Sustainability may be a buzz word used in today’s corporate environment, but it is more than just a fad. Sustainability today and in an ongoing capacity will mean an Earth that is healthy and can sustain us for generations to come. For this reason, each and every person and company are responsible for doing their part to minimize their impact on the environment.
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Companies are particularly under the spotlight when it comes to sustainability. The problem is, until recently, sustainability was considered a non-financial risk, one that was not given its due. Now that sustainability has become a financial risk for companies, communicating sustainability efforts and the results of those efforts has become critically important in the operation of any company.
This is why it is critical for companies to ensure they produce an annual sustainability report, a practice that is becoming increasingly popular. The sustainability report is more than simply an indication of what a company has been doing to operate in a sustainable manner, it also has both internal and external benefits that directly affect company revenue.
Internal Benefits of a Sustainability Report
When companies consistently issue a sustainability report, they enjoy internal benefits that can directly affect their revenue and their bottom line. These benefits are related to the various internal stakeholders involved in a company, namely the employees and board of directors.
When it comes to employees, especially millennials, they take the sustainability of the company they work for very seriously. In fact, 75% of millennials are willing to take a pay cut to work for a company that is socially responsible and 64% will refuse a job from an employer that isn’t socially responsible. Considering the fact that millennials will soon make up more than half the workforce, this is a serious consideration.
Companies can save money via employee retention simply by engaging in and reporting on their sustainability efforts. The median cost of employee turnover in all jobs other than executive and physicians is 21% of the annual salary of an employee. So, if you are losing 5 employees a year, each who makes an average of $50,000 a year, you are looking at a loss of $52,500 per year. By becoming sustainable and being transparent through a sustainability report, you are less likely to experience the cost that accompanies high turnover rates.
In the case of the board of directors, sustainability is becoming increasingly relevant. Boards are beginning to realize that sustainability is now a major factor in a company’s level of competitiveness and their ability to continue to operate. Unfortunately, bringing sustainability into the boardroom has not always been an easy task, which is why the sustainability report has become an important tool in informing the board of the company’s sustainability efforts. The report provides solid numbers on how they are reducing their carbon footprint and facts regarding their sustainability efforts that can be applied directly to assessing risk and profitability.
External Benefits of a Sustainability Report
The external benefits of sustainability reporting include the benefits that relate to the consumer and the investor, both of which are critical in the continued operation of a business. In the case of consumers, they have made it clear they want to deal with sustainable companies. Nielsen reports that consumers want to purchase products that have been sustainably produced. Of the products they focused on, overall sustainable sales growth was 5% (compared to 2% overall growth), with the following for each category:
- Chocolate – 16% (compared to 5% overall growth)
- Coffee – 1% (compared to -1% overall growth)
- Bath products – 14% (compared to 1% overall growth)
Thus, the more sustainable a company is, the more likely consumers are to purchase from it. Nielsen states, “Brands that are able to strategically connect (sustainability) to actual behavior are in a good place to capitalize on increased consumer expectation and demand.” This strategic connection can be made with a publicly available sustainability report.
When it comes to investors, they are more likely to contribute to a company that engages in sustainability. The reason behind this is simple – the more sustainable a company is, the more competitive it is in terms of capital costs, operational performance, and stock prices. However, it has traditionally been difficult for companies to relay information on these issues to investors.
Once again, the sustainability report functions as a tool companies can use to communicate with investors on how they are improving their bottom line with their sustainability efforts (Sustainability Indices). The happier investors are with a company’s efforts, the more they are likely to invest in that company.
The Bottom Line
When it comes down to it, the internal and external benefits of issuing a sustainability report involves improving a company’s public image so it can enjoy increased:
- Customer retention and consumer satisfaction
- Employee retention and engagement
- Participation from investors
- Board of directors’ satisfaction
- Stock market prices
The sustainability report is the primary tool that makes this possible because it can easily and quickly convey all the data and figures of a company’s sustainability efforts in an-easy-to-read format. This will bring all stakeholders on board and help ensure a company’s future success in this new sustainable world of business.
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