The Value of Running a Sustainable Business
Running a sustainable business comes at a cost. So, is it worth it? If anyone knows the answer, it’s business guru Ryan Patel.
Ryan Patel is a business expert who regularly shares his insights to a global news audience on CNN, BBC, Fox Business, The Hill, and Yahoo Finance. He is a Board Director and Senior Fellow with the Drucker School of Management. He has also been an advocate of sustainable business for many years and so I asked for his insights in to how modern companies are now looking at sustainability.
Companies are waking up
“A small minority of companies are taking the lead when it comes to sustainability – companies like adidas, who really believe in the idea. Then there’s a mid-range of companies that are the followers, which is still fine, but they know that they’re being forced into being more sustainable so as not to get left behind. Then there is a third tier of companies who are not paying it any attention at all. Personally, I want to see more businesses take the lead.
“It should be said that companies don’t need to copy one another, and all try to take the exact same path towards sustainability, since what that actually means will be different for each one. It could be in process, it could be in product, it could be supporting the communities you sell to. There are a lot of different ways to make an impact.”
Sustainable business: Cost vs Reward
“Having a commitment to sustainable practices costs money, and especially in retail it can be expensive. If you look purely at the numbers without considering any other factors, it does seem expensive in the short term.
“But good brands understand that Environmental and Social Governance (ESG) is an important part of their purpose and in the long term, it creates stakeholder value for everybody. I believe you can make money, give back, and make a positive impact.
“Consumers can see who’s fake and who’s genuine. They know who has just made a fancy promotional campaign and who actually means it.
“In the past, it was easy for companies to make claims of being a sustainable business without having any depth. But now people want more; not necessarily in monetary terms, more like: ‘I want to see you in the community. I want to see you make an impact and I want to see that with my own eyes’.”
Sustainability efforts are recognized by the Markets (but not enough)
“I’ve been talking about corporate social responsibility for many, many years, but now we’re at a point where it can’t be ignored.”Ryan Patel
“The market is still coming around to understanding the value of sustainable business operations, partly because it’s really hard to come up with a benchmark everybody agrees on that can be used to compare companies. It’s hard to say, ‘Here’s what makes an impact, and this is the financial value’. However, I think it is clear that ESG-conscious companies have been more profitable in the medium to long term. And research supports this.
“One study, conducted by Morningstar, looked at a sample of 745 European sustainable funds and in the majority, they’ve done better than the non-ESG funds over the last three, five and ten years.
“Just as young consumers are now using their money as their voice, so are the young investors. The success of sustainable funds is not some ‘aha!’ moment where Wall Street has figured out the value of the ESG movement, it is being pushed by the younger generation.
“I’ve been talking about corporate social responsibility for many, many years, but now we’re at a point where it can’t be ignored. We’re also at the point where I believe it needs to be more transparent and driven by facts, so that people can make informed purchasing and investment decisions. I do think that this change is coming.”
Sustainability in times of uncertainty
“When instability looms (as we’re seeing with the coronavirus pandemic), there is a possibility that plans around sustainability will be torn up, but I’d argue for the opposite. This is the time we need companies and governments to step up for sustainable business.
“If you are looking at it from a profitability perspective, think about the loyalty and the goodwill that can be generated by doing something positive in the community. People will pay attention. People will know. I see this pandemic as an opportunity for those who have it in their company mission or purpose to actually do something that makes a tangible difference.
“The word ‘community’ always ends up in the mission statement of businesses, but are you really about it or not? Now is the time to show your true colors.”
The danger of ignoring sustainable business
“It’s clear that the startup community and small and medium-sized enterprises (SMEs) are champing at the bit in this sector. They’re moving fast and have the ability to go global quickly. My message to established companies is that if you’re not forward-thinking, if you’re not thinking about solutions, there is a competitor that’s smaller in size and moving faster who will out-position you.
“This is why we’re starting to see large mergers and acquisitions at an all-time high. Many big companies are realizing they can’t do it by themselves, that they’re not set up to do it by themselves. They won’t be able to get there fast enough, and they are deciding to go and buy these assets.
“The sustainability trend is now such a large boom. It just can’t be ignored.”
Looking to the future
“There has been an uptake in interest in the topic of sustainable business, but I also want to push the conversation forward and keep asking the question ‘What’s next?’. That’s what I feel like my role in all this is – I’m glad the conversation is running, but let’s not leave it. We can’t let it stagnate. I’m not saying we haven’t made progress; I’m just saying that we should be making more progress.
“As business leaders let’s keep asking ourselves: What else can we do? Are we holding ourselves accountable on our results? What are our sustainability commitments? What change are we creating? That’s what I want to see in the future.”
THE ADIDAS SUSTAINABILITY STORY – LEADING THE CHANGE
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very clever presentation
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