8 Myths about
Despite the fact that every day, issues related to environmental, social and economic preservation and responsibility spread in the social and, especially, business environment, many managers have a mistaken view of the impact of sustainable practices on their business. In this regard, we present below eight important remarks to clarify some myths concerning sustainability.
Sustainability is an expense and not an investment
The sustainability initiatives must have a business case that considers, not only the costs to be incurred to put them into practice, but also the quantification of the benefits. To facilitate this analysis, companies should consider the S-ROI (Sustainable Return on Investment) metric. The aim of the S-ROI is to make risk-opportunity assessments more robust by providing new visibility to intangible internal costs and benefits, and to externalities – social, economic and environmental effects that are not normally considered in traditional cash flow-oriented project planning.
Benefits may include avoided emissions, saved resources or improvements in safety and productivity, while costs may include adverse effects on public health, risks associated with increased resource costs or scarcity, or impacts of a project on nearby farms, fisheries or tourist sites. Quantifying these factors documents the intangible values of an investment and allows them to be incorporated into the decision-making process alongside traditional financial ROI metrics, providing additional insights, confidence and transparency for investors.
On the other hand, ethical conduct, non-discrimination and fighting corruption are actions within the scope of sustainability that do not necessarily involve the use of financial resources.
Sustainability is a passing fad/trend
Every day the market is evolving to pay more and better attention to sustainable companies, products and services. This includes not only new laws and benchmarks, but also the stronger demands of consumers and employees and the need to meet the expectations of investors. There are several studies that prove that sustainability is not a fad, it is the new way of doing business:
Without drastic changes in CO2 emissions, the world is heading towards a temperature increase of at least 2.7°C by the end of the century, much higher than the 1.5°C defined at COP26 (UN).
75% of executives at investment firms consider a company’s sustainability performance in their investment decisions, and 50% would not invest in a company with a poor sustainability reputation (BCG, 2022).
66% of consumers form impressions based on a company’s ethics, environmental impact and social responsibility (Nielsen, 2015).
50% of employees favour companies that focus on social equality and environmental protection, even considering a pay cut of up to 15% (PwC, 2020).
As long as the quest for economic justice is at the heart of the contemporary capitalist system, sustainability will continue to be relevant. The shape of it may change, but the essence will remain. In the future, this topic will be so embedded in the corporate culture that it will not need to be given so much prominence in terms of communication and political action.
The solution is to have a sustainability department
Many companies, thinking that sustainability is a trend, have created specific areas and positions to deal with the subject, without realising that it is an insufficient measure.
At an early stage, the creation of the Chief Sustainability Officer (CSO) role provides a source of sustained focus to drive the sustainability agenda forward. However, if the sustainability team remains isolated from the business, business unit leaders tend to delegate and disempower sustainability objectives.
It is paramount to clearly define the roles and responsibilities of the business units and of the core sustainability team and to understand that the role of this team should evolve over time.
Being sustainable means implementing environmental actions
One of the most used words nowadays to talk about the environment, and the negative impacts caused by man is sustainability, a term with varied meanings.
In the business context, the sustainability of an organization is defined by a set of three axes: natural value, human value and economic value. This definition is based on the ESG (Environmental, Social and Corporate Governance) framework that first appeared in 2006 in the United Nations Principles for Responsible Investment (PRI) report. ESG considers the impact and dependencies of a company on the environment and society, as well as the quality of its corporate governance.
Sustainability only applies to companies that produce goods
As much as 90% of the environmental impact of organizations is caused by indirect greenhouse gas emissions (scope 3). However, it does not mean that companies that do not produce goods, usually with simpler supply chains, do not have a significant carbon footprint.
Moreover, the labor force in service companies has been increasing while industry and agriculture show the opposite trend. Thus, especially in the services sector, the social aspect of sustainability must take on a prominent role.
In fact, any business that is part of a supply chain, that has employees and customers, must develop a strategy for environmental, social and economic sustainability.
Only with new technologies will it be possible to be sustainable
Another very common myth is the belief that new technologies solve all problems. It is quite evident that technology leverages sustainability: more efficient engines, light bulbs that consume less energy and more transparency of information are some examples that will bring positive impacts to this subject.
But not all the attention should be put on innovation and technology. Companies do not have to suddenly make large investments and implement all disruptive changes to become a sustainable company, as such changes, in large numbers and intensity, could affect the business.
The sustainability roadmap should be structured in projects of short duration, and scope with well-defined objectives that are implemented gradually, softening the internal impacts on the organization and allowing for necessary adjustments and corrections.
It is good enough to produce a sustainability report
Just publishing the document is not enough. The sustainability report is a statement, an accountability, it is the final line of a process that must be structured and continuous.
For a company to have an effective sustainability strategy, it must develop a roadmap, break it down into actions to be carried out by the various agents of the organization, monitor the progress of the actions and define countermeasures to be taken in case of deviations in the results.
Communicating sustainable practices is green washing
This is a historical issue, as in the past companies communicated any small action as if it were an achievement and the excessive fuss started to be criticized. In addition, some cases of green washing have been the subject of public scrutiny and have generated quite a stir.
Companies that set meaningful goals, and achieve them, have every right to report on their successes. Truly sustainable projects deserve to be communicated and serve as a form of incentive for other organizations, while also raising global awareness regarding sustainability.
In this process, transparency is an extremely important element, not only for achievements, but also for failures. There is nothing better for building credibility than acknowledging mistakes and recognizing lessons learned.
These are just some of the myths we have observed while working with large and small businesses. As with these eight, there is an abundance of evidence to dispel the myths, but the conclusion is quite straightforward: companies that choose to turn a blind eye to the benefits of becoming more sustainable are putting themselves at an immediate competitive disadvantage and possibly at risk of survival in the future.
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