Sustainability Transformation: Business Opportunities Can Outweigh Costs

What is the real business case for sustainability transformation? Many executives and the organizations they serve remain unclear. Most consider it an unwelcome cost driver and underestimate its potential as a source of strategic value creation. Yet the numbers tell a different story. Research shows that sustainability frontrunners—companies that have progressed further than their peers in implementing sustainable practices—witness higher-than-average revenue per employee. So, while it may seem counter-intuitive, spending on sustainability can be a major source of opportunities for financial growth—if managed correctly.

Sustainability can pay dividends

In the last few years, companies across the globe have been scrambling to set ambitious net-zero targets, but few organizations have matched their ambitions with concrete plans to make their business more sustainable. A key barrier to progress is the perception that sustainability is a drain on cash.

Over half of executives (53%) believe that the cost of pursuing sustainability initiatives outweighs the potential benefits, according to a recent study by Capgemini Research Institute. However, the same study found that many companies are already reaping the benefits of adopting sustainable practices, with frontrunners outperforming on three key metrics: growth in total revenue, revenue per employee, and profitability. While sustainability may not directly lead to profitability, this does imply that organizations can be both sustainable and profitable at the same time.

Organizations benefit financially from sustainability in a number of ways. For example, two-thirds of frontrunners have smart systems to monitor and reduce energy consumption, while slightly more bring the company’s emissions and its costs down by encouraging employees to work from home. Sustainable companies may also be directly rewarded by investors, employees and consumers.

Real sustainability must be company-wide

For change to gain traction, companies must fully understand the value sustainability can bring to a business. Not an easy feat, considering that only one in five executives see a clear business case for sustainability. Research suggests that companies still do not regard it as a long-term investment, and that green initiatives are mostly implemented in silos, with limited impact.

The clear winners in the sustainability game—that is to say organizations that successfully marry sustainability and profit—are those that integrate it into both their culture and their business model. To do this, all employees must be fully on board with a sustainability mindset, and it has to be central to every decision made.

Companies can get the change ball rolling by upskilling employees and the C-suite, as well as targeting new hires with sustainability skills, such as carbon accounting and environmental science. However, this strategy is currently under-used: Only 47% of executives say their company is actively recruiting for sustainability skills, and just 41% say upskilling/reskilling their employees on sustainability skills is a top priority.

Change starts with the C-suite

A company’s entire executive committee needs to buy into change, and the transformation to becoming a sustainable business must be implemented in a collaborative manner across the organization. But when it comes to making the transformation profitable, the Chief Financial Officer (CFO) has a particularly powerful part to play. It is their role to articulate the business case for sustainability and ensure it is understood throughout the organization, while also protecting the company’s bottom line.

The CFO needs to understand the evolving metrics needed for sustainability transformation—for example, using the cost of waste as an indicator to support the case for building a circular economy—and lead on setting environmental sustainability strategy. Additionally, the CFO and their team are critical to ensuring all business functions adopt sustainability practices in their operations, and must lead engagement and collaboration with outside firms on sustainability. At the same time, they are responsible for funding green initiatives and low-carbon and climate-resilient development of the organization, and making green investing a serious priority.

Another crucial responsibility of the CFO is setting up appropriate carbon accounting. Nearly half of the world’s 500 biggest companies use an internal carbon price, for example in order to drive low-carbon investment, increase energy efficiency, or address regulations that can increase the cost of emissions.¹

The responsible win-win: green practices can generate greenbacks

As sustainability moves ever higher up the world agenda, companies must act now to embed ESG responsibility into their processes. Making a business greener and making money can go hand in hand. However, this can only happen when sustainability is embraced as an opportunity for new activities, improved market share and a more resilient business — and not treated as an afterthought, or worse, a costly burden.

The obvious ringmaster of profitable sustainability transformation within a company is the CFO. The guardian of a company’s financial wellbeing, it is their job to make the business case for sustainability so clear that the entire organization is motivated to get behind the move to greener business practices. In the end, it’s a win-win: not only will it serve the planet and its people, but the company’s bottom line will also benefit in the long run.