Sustainability in Business

What is Sustainability In Business?

Sustainability refers to the approach companies take to manage their operations in ways that ensure long-term viability while considering social and environmental impacts alongside economic performance. It moves beyond traditional business goals that focus solely on profit, encouraging businesses to adopt practices that are socially responsible and environmentally friendly.

A foundational concept in business sustainability is the “triple bottom line” (TBL), which expands the traditional reporting framework to include three key dimensions: Profit, People, and Planet.

  • “Profit” represents the traditional measure of business success, focusing on financial performance and economic growth. The #1 goal for all businesses is to achieve financial success that enables them to sustain their operations and grow.
  • “People” refers to the social dimension of sustainability, which recognizes that businesses have a responsibility to their employees, customers, and the communities in which they operate. It includes fair labor practices, community engagement, employee well-being, and ethical sourcing.
  • Planet” encompasses the environmental aspect of sustainability, highlighting the importance of reducing negative impacts and preserving the environment for future generations. It includes efforts to reduce carbon footprints, manage waste, use sustainable resources, and support biodiversity.

Implementing the TBL framework can lead to various benefits — a better reputation, higher customer loyalty, better employee engagement, and long-term profitability. That said, businesses also face challenges when adopting sustainable practices, including balancing competing demands of the three dimensions, measuring and reporting impacts, and managing financial constraints.

Synonyms

  • Corporate sustainability
  • Sustainable business model
  • Triple bottom line (TBL)
  • Environmental, social, and governance (ESG)
  • Circular economy

Core Elements of Sustainability In Business

Based on the tripple bottom line framework, sustainable companies are…

  • Financially healthy
  • Socially responsible
  • Environmentally conscious

They also have governance structures in place to ensure these practices are embedded in their operations and decision-making processes.

Environmental Sustainability

Being environmentally sustainable means taking action to minimize negative impacts on the environment while promoting conservation and efficient use of natural resources. This approach ensures that businesses can continue operating without depleting resources or causing irreversible harm to the environment.

There are a few key ways businesses can become more sustainable:

  • Reducing waste to minimize their environmental footprint
  • Transitioning to renewable energy sources (e.g., solar)
  • Sourcing sustainable materials for their products
  • Implementing recycling programs and composting organic waste
  • Upgrading to electric or hybrid vehicle fleets and optimizing logistics routes
  • Adopting sustainable packaging solutions

For example, New Belgium Brewing diverts more than 99.9% of its waste from landfills and emphasizes energy efficiency in its operations. Adobe has set ambitious goals for net-zero energy consumption by 2050 and 100% renewable electricity by 2025. And companies like No Issue offer custom-branded packaging made from recycled and biodegradable materials.

Social Sustainability

Social sustainability is all about managing and improving a company’s social impact. The end goal is to create positive relationships and outcomes for employees, suppliers, customers, and the broader community. Corporate social responsibility (CRS) prioritizes equity, diversity, human rights, and the overall well-being of society.

This includes:

  • Providing safe working conditions and fair wages, and ensuring no discrimination or harassment in the workplace
  • Implementing policies that ensure equal employment opportunities for all, regardless of race, gender, or background
  • Actively engaging with and supporting the local communities in which they operate
  • Partnering with nonprofits to support causes like education, healthcare, and poverty alleviation
  • Providing continuous learning opportunities, skills development, and educational outreach programs

As an example, Gap Inc. has partnered with advocacy groups to support women’s equality in their supply chain, resulting in increased wages and better working conditions for female workers​. And companies like Danone have established funds to support local social innovations (in Danone’s case, community-based water treatment solutions).

Economic Sustainability

Economic sustainability ensures a business can thrive over the long term without depleting its resources or causing environmental harm. It involves making decisions that drive revenue growth and better margins while integrating sustainable practices that benefit both the business and society.

Tactics for achieving economic sustainability include:

  • Identifying opportunities for cost savings through resource efficiency and waste reduction
  • Investing in research and development to create innovative, sustainable solutions
  • Building long-term partnerships with suppliers and customers based on shared values
  • Proactively managing risks, such as geopolitical instability or supply chain disruptions
  • Considering new business opportunities that align with sustainability goals and values (e.g., minimizing packaging reduces waste, but can also be less expensive to ship)

Some companies have embraced the concept of the circular economy, where waste is minimized, and resources are kept in use for as long as possible. Most businesses use industry-specific tactics. A B2B manufacturer might prioritize reducing carbon emissions along its supply chain, while a SaaS company may focus on energy efficiency in its data centers.

Governance Sustainability

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community.

Governance and sustainability are closely linked. Good governance practices foster an environment where sustainable business practices thrive. Governance sustainability integrates environmental, social, and governance (ESG) considerations into the corporate governance framework.

