How to Improve Sustainability and Drive Profitability

Sustainability and Profitability – The Traditional View

Sustainability and profitability are two business objectives that have traditionally been thought of as incompatible. The conundrum suggests that an organisation must make a choice between maximising profits or pursuing sustainability goals. This view also proposes that by implementing a sustainability strategy, an organisation will lose out on profit since such initiatives are time-consuming and expensive. One study suggests that as many as 7 out of 10 companies expect environmental pricing to negatively impact their businesses, yet a study by Boston Consulting Group found that 90% of executives find sustainability to be important.

Similarly, research from an IBM 2022 report shows that sustainability is at the forefront of corporate priorities – with 73% of surveyed executives saying their organisations have set a net-zero carbon emissions goal. This report also highlights that organisations that are committed to and effective at executing sustainability strategies have superior revenue growth.

A growing body of research supports the concept that an organisation's sustainability goals can in fact be complementary to turning a profit. And if we’re serious about tackling our current climate crisis, the outdated ‘traditional’ view requires a transformative shift – one that welcomes the mindset that sustainability can be a business opportunity.

Benefits of Being a Sustainable Business

It goes without saying that sustainable business practices help protect our environment and the delicate ecosystems that support life. Being a sustainable business means striving for waste reduction, energy efficiency, less water consumption, and using renewable materials. By adopting sustainable business practices an organisation will reduce their carbon footprint and help protect the environment. But there are also plenty of non-environmental reasons why an organisation should consider becoming sustainable:

Satisfy stakeholder demand

From customers and communities to shareholders and employees, stakeholders expect companies to play a role in decarbonising the global economy. Consumers are asking for more sustainable products and services, with increasing numbers particularly among Millennial and Gen-Z generations. Investor pressure is another powerful factor shaping the shift towards sustainability. Gartner research found that 85% of investors considered environmental, social, and governance (ESG) factors in their investments in 2020, while 91% of banks monitor ESG performance of investments.

Meet ESG reporting regulations

Many countries and regions have sustainability regulations and targets related to carbon emissions and waste diversion. By adopting sustainable practices, organisations can comply with these and avoid fines or penalties related to non-compliance. Being a sustainable business also makes it easier to attain green building certifications that can help prove regulations are being met. At Method Recycling, our waste data collection technology, InSight, provides clear, accurate, and timely waste management data that is NABERS-compliant and can help your organisation attain sustainability certifications.

Positive brand reputation

Corporate social responsibility (CSR) is a valuable attribute. Being a sustainable business can demonstrate your organisation's commitment to the environment. This can improve your reputation as a socially responsible organisation, motivate current employees, and attract new talent of the same mindset. In a Deloitte survey, 49% of Gen-Zs and 44% of Millennials said that they had made career choices based on their personal ethics. Customers are looking for brands that put sustainability at the forefront of their business. According to a recent CGS report, 61% of UK consumers say that sustainability is central to their buying decisions while 51% of US consumers rate sustainability as important.

Lower operating costs

Investing in sustainable systems that run more efficiently can significantly reduce operating costs, such as savings on waste management fees, raw material use, and utility bills. For instance, with Method InSight’s near-real-time bin weight data, bins can be changed as and when needed, rather than at a set schedule, saving on bin liner spend and associated labour costs. According to the Better Buildings Partnership, better waste management delivers a 10% cost saving. Also, many green building certifications offer incentives such as tax rebates. By reducing waste and promoting reuse and recycling initiatives, businesses can save money on landfill and incineration fees, as well as on the cost of purchasing new raw materials.

Innovation

Implementing sustainable practices can stimulate innovation and creativity within a business, leading to the development of new products, services, and business models that are more durable, reusable, recyclable, and efficient. The IMB 2022 report shows that 63% of their respondents, who are dedicated to executing their sustainability strategy, outperformed on innovation compared to all others surveyed. Sustainability is a transformation opportunity that can leverage the power of data and technology to drive change and innovation.

How to Become a Sustainable and Profitable Business

The concept of sustainability is to shift from a linear model of consumption and disposal to a circular economy – by creating products that are durable, repairable, compostable, and recyclable; and services that balance economic, social, and environmental considerations with future generations in mind. To be profitable in this business model, an organisation should consider the following:

Create a clear sustainability strategy

The first step to become a sustainable and profitable business is to create a sustainability strategy that is clear and achievable. IBMs research report IMBs research report shows that while 86% of companies have a sustainability strategy, only 35% have acted on that strategy. To truly experience the benefits of sustainability, it must be an integral part of the overarching business strategy and operations.

