Can Businesses Afford Sustainability?

Few of us will be immune from the cost of living crisis looming this winter. Food prices are up. Wage hikes are not keeping pace with the rate of inflation. Dramatically rising energy prices will strain household budgets across Europe, in particular. A GlobeScan survey, conducted in July 2022 and involving 31 countries across the world, found that the majority of respondents (60%) feel “greatly affected” by the increased cost of living. A further 28% describe themselves as “moderately affected.” In the face of this and other data, we have not to doubt that the cost-of-living crisis is impacting employees as well as customers, globally.

In such circumstances, can businesses afford sustainability? It is an understandable concern. It is, however, the wrong question.

We believe that the right question is: “How can embedding sustainability help our business to save money and even make money?”. In our recent book The Sustainable Business Handbook, we define a sustainable business as “one that operates with minimal negative impacts and helps solve societal and planetary challenges”.

We explain that “sustainability is about aspiring to continue the business into the indefinite future. Nowadays that means managing risks and opportunities associated with the social, environmental and economic impacts that a business has, which requires good governance and leadership at all levels of an organization as emphasized under ESG.”

(ESG: Environmental, Social and Governance dimensions of business).

As we further outline in the handbook:

“Sustainability covers a very broad range of issues. In recent years, issues such as biodiversity, corporate tax strategy, employee health and well-being, artificial intelligence, gender, ethnicity and disability pay ratios, healthy diet and obesity, living wage, mental health, responsibility for mass redundancies caused by automation and single-use plastic, to name just some, have been added to an already formidable sustainability agenda”.

There are many dimensions of sustainability that are impacted by the cost of living crisis; they include economic, education and health inequalities. The unemployed and those on low wages, in particular, are already struggling as prices rise. This can lead to stress and mental illness. It can also mean deteriorating physical health, as people switch to less healthy diets.

An important element of embedding sustainability in business is building a positive culture, and that includes being engaging and empowering. Right now, many low-paid employees (and probably also many on mid-level incomes too) are deeply worried about the cost of living crisis. So, if a business is to engage and empower, it needs to look after those least well off.

Each business needs to think about what the crisis means for them and its key stakeholders. Research carried out in the summer of 2022 for The Grocer magazine, highlighted some things retailers could be doing to help:

“For example, a third of shoppers want more advice from retailers on how to be sustainable on a budget, while the same number (33%) want to know how to make the most of their food or waste less. Top of the list was their wish for retailers to run more promotions on sustainable products. This answer was chosen by more than half of respondents (56%)”.

In today’s difficult economic circumstances, it is even more important that businesses look at their cost base. The COVID-19 pandemic and global lockdowns showed that many businesses could operate remotely. So how much business travel does a company need to go back to? Not returning to previous levels of travel promises potential cash savings and the opportunity to reduce a business’s carbon footprint. Similarly, manufacturing businesses might use the recession as a catalyst to accelerate the adoption of circular economy principles and redesign, recycle and/or re-use raw materials, thus reducing waste and saving money.

Employees – especially younger employees – will be watching very carefully for any sign of backsliding on sustainability commitments. Why should employees believe future company promises if leaders abandon sustainability commitments when the going gets tough? Clearly, some sustainability goals may take longer to achieve in a crisis. Capital spending related to sustainability may need to be reprofiled. Still, though, today’s leaders can learn from the example of sustainability leaders in the last recession after the Global Financial Crisis in 2008, who built trust and goodwill by sticking with the substance of their sustainability pledges even under enormous economic pressure.

Indeed, a sustainability mindset may well empower businesses to think about how to help with the cost –of living crisis now unfolding. In the UK, for example, the responsible business coalition, Business in the Community, with more than 600 corporate members, has identified practical steps that companies can take. BITC suggests, for example:

Businesses might also look at establishing a hardship fund, paying lower-compensated staff weekly rather than monthly and looking at pay differentials and exercising restraint for higher-paid employees. They might also commit to paying a living wage in their own organization and promoting this through their supply chains. Taking such practical steps could also help businesses to strengthen the social pillar of their sustainability commitments – what some call “putting the ‘S’ in ESG.” Indeed, British think-tank ReGenerate Trust published ‘Solve for S” - How businesses can approach the “S” in ESG and how partnerships with civil society can help’.

Climate change, biodiversity losses and other pressing issues won’t go away because of the cost –of living crisis. Wise businesses will knuckle down and redouble their efforts to find profitable solutions to the problems facing people and the planet and not seek to profit from doing harm. Now is the time to build a sustainable culture that engages and empowers employees to help their business to innovate to save money. Such a culture requires trust – which comes in substantial part from organizations honouring commitments and operating fairly and with integrity.