What are the benefits of sustainability for businesses?
The benefits of sustainability for businesses
Business sustainability is essential to ensure a company’s prosperity, longevity, and resilience. Additionally, it is an investment that can become the basis for a company’s reputation and contribute to better financing opportunities and economic expansion.
Sustainability benefits for businesses:
Competitive advantage
Consumers tend to choose products and services from companies that show environmental and social responsibility, even if these products cost more. Sustainable Brand Index research proves this: 71% of Lithuanians have stated that sustainability is an important criterion when choosing products or services. Upon making sustainability a part of their business model, companies can gain a competitive advantage and stand out better.
Reduced expenses
A company may save some expenses by evaluating its performance, resource flows, and supply chain and implementing effective sustainability practices. For example, you can significantly reduce electricity bills by evaluating and implementing improvements to your energy efficiency.
More attractive as suppliers and partners
Most big companies have high sustainability requirements when choosing their partners and suppliers, which helps them achieve high-quality products and services, proper reputation, and smooth performance. Adhering to sustainability standards makes your company a more appealing potential supplier or partner and gives you a competitive advantage in the market.
Appeal to investors and banks
Companies that follow sustainable principles in their operations are typically more profitable, innovative, and resistant to changes, so investors tend to take into account ESG criteria, too. According to the data from the EY Global Institutional Investor Survey, 74% of investors claim that they aren’t keen on investing in companies with poor sustainability, and as many as 90% pay attention to sustainability when making investment decisions.
Banks already evaluate a company’s sustainability before providing financing, and this criterion is set to become even more important when making decisions regarding loan provisions.
Easier adaptation to ever-stricter requirements
The European Green Deal raises highly ambitious goals for reducing climate change impact. The EU has committed to reducing its emissions by 55% by 2030 and, by 2050, ensuring a neutral climate impact, which means that the GHG emissions do not exceed the amount that is collected or absorbed. To reach this goal, stricter requirements and legislation changes are foreseen in numerous areas. These include the “polluters tax” in the tax system, requirements for energy efficiency, gradual reduction of the use of carbon and oil, encouragement of renewable energy production, and so on.
For these reasons, this decade is crucial for companies to prepare and adjust to the new requirements. A business that prioritizes sustainability will be better prepared for ever-stricter requirements. If companies don’t initiate becoming more sustainable themselves, clients and suppliers will likely make them do so.
If your company doesn’t choose to pursue sustainability, it risks becoming irrelevant in the future.
One of the most critical factors for a company’s reputation
Good reputation is one of the most important criteria for a successful business. A positive image has numerous advantages, from stronger consumer loyalty, brand popularity, and demand to better stakeholder relationships. According to the Cone Communications CSR Study, as many as 87% of consumers evaluate companies that support social or environmental initiatives more positively.
Talent attraction and advantages in the job market According to Fast Company data, more than 70% of employees claim that a strong sustainability strategy contributes to their decision to stay in the company long term. Meanwhile, more than a third of employees put more effort and time into their jobs if they are involved in contributing to the fulfillment of the company’s sustainability goals. Therefore, sustainability doesn’t just make a company more attractive to new talents but also improves its ability to retain and motivate existing employees.
Risk reduction and better resilience
Today, sustainability is one way to reduce risks and increase a company’s value. Sustainability practices help companies reduce risks related to ever-stricter environmental law requirements, a lack of natural resources, climate change, and consumers’ needs. By overcoming these challenges, companies can reduce their vulnerability in the supply chain, reduce the risk of environmental fines, and reduce reputational damage.
What is environmental protection?
Environmental protection
Environmental protection in business covers integrating sustainable practices and principles into the organization’s operations, strategy, and decision-making processes. In other words, companies consider their environmental impact and employ methods to reduce this impact and encourage long-term economic development.
However small, every business still uses energy and generates waste. These are the main reasons every company should know and understand its environmental impact. To understand your company’s environmental impact, you need to evaluate the main criteria: greenhouse gas emissions, energy consumption, waste accumulation and management, resource consumption, product life cycle, and others.
