We Asked, They Answered
Sustainability - The new way of doing business
As much as sustainability is crucial for our well-being, it is often welcomed with a sense of resistance. While some industries are thriving towards a more sustainable route, studies seem to indicate that businesses in general are lagging behind when it comes to sustainability. Starting from the very essentials, why should corporate strategies be focused on sustainability?
To start with, like in anything in life, change and new methods of doing things is always challenging to adopt, especially in the way one does business. As the expectations on corporate responsibility increase, and as transparency becomes more prevalent, companies are recognising the need to act on sustainability. In relatively simple terms, Sustainability is a business approach to creating long-term value by taking into consideration how a given organisation operates in the ecological, social and economic environment. If any organisation is after fostering its company’s longevity, then adopting sustainability strategies is key.
Some businesses have been in the industry for various years and while it might be attractive for new companies to adopt a sustainable route, it might be more difficult for established firms to transform their structure towards a sustainable one. What could be the main challenges encountered and what can be done to address these challenges?
Yes, as previously highlighted some businesses simply ask why should one change how to do business if what has been done in the past worked for so many years? Another side to the story could be, what if what has been done can be pursued and managed better? This would not simply enable the organisation becoming more profitable through better use of resources but also more socially conscious such as adopting better labour conditions while becoming more transparent and improving their governance. This truly matters not only in the eyes of the owners but also to clients, employees and investors who are seeking to do business differently.
There could be multiple measures adopted to enable this change. Large organisations such as Walmart, IKEA and H&M have moved toward more sustainable retailing, largely by leading collaboration across their supply chains to reduce waste, increase resource productivity and optimize material usage. Taking steps to address local labour conditions with suppliers from emerging markets is also the right path towards adopting sustainability measures. Other examples include adopting more energy and water efficiency operations as well as seeking to reduce carbon contribution by reducing overall waste and resource footprint. Other mechanisms include optimising the product life cycle even through the building’s operational and embodied carbon.
In a competitive industry such as retail, sustainability might be perceived as a burden rather than a source of empowerment. Are there any initiatives which can help retail shop owners turn their business into a more sustainable one?
Before discussing whether sustainability could potentially be a burden to an organisation, it is worth mentioning that it could be an even larger issue should organisations be legally incompliant.
In recent months the commission has proposed a Directive for Corporate Sustainability Reporting which will be coming into effect in the coming year. Initially this will be adopted for listed companies, banks, and insurance companies. Even though the proposal will not put any new reporting requirements on small companies, except for SMEs with securities listed on regulated markets. That said, many SMEs are facing growing requests for sustainability information whether they are retail or not. This is typically being requested from banks that lend them money and large companies that they supply. The transition to a sustainable economy is likely to mean that collecting and sharing sustainability information becomes common business practice for companies of all sizes. In light of this transition the Maltese Government is indeed becoming a catalyst in assisting organisation to adopt this change. Organisations are being asked to report their Environmental, Social and Governance (ESG) credentials and a platform has been adopted by the Government to guide listed companies and beyond through the collection and reporting of their ESG credentials. This is a first step towards guiding locally registered businesses.
On another front, various funding and schemes have been launched by the Government to assist businesses in adopting more Sustainable operations and practices. Malta Enterprise has launched the Eco-Friendly Retail Investment Grant, Investment Aid for Energy Efficiency Projects and Energy Audits together with the Energy and Water Agency, and the Smart and Sustainable Investment Grant to enable the private sector to embark on the twin transition to more digital and environmentally-sustainable business practices. These schemes provide opportunities for enterprises to grow, enhance their competitiveness and improve sustainability within their economic activity.
Awareness and information are catalyst for change. What are the main critical gaps, any business needs to address so as to ensure that they are not left behind?
There are two main critical gaps which need to be addressed; the knowing vs. doing and the compliance vs. competitive advantage. If you truly wish to stand out as an organization one needs to shift from the knowing to the doing phase and from compliance to competitive advantage. The risk of failure needs to also be made aware and given a price tag. If there is no competitive advantage to adopting Sustainability within the organisation, no organisation will embark on this practice.
Some practical recommendations include:
Setting up a small group of professionals to make sure that the strategy of the company and the sustainability efforts are aligned.
Address compliance, which indeed relates to upcoming regulations. Naturally investors increasingly shy away from compliance risks and having an organization which is actively being transparent and reporting its ESG credentials would make it more credible.
Link sustainability to a business case. In simple words this means to quantify the return on their sustainability investments.
Adopt the concept of transparency along all levels within the organisation including management and board of directors.
Present the organisation’s vision while setting clear goals and key performance indicators. Re-visit where and when necessary.
Those companies that proactively make sustainability core to business strategy will drive innovation and gender equality as well as loyalty from employees, customers, suppliers, communities and investors. Sustainability will not go away. It is simply a new way of doing business you either hop on or risk being left behind.
Before her role as an Advisor to the Minister for Sustainability Development and Energy, Abigail Cutajar used to be a sustainability consultant where she set up Sustainability Strategies for both local and foreign organisations such as Heineken Group. She also hold expertise in the design and construction phases of green buildings serving the commercial, residential, education and healthcare sectors amongst others with credentials such as LEED accreditation.