Any economist will tell you that businesses have one primary objective: maximizing profit. Because of that, sustainability-minded business owners and entrepreneurs sometimes feel pressured to push their ESG aims aside in order to keep their enterprise afloat. Many feel that they have to choose: sustainability of the business or sustainability of the earth? However, here at Ecolytics, we have found that sustainability and profit do not have to be mutually exclusive goals. In this article, we present three conclusions drawn from various studies and reports and prove how sustainable business practices can increase your company’s customer satisfaction, investor attraction, and revenue acquisition, benefiting both your bottom line and the planet.
1. ESG initiatives enhance profits, revenue, and growth.
- In Deutsche Bank’s research on sustainable investing, 89 percent of the 100 global academic studies reviewed conclude that companies with high ESG ratings surpass market performance in both the medium and long term
- McKinsey & Company’s Profits with Purpose report demonstrates a significant, cross-sector correlation between resource efficiency and financial performance
- Using a study by the World Economic Forum, a Harvard Business Review investigation identifies a dozen firms with particularly noteworthy sustainability practices, finding that all of their growth rates and profit margins were consistently higher than standard
- A 2023 study produced by Ecovadis and Bain & Company that examines 100,000 companies indicates that efforts towards renewable and efficient energy are positively correlated with profitability, particularly in carbon-taxed locations and carbon-intensive industries like transport and manufacturing
2. Investors reward companies with sustainable practices.
- CDP’s 2022 report finds that companies with strong carbon-related performance and disclosure practices yield higher stock market returns, with the financial benefits of climate action outweighing the risks by at least 15 times
- A working paper published by the National Bureau of Economic Research indicates positive correlations between the sustainability of companies and returns on investment, assets, and equity
3. A significant portion of institutions have adopted a sustainability plan for their business because of the diverse benefits it presents.
- Edie’s 2023 Sustainable Business Report finds that 74% of sustainability representatives from the surveyed 225 organizations place either high or business-critical priority on investing in energy efficiency this year
- The ROI Marketing Institute, which investigates profitability of business operations, released a Sustainability Management Report in 2021, showing that 96.7% of 581 interviewees have a sustainability project in place at their organizations
- KPMG, one of the Big Four accounting firms, published a Survey of Corporate Responsibility Reporting in the Journal of Accountancy in 2017, finding that 93% of the world’s 250 largest companies issued sustainability reports
The bottom line is that for many companies, especially small businesses and startups, implementing sustainable practices can have a beneficial impact on your company’s financial health. These existing bodies of research, key portions of which have been excerpted above, indicate a strong positive correlation between sustainability and financial performance.
Creating and enforcing environmentally friendly and ESG-centered plans evidently promotes revenue growth and stakeholder investment, which is presumably why an overwhelming majority of the largest and most successful companies worldwide have adopted these behaviors themselves. The comprehensive evidence demonstrating the financial and social benefits of ESG initiatives advises that sustainability is, in fact, profitable.
Interested in pursuing profitable sustainability practices for your company? Ecolytics provides tailored guidance on how to implement environmentally friendly best practices for companies of any size and sector. Ecolytics’ sustainability management software provides a single platform for measuring your GHG emissions and waste and water use, offers data-driven insights and actionable recommendations for how to improve, and gives you custom-built reporting tools to showcase your sustainability performance and ESG impact to customers and investors alike. Request a demo from our team today to learn more about the platform and its features.