When we talk about sustainable business, we often think we can’t have it both ways,(i.e.) money and sustainability. Conventionally, ‘business’ means making monetary profits by providing products or services to interested customers. Although the basic definition of the business remains the same, today the aim and concept of it have changed a great deal. Business is not just about making money and is not restricted to it either.
With the birth of fossil fuels as a source of energy and all forms of toxic, synthetic polymers, we have changed the design of the business world. We created problems, and now nature requires us to create a market around it – a sustainable market.
SUSTAINABLE BUSINESS AND INVESTING
Sustainable business is the art of integrating environmentally sound ideas into business strategies to satisfy, not only the aspect of business, but also the environment, as well as the society. While sustainability in business and investing has become mainstream today, it is still often seen as a burden rather than an investment opportunity. According to a report by McKinsey and Company, as cited in a 2018 Harvard Business School article, companies with a high ESG score tend to have lower debt costs and equity.
Environmental, Social and Corporate Governance, or ESG are the three central factors that measure sustainability and analyse the impact of a company’s activities/practices. These criteria help to better determine the factors affecting the environment and the society such as calculating carbon footprint, water usage, energy efficiency, and the corporate social responsibilities. People in the corporate world are coming up with sustainable strategies every day, ESG is a small part of it.
Businesses with sustainable approaches can not only help a company be eco-friendly but also save from potential losses. Sustainable materials should be harvested with strategies not harmful to the climate. These assets produce naturally and rapidly. They are more energy-efficient than conventional materials. Sustainable materials are reusable and recyclable. The utilization of these materials helps keep the planet sound and stay a viable platform for life.
TALES OF PROFIT AND LOSS
Many governments around the world have adopted the Paris Agreement and the Sustainable Development Goals in order to achieve an environmentally stable planet for all. With governments setting their personal targets to make their contributions, large-scale companies have been taking a part in contributing with their sustainable business strategies as well.
Arm Holdings is a well-known semiconductor and software design company that aims to provide low-cost, energy efficient technologies to its partners through their sustainable and innovative business models. Arm’s innovative business strategy is based on understanding the requirements of their semiconductors and ‘original equipment manufacturers’ or OEM. By analysing customer and OEM inputs, their own research and understanding the changing need of the environment, they produce cost- and energy efficient chips. Here are some of the strategies and ideas Arm uses to create social and environmental sustainability:
- Developed carbon emission reduction targets
- Disclosure of emission data
- With respect to the 2010 data, Arm set targets to reduce CO2 emissions by 30% and per person energy use by 15% by 2020. Arm achieved both the targets by March 2019 and is setting new and improved targets
- Investment in technologies for wildlife conservation
- Teaming up with Google in 2015, Arm provided seed funding for WILDLABS, an open online community committed to technology conservation.
Arm measures it’s sustainability progress and contribution on the UN SDG indicator level and details its sustainability impacts in its annual Global Goals Impact Report. The report mentions Arm’s belief that to advance the Global Goals businesses can and should be making relevant investments and innovations as well as a bringing a change in business models. “This is why Arm founded 2030Vision to unite the technology sector to work together to harness their resources, innovative ideas and considerable skills to turn the vision of the 2030 agenda into a reality”.
While there are companies such as Arm and BlackRock that have adapted to the changing business needs and environment, there are some that have faced losses for not understanding its significance. Navistar International and Cummins Inc. compete in the heavy-duty truck engines market. When faced with new environmental regulations that required new emission control technologies, Navistar decided that its engines will comply to the regulations without any modifications. In 2001, the CEO of Navistar, Dan Ustian, was faced with several US-EPA regulations to reduce NOx and soot emissions from its diesel engines.
Ustian, on several occasions, spoke on his opposition of using the more popular Selective Catalytic Reduction (SCR) technology after Navistar’s announcement of adopting Exhaust Gas Recirculation (EGR) tech as a company strategy. With EPA’s increased non-conformity charges and Navistar’s reducing EPA credits, the company faced major losses. Navistar went as far as to sue the Environment Protection Agency for its ‘invalid’ SCR implementation. Navistar’s brand value lowered with every vehicle breakdown and its significant reliability and quality issues. Navistar faced several other legal issues.
Cummins came to Navistar’s rescue in August 2012, when Navistar announced it will be using Cummins’ engines and it’s SCR technology. Even today Navistar depends highly on, once a competitor, Cummins. In August 2020, Cummins and Navistar extended their partnership with a new long-term deal under which Cummins will be supplying Navistar medium- and heavy-duty big bore engines.
These were only two examples of how today sustainable business strategies and ideas can help companies stay ahead and how a company can lose as a competitor because of its unsustainable business approach.
HOW CAN YOU MAKE YOUR BUSINESS SUSTAINABLE?
Today, sustainable businesses can be seen having a great and prosperous future ahead due to the magnitude of the past and current anthropogenic effects on the environment. One might how company become eco-centric or how can new businesses be sustainable from the start? Well, here are a few ways you can do that:
- Connect with companies that are already involved in environmentally sound activities and work.
- Make CSR an essential part of daily operations instead of looking at it as just a requirement.
- Keep quality and environmental standards in mind. When starting a new business, keeping quality standards such as ISO14001 or the BISx in mind can help give you a basis for how to keep the company sustainable. Quality management can help you understand environmental standards as well.
- Sustainability comes at the center of society, economics, and the environment. Don’t prioritize one over the other.
- Embrace the change by understanding the changing environment. The environment is dynamic, make sure your business can adapt to the change.
- Give up the thought of a linear economy. Think circular – Reuse, Repair, Remanufacture.
- QMS 101, establish your aim, objectives, and mission. Your business mission should align with the national standards as well as the environment while also making sure the business itself is profitable. Make sure you and your employees understand what your sustainability objectives mean and how they can affect the company and the natural environment. Make goals you can achieve and keep updating them as you conquer them. Your goals should be SMART – Specific, Measurable, Achievable, Relevant, and Time-bound.
Businesses have, in the last 20 years, come a long way with their sustainable practices. Sustainability in businesses is essential and thankfully we can see many small-scale and local businesses, that are adopting, sustainability popping everywhere.
Sustainability in business and investing is still an emerging strand of the corporate world in many countries and large-scale companies like Arm and BlackRock can prove to be great examples for budding businesses.
