Corporate sustainability is sexy – and not only that…
Sustainability is no longer fashionable and has become a necessity for enterprises. What is changing in the Portuguese entrepreneurial tissue?
A few years ago, when Portuguese entrepreneurs were talking to managers about innovation and sustainability, for many it was merely a theoretical discourse. Many of them had difficulty in framing these aspects in their companies’ daily lives. In fact, there was often not even much openness to change. Nowadays, new business administrators have a notion of their responsibility towards society and the environment. In a few years the word sustainability has ceased to be a fashionable term and has become part of the business plan of successful entrepreneurs. Why has this paradigm shift occurred now?
Sustainability is sexy
Several international studies prove that companies whose prospects are beyond the next quarterly figures are economically more successful – even in the short term. A sustainable orientation can be beneficial for companies in many areas: including greater efficiency, improved corporate image, employee satisfaction and also greater opportunities to recruit new talent.
A sustainability-based business management denotes greater resilience at all levels of business, which is, of course, advantageous for a corporation. Companies that use less plastic are less exposed to oil price fluctuations; those that pay fair wages stabilize the qualified workforce.
Sustainable companies are more successful
Sustainability pays off economically for companies. The investment in sustainability brings competitive advantages to companies, increasing sales margins.
“Cheap is good” – this lemma is becoming out of fashion among consumers with purchasing power. In recent years, there has been a significant change in awareness of the demands placed on products and services.
Several studies have examined the ecological and social dimensions in enterprises. All these studies reveal the strategic relevance of companies in operating in a more sustainable way. This is because sustainable companies increase brand and product value, reduce costs and, in most cases, achieve higher margins.
A study by a German financial institute recently showed that sustainability also has a positive effect on traditional economic indicators: Companies operating sustainably in the consumer and retail sectors are increasing their EBIT margin. On average, this is 6 percentage points higher compared to competitors operating in a less sustainable way.
What does corporate sustainability mean?
But what really hides behind the term sustainability in relation to companies? Is it enough not to deposit the waste from the factories in the forest or not to dump the waste water in the nearest river? Or does a solar photovoltaic system have to be installed on the roof of the company?
According to the common definition: sustainability is the principle according to which one cannot consume more than what grows back or regenerates again to be available in the future. A simple example: you can only cut as much wood from a forest as the one that will grow again.
Many people associate the term “sustainability“, especially the saving of energy, the use of clean energy or windows with double glass. But there is much more to it than that. Sustainability embraces all social and ecological aspects of business life. Starting with offering organic fruit to employees up to a policy of zero emissions.
What makes corporate sustainability so urgent?
One look at the daily news is enough to understand the urgency of action: climate change, hunger, refugees, plastic waste in the seas and the extinction of species – even pandemics like COVID19.
Ecological and social sustainability has become a matter of human survival and no one doubts anymore that something has to happen. What was once considered a topic for idealists now appears at the top of the agenda – debated at the highest level.
Should companies now suddenly save the world? Yes, at least a little. This is what customers, regulators and investors are demanding more and more, thus creating impulses for the transition. Companies that know how to respond better will have a competitive advantage.
Sustainability is much more than protecting the environment – it’s part of modern business strategy.
The clear expectations of customers send clear signals to companies, they have to adapt their offers to the demand. More and more, Portuguese entrepreneurs are recognizing the added value that sustainable management offers.
Recently, we have seen in Portugal that the new generation of managers has already advanced with the implementation of the concept of sustainability in their business models. For new managers, sustainability is increasingly a strategic issue. Have our young leaders learned from Michael Porter’s advice?
If so, it is not by chance. It is over a quarter century since the report on the Portuguese economy by Michael Porter, a renowned business strategist and professor at Harvard Business School, was published. In this report Michael Porter applied his model of competitive advantage to the Portuguese economy. The results show that the six clusters chosen in his report were able to respond well to the “competitiveness audit”.
According to Michael Porter, many companies have an economic strategy and a social responsibility strategy, but what they should have is a single strategy to obtain competitive advantages. Companies need one strategy, combining sustainability and economy. Sustainability should not be seen as something that competes outside the organization’s strategy, or just as a policy of image communication.
An external investor to realize solar installations?
However, managing a company’s finances today requires in-depth planning, and treasury sometimes limits the ambitions of managers. The necessary funds even exist, but are channeled into raw materials that make the company operate. This is where the investor’s role in business sustainability projects such as increasing energy efficiency and installing photovoltaic solar energy comes in.
Investors want profits – but no longer at any price. Increasingly, investors are interested in knowing more precisely what their savings plans and funds actually contain in terms of individual investments. Environmentally or socially questionable actions are disapproved by many investors.
There is a growing interest in investing in renewable energy projects. In this case, the investor invests in the photovoltaic installation and shares the savings income with the company. An advantageous situation for both entities. In this way each one focuses on its own competences, increasing the competitiveness of the business as well as the quality of life on our planet.