Evaluating environmental impact and applying sustainable solutions to reduce it requires expert knowledge and experience. Sustaiming sustainability consultants and experts from various teams can help you do just that.
What is social responsibility?
Social responsibility
Social responsibility in business covers integrating responsible practices and principles in organization’s operations, strategy, and relationships. A socially responsible company takes into account the effect it has for its social environment and aims to create a socially positive environment for its employees, community, and society.
To understand your company’s social responsibility, you need to evaluate the main criteria: employee wellbeing and diversity, gender equality and human rights, employee health and safety assurance, employee skills, collaboration with social partners, and others.
The success of any company depends on its employees’ skills, knowledge, motivation, values, and other aspects that contribute to the company’s expansion, competitiveness, and growth. Social responsibility helps your company follow a socially sustainable business path. If you need help taking the first steps or continuing on this path, Sustaiming sustainability consultants and experts from different areas are happy to share their knowledge and experience.
What is sustainable governance?
Sustainable governance
Sustainable governance in business covers ethics, transparency, accountability, and anti-corruption. It encourages stakeholder engagement and risk management, quality service provision, and improved company reputation.
Often, companies need help to objectively evaluate their compliance with sustainable governance criteria and notice or even admit the flaws of their operations. In situations like these, Sustaiming consultants and experts from various areas can help you by evaluating your company’s governance and offering the most effective and efficient solutions for eliminating the existing flaws.
What is a sustainability report?
The sustainability report reveals various sustainability parameters of the company’s activities in ESG (environmental, social, and governance) areas. This allows the company to transparently and clearly communicate its risks, opportunities, and goals to stakeholders (investors, clients, society, governmental and non-governmental organizations, etc.).
Some companies are already making sustainability reports of their operations; others will soon be required to do so under the effective EU and national legislation (read more here). However, sustainability reports have more benefits than just fulfilling the requirements. Even if you’re not obliged to prepare them, your business partners can soon ask you to provide information about your company’s impact on the environment and society, as this may be essential for ensuring the sustainability of their own operations. Sustainability is closely related to long-term business success, performance, and stability. You can find out more about the benefits of sustainability to your business here.
Sustainability reports can be prepared in accordance with various standards and guidelines (read more here). However, preparing a sustainability report isn’t easy – the process requires knowledge of sustainability, legal requirements, and sustainability standards. That being said, a professional and quality sustainability report is a great tool for communicating with your stakeholders and strengthening the image of a reliable business.
It’s important to mention that, according to the EU Corporate Sustainability Reporting Directive, companies must provide information using the double materiality model. This means that a company should evaluate its impact on the environment and society, as well as analyze the potential risks posed by sustainability challenges (e.g., climate change, pollution taxes, etc.)
Who must submit sustainability reports?
The EU, aiming to increase corporate accountability and ease the shift to a sustainable economy, has passed the Corporate Sustainability Reporting Directive – CSRD.
Under the CSRD, companies are obliged to submit their sustainability reports regularly. A third party will also have to check these reports during an audit.
Currently, sustainability reports must be submitted by companies to which the Non-Financial Reporting Directive is applied.
CSRD foresees a gradual implementation of sustainability reports:
- 1 January 2024 (reporting in 2025) for companies already subject to the NFRD (listed companies, large companies, and banks with over 500 employees);
- 1 January 2025 (reporting in 2026) for companies that meet at least two of the three criteria: their assets are at least 25 million EUR, their turnover is at least 50 million EUR, they have 250 > employees;
- 1 January 2026 (reporting in 2027) for listed SMEs (except for very small companies), small and non-complex credit institutions, and captive insurance undertakings;
- 1 January 2028 (reporting in 2029) – for third-country enterprises if the net turnover in the EU is above 150 million EUR and which have at least one large or EU-listed subsidiary or branch which receives at least 40 million EUR in profit.
