Sustainability paves the way to innovation, not an additional operational expense

This ambitious agenda has been held back through legal challenges on regulatory proposals in the courts. This resulted in a stalemate as organisations stalled their climate-related reporting with sustainability increasingly becoming perceived as a burdensome compliance exercise. The unwanted consequence could lead organisations to move out sustainability of the strategy function and relegate this to the lawyers and accountants of compliance. This not only creates a new resourcing challenge but a big problem for the overall business landscape as companies focus more on the “what” of reporting rather than the “why” of innovation. The act of disclosing has become more important than the content of the disclosures themselves.

Organisations need to stop thinking about sustainability as an expense and start focusing on its role in innovation and revenue generation. Sustainability, at its core, is all about innovation, i.e. achieving competitive advantages, capitalizing on macroeconomic trends and ensuring long-term viability through market disruptions both in terms of cost savings and revenue growth.

Sustainable businesses prioritise resource conservation over resource consumption

Today’s rhetoric positions sustainability as imposing billions of euros of new costs and compliance burdens on businesses of all sizes. But the truth is that sustainability drives resource efficiency. By focusing on materials use and waste production, organisations can create innovative solutions, optimize processes and be well-prepared against potential market shocks by ensuring an effective supply chain. This leads organisations to reallocate resources for even more innovation, like developing new products or services that address social and environmental needs. Organisations which are focused on sustainable innovation and resource efficiency are more resilient during crises, experience less share price volatility, and generate more long-term revenue. Sustainability offers a bridge to innovation, not a burden. 

Sustainability enables better hiring, better training and more collaboration

While the S pillar of “ESG” often weathers the loudest backlash from the anti-sustainability crowd, its focus on human capital is one of the biggest opportunities for growth and innovation for organisations. Hiring and retaining the best talent is always a strategic investment – from building a pipeline of the best and brightest employees, to developing the policies and programs to keep people engaged, to creating a culture that encourages creative thinking around complex problems. Organisations with engaged and healthy employees tend to have lower turnover rates, higher productivity, fewer accidents and better brand reputation – all key factors that directly impact financial performance. A workforce that is well-equipped to do their job through clear and consistent training is more effective, more adaptable to a changing business environment and better supported to move the organisation forward. Investing in a robust human capital program essentially means taking a loan out on the future innovation of an organization. Reporting by itself fails to recognise the forward-looking opportunity that human capital presents and the opportunity to insulate against potential losses.

Sustainability is what investors want

As we move forward, global investors continue to see sustainability as paving the way to innovation. But this goes beyond publishing a report full of data. Sustainability is about how the reporting data is used to make better, more strategic decisions for the organisation. Investors seek insights on how businesses are mitigating risk, investing in strategic, market-driven opportunities, and resourcing for continuity plans. Focusing purely on reporting misses out on the information that investors look for: how the organisation is pursuing growth opportunities for long-term value creation. Investors seek reporting to see that an organization is using ESG to build a better company, not reporting for reporting’s sake.

Sustainability Constraints Inspire Creativity

One must contend that a focused approach, such as ESG reporting, can often lead to more creativity and innovation. Instead of thinking about sustainability as a limitation or an expense on the business, an organisation must consider the positive effects of systems parameters and regulatory standards, which can push teams to develop new solutions that may not have been developed under more open circumstances. This contrasts with business strategy that comes without constraints, which often leads to business as usual and employees taking the path of least resistance. By exploiting new design limitations focused around ESG factors, organisations can create efficient, cost-effective, and environmentally friendly products and processes that meet today’s market, beyond reporting. 

Conclusion

A focus on sustainability is a net benefit for all: enabling reduced operating costs, a more engaged workforce, new clients, happier investors, and lower environmental impacts for our planet’s health and safety. Prior to writing off sustainability as a pure expense, organisations should consider the long-term opportunities that the practice enables and the insights that ultimately drive business growth.
 

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