Why is Sustainability Important in Business?

Updated in December 2024

What is Sustainability in Business? 

Sustainability in business refers to practices that meet today’s needs without compromising future resources. It revolves around three key pillars, which together form the foundation for a resilient and responsible organisation.

• Environmental Responsibility, such as reducing your carbon footprint, optimising resource usage, and adopting circular economy principles. 
• Social Impact, such as prioritising employee welfare, diversity, and community engagement. These efforts build trust and foster stronger stakeholder relationships.  
• Governance, such as maintaining transparency and ethical decision-making. Integrating robust ESG reporting frameworks ensures that stakeholders understand your sustainability commitments.

The Kyoto Protocol and the Paris Agreement are good examples of how increasing interest in sustainability from a multitude of influential stakeholders can result in a higher priority placed on ESG, which has led to the Sustainability Paradigm Shift.

Why Is Sustainability Important in Business?

Sustainability is not about reinventing or replacing a business model, but rather about incorporating ESG factors into strategy, policy and operations that already exist. The effort and cost should be considered in the context of the strategic development that is required for the company to remain competitive, not as a compliance burden.

• Consumer Demand: Studies show that over 70% of consumers prefer brands that align with their values. Sustainable businesses build stronger customer loyalty and gain a competitive edge.  
• Investor Interest: ESG-focused investing is on the rise. Companies with strong sustainability performance attract investors who prioritise long-term growth and resilience.  
• Cost Savings and Efficiency: Sustainable practices like energy efficiency and waste reduction can significantly cut operational costs. For example, switching to renewable energy can lower utility bills while reducing carbon footprints.  
• Brand Reputation and Differentiation: Companies that lead in sustainability are seen as industry leaders, enhancing their reputation and standing out from competitors.  

More specifically, in the early days of responsible investing, the choice between maximising value creation for shareholders and social responsibility was thought to be mutually exclusive.  Today, there is clear evidence that companies that incorporate ESG factors into their strategy and policies, and thereby create value for a wide range of stakeholders, outperform companies that do not. They maintain their value better during downturns and crisis periods, they are more likely to capture value from innovation and they ultimately have higher returns. 

Including Sustainability to the Company’s Commercial Objectives

By integrating ESG into the strategy and policy, the business decisions that are made to achieve the initial commercial goals like cost reduction and efficiency improvements will consider additional factors that are important to a wider range of stakeholders. 

What is most interesting is that the integration of these ESG factors into the decision-making process can achieve the same goals of traditional business management ‘best practices’ while simultaneously creating additional financial and financial value. 

Example

Last-mile delivery costs account for more than 53% of total delivery costs. With the volume of online shopping continuing to increase, this will have a significant impact on company cost structures in the future. For instance, IKEA has seen its online sales increase by 50%, which now represents 10% of total sales. Realising that last-mile delivery will not only impact cost, but also traffic congestion and air pollution, ESG is a significant component in its delivery strategy. Ikea plans to optimise delivery efficiency and achieve zero-emission delivery methods in all 30 global markets by 2025.

CSRD & EU Taxonomy Regulations —The Key to Impactful Sustainability Integration

One of the primary challenges of sustainability in business is the differing perspectives across jurisdictions, cultures, and stakeholder groups on what should be considered sustainable. This fragmentation has led to the emergence of numerous sustainability associations and frameworks, each attempting to define, manage, and improve sustainability practices.

To address this complexity, regulation has been introduced to provide standardised, quantifiable criteria for sustainability. Europe has taken the lead with initiatives like the Non-Financial Reporting Directive (NFRD), which has since evolved into the Corporate Sustainability Reporting Directive (CSRD), alongside the EU Taxonomy and Sustainable Finance Disclosure Regulation (SFDR). These frameworks aim to create a common language and set of metrics for assessing sustainability.

The EU Taxonomy, for example, offers clear definitions and measurable criteria for specific economic activities. This allows companies to credibly assess their business models and pinpoint opportunities to integrate sustainability into their strategies, achieving both ESG and financial benefits. By using these standardised, activity-specific KPIs, businesses can align sustainability with strategic, investment, and operational decisions, ensuring that financial and non-financial factors are equally considered. CSRD, with its set of 12 ESRS covering hundreds of data points, provides a framework to generate reliable and comparable data.

Moreover, standardisation facilitates transparency, helping companies track and manage sustainability progress, minimise greenwashing risks, and enhance stakeholder trust—all of which bolster their brand and reputation in the long term.

Conclusion: Sustainability Is a Business Imperative  

Why is sustainability important for business? Because it drives resilience, innovation, and growth. In a world where stakeholders demand accountability, adopting sustainable practices is no longer a choice—it is a necessity to drive long-term value. By integrating sustainability into your operations, you position your company as a leader in the global transition to a greener economy. 

Greenomy is here to help businesses succeed in this journey with our ESG reporting solution, streamlining CSRD and EU Taxonomy compliance. Collaborating with sustainability experts like Greenomy offers valuable guidance and support, ensuring your organisation not only meets regulatory requirements, but also utilises its sustainability reporting as a strategic asset. Book a demo to learn more.

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