Sustainability reports require significant time and effort, so it is wise to foresee what kind of data you will need for the report in advance. If you aren’t yet familiar with sustainability reports and the newest CSRD requirements, Sustaiming team can help you.
Sustainability report: where to begin?
- We recommend you begin by determining if your company will be required to submit sustainability reports under the CSRD. However, even if you are a small company and you won’t be required to provide sustainability reports, we suggest considering your company’s possibilities to have sustainability evaluations or reports. The biggest business partners might soon ask you to provide information about your company’s environmental and social impact, which contributes to the bigger companies’ sustainability reports. They are set to become as usual and important as financial reports in the very near future. One of the best things for a company to do is to begin thinking about sustainability now – whether required or not, knowing where you stand will be beneficial for your company. Find out more about the benefits of sustainability here.
- Clarify which information should be included in your sustainability report under the CSRD. It’s worth noting that once CSRD requirements become effective, you must disclose more information and data than you could find in previous sustainability reports prepared under the most common sustainability standards.
- Include sustainability in strategic meetings and managers’ agendas.
- Evaluate if your company has sufficient experts and competencies or if you need more knowledge, human resources, and external assistance.
- Perform the dual materiality assessment and see which areas of sustainability could be significant to your company through impact, risk, and opportunity points of view. Don’t forget to include your stakeholders in the process.
- Perform an operations assessment and objectively note which activities you already do well and what kind of sustainability measures you’re taking (even if you didn’t consider them to be a part of your sustainability strategy previously). You should also note what’s missing in your company under the CSRD.
- Prepare missing sustainability policies, terms, and procedures and integrate sustainability into your organization’s strategy.
- Get ready for data collection and the reveal of sustainability information.
- Appoint persons or teams that will be responsible for implementing all processes related to sustainability.
If your company will have to follow the CSRD, you must act and start getting ready now. Don’t ignore the upcoming changes – prepare for them. And if you need any help doing so or integrating sustainability strategy into your company’s operations, Sustaining consultants are happy to help.
Sustainability report standards and guidelines – what should I know?
When preparing sustainability reports, you should follow the applied sustainability standards. For a long time, companies have used different standards for these reports, such as the Global Reporting Initiative, Sustainability Accounting Standards Board, Task Force on Climate-Related Disclosures, and others.
The EU wanted to stop the application of different sustainability standards and ensure comparability and reliability. Therefore, it employed the European Financial Reporting Advisory Group to create the concepts of European standards.
The first set – European Sustainability Reporting Standards – has been approved by the EU delegated regulation: (EU) 2023/2772: https://eur-lex.europa.eu/legal-content/LT/TXT/?uri=CELEX:32023R2772
Sustaiming sustainability consultants will help you choose the sustainability standard that’s the best for your company while taking the requirements of CSRD into account and taking care of the whole process of preparing a sustainability report.
Business sustainability strategy – where do I start?
Sustainability strategy is a value-based approach towards business expansion. It reveals the company’s view on sustainability as well as the integration of sustainability principles and practices in its operations and decision-making processes. A sustainability strategy sets the direction and goals of the company and foresees the measures to achieve these goals.
The first steps towards a sustainability strategy should go as follows:
- Internal audit or evaluation of the current situation to reveal your current position and operations. Most companies already organize and implement various responsible activities but don’t necessarily consider them to contribute to sustainability principles and goals. Additionally, to identify the most significant areas of sustainability and set reasonable KPIs, you must have a clear overview of the current situation.
- Identify your stakeholders and their sustainability expectations and priorities for your operations.
- Perform materiality assessment. It will help you see where your company’s impact is significant, where are potential risks and opportunities, and in which areas of sustainability your company can have the biggest positive impact and should therefore focus on it.
- Raise goals that will help you implement your sustainability strategy and reduce negative impact.
- Set your KPIs and begin monitoring them.
Sustaiming sustainability consultants can help your business create a tailor-made sustainability strategy to match your needs and stakeholders’ expectations.