Now More than Ever, Businesses Need to Focus on Sustainability
November 8, 2022 | by Peter Doo
In February of this year, Business News Daily reported that there has been a 71% rise in the number of searches for sustainable goods globally since 2017. Citing a 2019 Accenture report and a 2020 McKinsey report, BND concludes that 66% to 75% of consumers consider sustainability when they make a purchase. According to a March 2022 report by Sensormatic Solutions, 53% of consumers would shop at a store less often if they knew the brand was not eco-friendly. Some even stated they would avoid shopping there completely. Many reported that they’d be willing to spend more on sustainable options.
Today, transparency is widespread due to social media channels. Virtually all large companies publish Environment, Social, Governance (ESG) reports describing their commitment and progress in these areas of business practice. A corporation guilty of making false claims or engaging in practices that harm the environment or communities, can easily be exposed. Within seconds, customers and disgruntled workers can take to TikTok or Twitter to air their concerns. Headlines like these spread quickly, and from there, it can be difficult to rebuild your reputation. Conversely, customer endorsements can raise the profiles of responsible companies.
So, why do customers prefer sustainable brands, and why should companies follow through on eco-friendly promises? It’s rather simple. Consumers care about their communities and the planet, and they don’t want to support businesses that do harm. From a business perspective sustainability is not only ethical but also profitable. More customers shop at stores that offer sustainable options, and businesses are always looking for new ways to attract more customers and build brand loyalty. As the impacts of climate change become more apparent and scientists and businesses continue to ring the alarm, consumer preferences for sustainably manufactured goods have continually risen.
Will Inflation Affect Eco-Friendly Brands?
In February of 2022, while these articles and surveys were being published, the annual inflation rate reached 7.9%. It’s now at 8.2% as of the end of September, the highest figure since 1982. Unfortunately, we predict that this will have an impact on eco-friendly brands. As prices rise in grocery stores and retail shops, consumers will limit their spending. People are generally more willing to spend more on sustainable goods, but inflation could change this.
Families refocus their priorities when times are tough. Rather than paying extra to support eco-friendly brands, customers may have to put that money towards essentials. Gas and food prices are surging, and these may take precedence over green initiatives for the time being. The solution lies in providing consumers with sustainable options affordably. Luckily, as “green” becomes the norm, green resources also become less expensive.
Climate change is not going away. Hurricane Irma has caused devastation to communities in Florida, drought continues to challenge western states and flooding has overwhelmed large portions of Pakistan. The characteristics of the storm that contributed to its voracity are the result of climate change. Regardless of economic or political turmoil, the deadline by which scientists predict we need to reduce carbon emission will not change. How consumers will respond is to be seen. Responsible business practices must continue to progress and expand.
The Business Benefits of Sustainability
Individuals are one consumer group and businesses are another. Businesses consume large amounts of resources. Sustainability has long been touted not only as a response to customer demand, but also as a form of business cost savings and risk mitigation. I am reminded of Ray Anderson, founder of Interface Carpets, a global company valued at over a billion dollars. Ray Anderson began piloting his operations toward a more sustainable model in 1994. He said, “While environmental and financial sustainability have often (and mistakenly) been seen as opposite goals, they are in truth, one and the same.”
Remember the Kyoto Protocol? Adopted in 1997 and eventually signed by 192 nations, it was designed to reduce greenhouse gas emissions by 5% compared to 1990 levels over the five-year period, 2008-2012. By 2008, Interface had already cut its net GHG emissions not by 5 percent, but by 71 percent (in absolute tons) measured against its baseline year of 1996. During the same period sales increased by two-thirds and earnings doubled. Profit margins expanded, not contracted, while GHG intensity, relative to sales, declined some 82 percent. Now deceased, Ray Anderson continues to show the way for companies wanting to do well by doing good. You can see current statistics of interface’s environmental performance here.
More sustainably manufactured processes often result in fewer regulatory infractions, less exposure to liability (from pollution, for example), less community opposition, lower staff turnover, lower energy and water demands, material savings and, potentially, diversification of one’s supply chain.
As it is recent news, it is worth mentioning the action of Patagonia clothing company’s founder, Yvon Chouinard. He has transferred company ownership to a trust and nonprofit dedicated to fighting climate change. Patagonia is privately held while Interface is a public company, two models that resonate within the business community. Businesses like these, following and committing to a few basic principles, have shown the way. Companies, large and small, are increasingly taking responsibility for creating a sustainable future.
Lorax Partnerships can help your business identify and address sustainability goals. Whether a first step or a deeper dive, contact us!