Implementing Sustainability to Counter Global Events
Author: Ryan MacDonald
Date: November 13, 2017
Benefits of Making Your Business More Sustainable
Business and the environment have an increasingly important, yet volatile relationship. Earth’s global temperature is rising, and the ensuing weather patterns will affect business environments as well as the biosphere. As climate change becomes an increasingly urgent issue, businesses cannot afford to ignore their impact on the environment. Powerful shifts in today’s climate are manifesting in a dramatic fashion across the globe. The consequences are potentially dire. In one example, Climate Central and Greenpeace predict rising sea levels to displace hundreds of millions of people over the next century across India, Southeast Asia and the Pacific, South America, coastal Europe, and the Southeastern US[1]. Many of these regions also face decreased water security. This problem is particularly severe in Asia. For example, people residing in India, China, and Pakistan that depend on rivers born from Himalayan glaciers comprise 47% of Earth’s population. Climate scientists estimate that up to 66% of the ice pack could disappear by 2100[2], This lack of water would cause countless deaths, and force mass migration into surrounding communities. Such a humanitarian crisis would devastate the well-being and economic production of all affected regions.
While the exact implications of climate change are uncertain, two things are clear. First, the changing climate will universally affect almost every aspect of life on this planet. Business and policy strategies will play a key role in preventing the most severe environmental and humanitarian effects and adapting to life in a new climate. Second, this complex issue must be approached by a multitude of business and policy actors together. Innovation and collaboration are key in providing the comprehensive solutions that this problem demands. FAO Global encourages businesses to recognize and adapt to the shifting environment. Analysts at FAO Global can help ensure that your company is well-insulated against future environmental risks. Through our network of experienced professionals, we can help keep your company up to date on the latest regulatory and environmental developments at home and abroad. With this information, your company will be better equipped to implement a sustainable business model. Below are just a few of the benefits of making your business more sustainable.
Build a Better Product and Brand
Powerful companies such as Starbucks, Tesla, and Patagonia have added immense value to their brands through a foundation of sustainable, harm-reducing products. A truly sustainable product is one that can be replicated indefinitely, with no adverse environmental effects. A chair built from exclusively recycled material, a data server that runs on 100% renewable energy, a solar panel that outputs more clean energy than was required to make it – these are examples of completely sustainable products. Earth’s dwindling supply of finite resources threatens to increase firms’ production costs. Companies stand to avoid these costs by evolving their products to meet a more sustainable standard. However, given the available technology and the necessary corporate pursuit of profitability, truly sustainable products are rare. It is more realistic to envision a sustainable product on a spectrum, as one that does less harm than competing products. A product can achieve greater sustainability in various ways, such as greater recyclability, less resource use, a longer product lifespan, or increased environmental benefits of usage. For example, a new car tire design that improves gas mileage may have a greater positive impact on the environment than a tire made from recycled rubber that doesn’t provide a similar efficiency boost.
A sustainable product is just one way to build an environmentally friendly brand. Other prominent firms such as Walmart, IKEA, Apple, and Google have garnered positive media attention by striving to run on renewable energy in recent years. Google expects to run on 100% clean energy in 2017, up from 44% in 2015[3]. While each approach may differ, companies that embrace sustainability initiatives can boost their brand image immensely. Constructing a sustainable brand is important, especially because the way consumers value products is changing. Consider which is “better,” a product that is wildly popular with millions, or a product that improves the lives of thousands? Products that are measured in positive social, economic, and environmental impact as well as function are more common now than ever. In an effort to recognize products that create positive externalities, many organizations are publishing sustainability certifications to recognize effort towards improving the way business is done. These certifications range from B-Corp companies to Fair Trade Certified and Organic producers.
Don’t Get Caught by Regulation
Another challenge posed to businesses by climate change is the uncertainty surrounding climate policy and regulation. As the need for action mounts, potential carbon tax policies, emissions caps, and new sustainability standards may impose limits on businesses’ products and operations. The creation of new climate policy is a crucial aspect of the global approach to mitigate climate change. However, new legislation may require dramatic changes to the operations, supply chain, and strategies of unprepared private sector firms. 58 governments have passed both mitigation and adaptation frameworks to limit and adjust to the effects of climate change[4]. Emissions cuts are often at the forefront of upcoming legislation. For example, China’s newest 5-year plan aims to cut emissions by 18% over the next 3 years[5]. Regulation is a constant business risk, and compliance is not always easy. By planning ahead and proactively implementing a sustainability plan, firms can ensure that they do not get caught flat-footed by upcoming regulations. This is especially pertinent for international businesses, which must be especially cognizant of the existing and potential regulations in all areas that they operate.
