) has been working to require more detailed disclosure of sustainability issues by companies operating within or in partnership with those in the continent. In the United States, Gary Gensler, chairman of the Securities and Exchange Commission (SEC), has stated that he wants mandatory disclosure of climate risks and urgent action to implement the new rule.
Even outside these regions, addressing environmental issues in concrete and transparent ways increases a company’s value. If you are looking for virtual CFO services that will help you scale to sustainable success, contact Profit Reimagined today.
Higher Satisfaction Ratings from Consumers, Investors, and Shareholders
More consumers, investors, and shareholders are pushing organizations to address environmental issues in concrete and transparent ways. They want companies to operate with goals prioritizing and caring about their employees, community, industry and world.
If an organization's products, business practices, or brand become unacceptable to stakeholders, its business model may cease to exist.
As companies work to rebuild relationships with stakeholders, they must understand where they are creating benefits and harms for stakeholders. This includes considering the social cost of carbon emissions and taking steps to mitigate it.
Companies that pollute water and air or unfairly pay employees should calculate the social consequences of their actions. Then, learn to address them while creating shareholder value.
Supporting Eco-friendly Initiatives and Causes
Another way that companies can show their environmental awareness is by supporting eco-friendly initiatives and causes. Brands and organizations can deploy these tools to communicate sustainability:
Eco-friendly Packaging
The term "eco-friendly packaging" is clearly more than just a buzzword. Packaging is essential for the safe distribution of products in today's society and supply chains. Unfortunately, the packaging industry consumes many resources, such as plastic and paper (approximately 40% and 50%, respectively, in Europe alone).
One solution that has been proposed is to use reusable packaging. If you are worried, studies have shown that consumers will likely accept and choose sustainable packaging and delivery options.
In fact, McDonald's made an announcement in 2020. Within the next decade, its yellow wrappers, styrofoam cups, plastic ice cream containers, and signature fry boxes will be much more environmentally friendly. They're aiming for 100% recycling of customer packaging by 2025.
However, be careful with your claims. Just because a product says it's "eco-friendly" doesn't mean people will believe it. Claims of false advertising may even do more harm than good. An example is the outrage faced by Innisfree in 2021 after a consumer filed a complaint. Allegedly, its "paper bottle" packaging is just paper wrapped around a plastic bottle.
Hiring a virtual CFO on-demand who supports eco-friendly initiatives and causes is a strategic move. Book a call with Profit Reimagined to learn how outsourced CFOs can help your company create value for stakeholders.
Partnering with NGOs to Promote Sustainable Development
The United Nations Conference on the Environment and Development, also known as the Rio Earth Summit, was held in Rio de Janeiro in 1992. It highlighted the importance of partnerships in sustainable development.
A decade later, the 2002 World Summit on Sustainable Development was held in Johannesburg. This marked the start of widespread adoption of corporate social responsibility (CSR). While corporations were absent at the first summit, large numbers attended the second. Here are examples of partnerships:
The Coca-Cola Company engages in water stewardship with the World Wildlife Fund (WWF). The goal is to help conserve priority river basins around the world.
Chiquita Brands International Sàrl, a top producer of bananas, launched the Better Banana Project. They worked with the Rainforest Alliance to grow bananas following rigorous standards and guidelines.
The government of Yukon partnered with ECO Canada to launch the Yukon Sustainability Awards. This reinforces the region's position as a global leader in acknowledging companies driving the transition towards a more sustainable and green economy.
Proactive partnerships with NGOs can provide benefits such as a better brand image and reduce the risk of costly confrontation. With these creative initiatives, companies can positively impact the environment and engage their customers and employees in important causes.
Raising Awareness about Environmental Issues
Individuals are more likely to form social and environmental awareness when they have access to integrated information on these issues. Together, social and environmental responsibility impact the formation of awareness more strongly.
However, certain groups of individuals are uninformed and disinterested in these issues. In response, institutions, organizations and the government are encouraged to find ways to stimulate the interest of these individuals in socio-environmental issues. These could include:
Sharing information about the importance of environmental conservation through social media
Hosting events or workshops
Collaborating with environmental organizations
Some examples are:
Wyndham Green developed the WYND Green app. This aims to make it easy for vacation club resort teams to share sustainable green best practices.
Marriott International launched Green Events, a package that offers eco-friendly products and campaigns at large-scale conferences and gatherings.
Accor joined the Sustainable Hospitality Alliance. They developed free practical resources and programs to assist the broader industry in operating sustainably.
These companies have acted on their environmental awareness to fulfill a broader social responsibility. As they lead by example, businesses can inspire people to take action and make a positive difference in the world.
In summary, environmental awareness leads to new consumption habits, pressuring organizations to adopt a new, socially responsible posture. Being socially conscious prevents the quick degradation of natural resources and ensures sustainability for future generations. With increasing support from various stakeholders, socially conscious companies are on the path to achieving or maintaining financial success.
Interested in reaping the economic benefits of sustainability? Visit Profit Reimagined to start your profit-with-purpose journey.
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