7 reasons to do business sustainably

7 reasons to do business sustainably

Forward-looking businesses are becoming more sustainable, not because they are forced to do so by regulators or investors. They are embracing sustainability because they see opportunities. Yet many businesses are still adopting a wait-and-see approach. Yet there are plenty of reasons to go all out for sustainable entrepreneurship

Over the past 20 years, sustainability has evolved from marginal noise to a top priority for senior managers and entrepreneurs. The climate shocks are making everyone feel that things cannot go on like this. That is precisely the urgency that has been missing in recent years.

Xavier Baeten, lecturer in Corporate Sustainability and Responsibility at Vlerick Business School

1. Engine of innovation

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‘Companies that place sustainability at the very heart of the business tend to focus strongly on innovation to achieve their goals,’ says Xavier Baeten. He cites the example of the Finnish company Neste, which has evolved from a traditional oil refining company into a global leader in renewable and circular technologies. The company refines diesel from cooking oil and fats. This process produces CO2 emissions that are 90 per cent lower than with conventional diesel production.

‘Sustainability is an engine of innovation. It creates opportunities that can help both large and small companies to safeguard their future,’ says Xavier Baeten

2. New revenue streams

Driven by the sustainable transition, new sectors or business models are emerging, allowing companies to tap into new sources of revenue. Filip Ferrante: ‘The circular economy, which is aimed at maximising the reuse of raw materials and/or residual materials, is a good example. The as-a-service model is also on the rise. This involves not just offering commodities such as mobility or energy products, for example, but also the entire package of services around them, such as maintenance.

‘There are also still many opportunities for companies in combining sustainability with digitalisation,’ argues Xavier Baeten.

3. Cost savings

‘By investing today, a company can avoid high costs tomorrow,’ says Filip Ferrante, Director of Corporate Sustainability at KBC Group. For example, investing in solar panels or LED lighting doesn’t just reduce electricity bills. ‘These investments also reduce the company’s environmental footprint, enabling sustainable businesses to avoid an unexpectedly high tax bill..

4. Cheaper financing

The underlying environmental and climate risks mean that companies which continue pursuing harmful activities or fail to invest in reducing their environmental footprint will face higher financing costs in the future. The impact of those risks, such as outdated, non-environmentally friendly technologies, will be factored into the risk analysis of projects to be financed.

‘It is no secret that the financial regulator intends to use the capital instrument to encourage banks to make their loan portfolios greener,’ says Wim Eraly, Senior General Manager Corporate Banking at KBC Belgium. Banks that still have too many polluting sectors in their loan portfolios will eventually be required to set aside more capital for these. That could make borrowing more expensive for some businesses. ‘Borrowing will not become more immediately, but it is certainly the direction of travel. Companies need to embrace and transition towards sustainability now. KBC, together with its partners, can guide them in this,’ says Wim Eraly.

5. Sustainable suppliers in demand

Sustainability does not stand in isolation, and large sustainable companies often consider all the links throughout their value chain. As a result, they are increasingly putting pressure on their suppliers to adopt sustainable policies, too. Suppliers who want to retain their customers then have no choice but to make their business processes more sustainable.

‘The result is that we often see the whole value chain becoming more sustainable. That is a trend that an SME supplying large companies, for example, must definitely take into account. It is then better to anticipate strict sustainability requirements and work out a sound policy, rather than wait for it to be imposed,’ says Filip Ferrante.

6. Workers embrace sustainability

‘Previously, applicants used to come for a job. Now they come for the business. Sustainable businesses then have an edge, because sustainability is a really important issue, especially among the young,’ says Wim Eraly.

This also makes sustainability important for companies as a weapon in the 'war for talent'. And the positive effective continues after employees have been hired. ‘Sustainability is part of KBC's corporate culture. We are already seeing that our own employees are very enthusiastic about sustainable projects,’ Wim Eraly continues. ‘We are seeing the same momentum as in innovation projects.’

Academic studies confirm this. ‘From our own research, we know that a good company reputation and pride in working for a company really have a very major impact on employee engagement,’ says Xavier Baeten.

7. Future-proof

‘If corporate sustainability has one big overarching advantage, it is that it guarantees long-term security,’ says Xavier Baeten.

Sustainability taps into all the different levels of a company, and its impact spreads like an oil slick. Sustainable businesses:

  • Enjoy a stronger reputation
  • Innovate more
  • Are sought after in the labour market
  • Find it easier to raise finance.
  • Opening up new revenue streams

‘If a company’s only reason for focusing on sustainability is to improve its reputation, I would advise them against embarking on it. But companies that choose sustainability because they genuinely believe in it do reap all the benefits and thus secure their future.’

KBC expressly points out that the use of terms such as 'green' and 'sustainable' on this webpage in no way suggests that what is described is already (fully) in line with the EU Taxonomy.