Many businesses may be reluctant to pursue sustainability initiatives because of lingering misconceptions about their perceived costs and benefits. We address five key myths and shine a light on the realities.
Myth 1: Sustainability is good for reputation, but not for business growth
Is sustainability about corporate reputation? Absolutely – but many businesses are also discovering the potential profitability and value offered by associating themselves with positive environmental approaches.
Branding association has a big part to play here. Just as some people associate Nike with sports or athletic performance, customers may think of environment protection, ethical practice or social responsibility when they perceive your brand. And this can create demand and loyalty from customers who care about such things.
Research is showing that consumers increasingly do care about the environmental and social credentials of what they buy. For example, in a recent HSBC study, a majority of US respondents said they would spend more on sustainable – organic, antibiotic-free, fair-trade, cruelty-free – products.1 At the same time, more consumers are choosing not to support companies that don’t show a commitment to sustainable practices and green business initiatives.
In short, making sustainability a higher business priority can help companies access new customers and new green market opportunities, as well as avoid brand damage and reputational risk.
Making sustainability a higher business priority can help companies access new customers and new green market opportunities.
Myth 2: Sustainability is costly and affects the bottom line
Sustainability strategies have historically matched or outperformed conventional strategies. In 2015, academics analysed more than 2,000 studies and found that in roughly 90 per cent of cases, companies with strong environmental, social and governance (ESG) profiles achieved equal or better financial performance than companies that had weaker ESG profiles.2
Recent rankings of sustainable corporations have found similar results. Take the S&P 500 Environment and Socially Responsible Total Return Index, an iteration of the US S&P 500 equity index that focuses on environmental and socially responsible corporations. It consistently outperforms the S&P 500.
Myth 3: Sustainability is for larger companies, not SMEs
It’s true that bigger companies have the resources to more effectively influence government policy and their supply chain to be sustainable. But small and mid-sized enterprises (SMEs) can be just as effective as their larger counterparts in almost every other respect when it comes to adopting sustainable business practices.
For example, enterprises of all sizes are increasingly decoupling business growth from environmental impact by adapting to a ‘circular economy’ business model. This means establishing processes to repair, reuse, refurbish, remanufacture and recycle. Many businesses are also cutting costs by reducing their use of energy, water and other resources.
Smaller companies’ competitiveness often depends on being lean, resourceful and nimble, and sustainability enables just those things.
Myth 4: Investors don’t care about sustainability
As the market for sustainable finance continues to grow and evolve, more investors are seeing a company’s sustainability performance as important to their investment decisions. About 86 per cent of the Asian investors HSBC recently surveyed considered environmental issues important, for example.3 Almost a third (31 per cent) said they always look at ESG considerations when they invest.
Regulators, too, are demanding increased sustainability reporting. By addressing your company’s sustainability performance, you can avoid management and legal risks regarding improper disclosure, as well as create new ways to drive value.
More consumers are choosing not to support companies that don’t show a commitment to sustainable practices and green business initiatives.
Myth 5: Sustainability is just a passing fad
Sustainability isn’t just a catchy buzzword. Rather, it’s an investment in the future of business and essential for long-term prosperity – you can’t profit without a planet.
Destroying the environment comes with severe financial costs, so it is in the best interests of every corporation to preserve resources through sustainability strategies. Companies that recognise the new realities and adapt their supply chains, processes and raw materials accordingly can help to future-proof their businesses and ensure their longevity.
The global economy will surely grow, but so must our stewardship of the planet we rely on. The best performing companies of the 21st century will be those that recognise this evolving new order and take steps to become more sustainable now.
1. HSBC, ‘Who Cares Wins: The rise of the young, socially and environmentally motivated consumer’, 2019.
2. Global Research Institute, ESG & Corporate Financial Performance: Mapping the global landscape, 2015.
3. HSBC, Sustainable Financing and Investing Survey 2019 (PDF, 21.6 MB).