Understanding the Social Implications
Aside from legislation, another powerful influence on business behavior is “social regulation,” or the collective reviews and information shared among a certain consumer base. In the current age of information, feedback spreads more quickly among consumers. This is true of both positive and negative comments. The social commentary surrounding a company has an especially potent effect on millennials and “technology-enabled consumers,” who can access these reviews while shopping on their mobile devices. In the past decade, it has become apparent that negative press for insincere or insufficient sustainability efforts can have severe impacts on a company’s image and profitability. By incorporating sustainability goals into your daily business, your company can avoid negative social pushback and bolster your reputation in many social spheres. Sustainability goals can be focused on reducing the harm of your current business with goals like emissions cuts, clean energy targets, or recycled materials programs. Another type of sustainability goal is value-based, which aligns your company’s mission with the best interests of the environment. Your company can make a more direct impact by offering products and services that focus on improving entire sectors of business and consumption, such as electric cars or environmental consulting services.
Be Part of the Solution
For all its deleterious effects, climate change presents an exciting opportunity for businesses to step up and take a leadership role in forming a solution. Companies today are enjoying a larger role in the lives of consumers. Products of innovators like Apple, Tesla, and Google have positive externalities. They can connect consumers socially, or raise collective interest in renewable energy. Such companies are evolving to instill social change as well as commercial change, opening up incredible opportunities to affect people positively and add value to their business. With this heightened level of influence, companies are able to shape policy and help write the narrative of private sector engagement with climate change. The environmental crisis presents another opportunity for the private sector to pursue a mission to positively affect the lives of consumers through the services and products they offer, and through their care for the environment.
Some companies may find it impossible to participate directly in providing solutions to climate change. Such a direct approach is not necessarily a requirement. However, the benefits to realizing that environmental factors will affect all businesses and consumers, and demonstrating a resolve to become part of the solution will undoubtedly add value to your firm. Instilling a sense of purpose and progress in your business model will allow you to connect with your customers on a more substantial level, and will inspire powerful brand loyalty.
Conclusion
Based on its ability to pivot and innovate new solutions, the private sector is poised to take a leading role in combating the effects of climate change. Businesses that ignore the collective good risk alienating a growing socially conscious consumer base and are more likely to be targeted by regulation. This article discusses some of the basic benefits to increasing the sustainability of your business. Given the complex nature of the topic, this objective can take a variety of different forms. All companies and organizations stand to benefit by planning to adapt to a future that is affected by climate change. Whether your goal is to solve climate change or to survive it, the most important takeaway is to implement a sustainability plan that will work for your specific requirements and objectives. Done correctly, this plan will improve, not impede, your business and better position your organization to navigate international environmental complexities. Whether your market is domestic or international, FAO Global offers tailored expertise to address the market dynamics, environmental concerns, and political environment that pertains to your organization’s specific situation.
About the Author
Ryan MacDonald is a frequent contributor to FAO Global Articles and holds a B.S.B.A from the University of Denver in Finance and International Business. He has experience in financial services and business development planning and research, with a focus on improving business innovation and sustainability.
References
[1] Climate Migrants in South Asia: Estimates and Solutions, Greenpeace, March 25, 2008, Greenpeace.org, November 7, 2017
[2] The Great Himalayan Watershed: Water Shortages, Mega-Projects and Environmental Politics in China, India, and Southeast Asia, The Asia-Pacific Journal, July 27, 2009, Apjjf.org, November 3, 2017
[3] Google Will Be Powered Completely by Green Energy Next Year, Bloomberg Markets, December 6, 2016, Bloomberg.com, November 4, 2017
[4] The Global Climate Legislation Study, The Grantham Institute, November, 2016, Lse.ac.uk, November 4, 2017
[5] The Global Climate Legislation Study, The Grantham Institute, November, 2016, Lse.ac.uk, November 4, 2017