Demonstrate commitment and communication

Achieving sustainability goals requires commitment throughout the organisation. Communicating your organisation’s sustainability goals to employees and partners will assist in supporting the needed behaviour change and workplace engagement to be successful. Making sustainability a focus for leadership and board members will set the tone for the wider company. Establishing sustainability teams and roles can help lead climate action in your workplace, engage employees, encourage participation in sustainability initiatives, and drive progress towards achieving your goals.

Redesign products and services

Sustainability can be a catalyst for transformation. Fostering innovation and looking at ways to redesign products and services, that take into consideration your sustainability goals, can increase profits and save on unnecessary spend. Consider Unilever Unilever who changed the shape of a deodorant to use less plastic, and created a concentrated laundry product that heavily reduces the use of water.

Products and services that are more sustainable may come with a higher price tag and this is something that a business must take in account when pricing. However, 73% of Gen-Z consumers say they are willing to spend more on sustainable products. This demonstrates that regardless of the potential increased costs in producing more sustainable items, the demand from the market supports financial (and social) profitability.

Invest in research and collaboration

Becoming a sustainable business is a long-term commitment that requires research, efficient systems, and collaboration. Investing in effective systems to improve operations such as efficient waste management and energy-saving initiatives will cut costs overtime. By collaborating with partners, clients, suppliers, or sustainable business networks (such as the B Corp certification community), there is more opportunity to generate solutions that benefit profit and sustainability long-term.

Take confectionary company Mars, for example, who are improving the sustainability of their cocoa suppliers by helping smallholder cocoa farmers in the Côte d’Ivoire increase their productivity by providing access to improved planting materials, fertilisers, and training. They’re also investing in research that will help increase the quality and performance of cocoa plants for the future.

How Sustainability Helps Profitability – What’s the Data Saying?

Managing waste, energy, water, and raw materials efficiently can lead to significant savings for businesses. In fact, being more efficient at using resources is a strong indicator of superior financial performance overall. According to McKinseny & Company, sustainability initiatives reduce costs and can affect operating profits by up to 60%.

Deutsche Bank also shows impressive research demonstrating that organisations with high ESG ratings have a lower cost of debt and equity and 89% of the studies they reviewed show that companies with high ESG ratings outperform the market in both the medium and long term.

With such encouraging data, investors are becoming increasingly comfortable with the idea of investing in socially responsible organisations. In fact, in the last three years, socially responsible investment has grown by 22 percent now accounting for more than 11 percent of all assets under management in the United States.

Data shows that organisations who have integrated sustainability into their business operations are reaping the benefits and setting the conditions for long-term success.

How Method InSight Can Help Create a Sustainable and Profitable Business

Sustainability is no longer a nice-to-have, it’s a business priority. It is a financially and socially profitable strategy to help an organisation stay relevant and competitive. Sustainability creates new opportunities and innovative ways to reduce costs and increase financial gain long term. But it doesn’t happen by itself. Organisations need to prioritise sustainability, with clear goals, teams, accountability measures and commitment from leadership to make running a sustainable business profitable.

To measure your organisation’s success, it’s imperative to have access to good data and reporting capabilities. Investing in technology to track and manage your sustainability initiatives will help determine how successful they are, where improvements could be made, or efficiencies introduced.

With ESG reporting and regulations becoming more prevalent worldwide, being able to measure your organisation’s carbon emissions is an important part of your sustainability strategy. Considering that buildings are currently responsible for 39% of global energy-related carbon emissions, implementing systems that make your organisation more efficient and sustainable is essential.

At Method Recycling, we're committed to helping businesses lower their carbon emissions through smart waste management practices, our waste data collection technology InSight, and making ESG reporting requirements more efficient and accurate than ever before.

InSight enables clear waste reporting with accurate and timely bin-by-bin waste data that delivers fast feedback on how your organisation is tracking towards its waste reduction and sustainability goals. With automated data collection, it also cuts costs associated with manual data entry and analyst labour.

With near-real-time data, InSight enables efficiency in bin liner changes and waste collections, reducing cleaning hours, material costs, and unnecessary plastic going to landfill. By having access to measure and manage more waste streams, InSight can help increase diversion rates in your organisation, resulting in lower recycling contamination fees, reduced waste transportation, and landfill disposal costs.

Not only does the analytics portal make InSight easy to use, but it also enables waste metrics to be displayed digitally near bin stations, or online, helping to inform employees, foster engagement and commitment – key for sustainability success in your organisation.