Examples of good governance practices include:

  • Transparency in financial reporting and decision-making processes
  • Ethical leadership that prioritizes fair labor practices, anti-corruption measures, and respect for human rights within the organization and its supply chains
  • Assessing environmental risks (such as climate change impacts), social risks (such as labor rights violations), and governance risks (such as regulatory compliance issues)
  • Engaging with stakeholders — employees, customers, suppliers, and the community — and holding internal team members accountable
  • Tying executive compensation (bonuses and incentives) to the achievement of specific ESG targets, like reducing carbon emissions

The integration of ESG into corporate governance practices helps businesses align their values and actions. It also helps them communicate their progress toward sustainability goals to stakeholders and build trust with their customers.

Benefits of Sustainable Business Practices

When a business implements sustainable practices, it can have a positive impact on the environment, society, and the bottom line. Since today’s customers increasingly want to align themselves with companies that prioritize sustainability, becoming a sustainable business can also help you develop a competitive advantage.

Let’s take a closer look at the benefits of sustainability in business:

Cost Savings

According to a 2022 EY survey, 80% of supply chain executives are increasing their efforts toward sustainable operations, primarily to reduce costs and mitigate risks.

Through energy efficiency, waste reduction, and resource management, sustainable practices can help businesses save money. For example, switching to renewable energy sources (e.g., solar, wind) can lower utility bills, and using sustainable materials can reduce material costs.

Efficient waste management practices, including recycling and composting, help reduce the costs associated with waste disposal. Companies implementing “zero waste” programs often see a decrease in their waste management expenses. By reducing the amount of waste sent to landfills, businesses can lower disposal fees (and potentially generate revenue from recyclable materials).

In certain countries and jurisdictions, businesses that burn lots of fossil fuels or produce high levels of carbon emissions are subject to a carbon tax and other financial penalties. While a 100% reduction might be impossible, these companies can minimize their tax burden (and environmental impact) by reducing their carbon footprint.

Improved Brand Reputation and Customer Loyalty

Consumers are increasingly looking for brands that align with their personal values, particularly regarding environmental and social responsibility. In fact, a 2022 Yotpo consumer survey found that 84% of global consumers are more likely to buy from a brand that demonstrates a strong commitment to sustainability. So, it’s one of the best strategies for improving retention.

Loyal customers tend to become brand advocates, promoting the company through word-of-mouth and social media, which can attract new customers who value sustainability. Not to mention, sustainability initiatives naturally earn positive media coverage, contributing to an overall enhanced brand reputation.

Sustainability-focused loyalty programs can further deepen the relationship between a brand and its customers. Rewarding eco-friendly behaviors, like recycling or participating in environmental activities, reinforces the commitment to sustainability while engaging customers in meaningful ways.

Tentree’s “Impact Wallet” (where customers can track the positive impact their purchases have on the environment) and Girlfriend Collective’s “The Collective” (where customers share photos of themselves wearing the brand while participating in environmental activities to earn points for discounts) are two examples of successful sustainability-focused loyalty programs.

Higher Employee Morale and Engagement

It’s not just customers who want to align themselves with responsible companies. 70% of employees are more likely to stay with a company that has a robust sustainability plan. Organizations that prioritize sustainability are more attractive to job seekers, especially to those of younger generations who place a high value on environmental and social responsibility.

For example:

  • Flexible working arrangements (e.g., remote/hybrid work models) reduce carbon emissions. But they also boost employee well-being and work-life balance.
  • Creating an eco-friendly workplace, such as using energy-efficient systems, reducing waste, and promoting responsible resource consumption enhances the physical work environment.
  • Sustainable office solutions like ergonomic furniture and natural lighting improve comfort while contributing to a healthier and more productive work environment.
  • When employees are involved in sustainability initiatives (e.g., green projects), they feel more valued and empowered.

Engaged employees who support the company’s sustainability efforts become passionate advocates for the organization, both within and outside the workplace. This advocacy enhances the company’s reputation and can attract customers, investors, and partners who value sustainability.

Attention From Investors Who Focus on ESG

If you’re raising capital through investments or loans, sustainability can be a major selling point for investors. Environmental, social, and governance (ESG) investing has gained significant traction in recent years, with global sustainable investment assets totaling $124.5 trillion in 2022.

Sustainable practices don’t just align with many ESG funds’ investment criteria. They make businesses more attractive to socially responsible investors (hence why 90% of companies on the S&P 500 release yearly ESG reports).

So, in addition to financial benefits like tax incentives and lower operational costs, implementing sustainability initiatives can help companies secure funding from impact investors who prioritize ESG factors.

Compliance With Legislation

Governments worldwide are increasingly implementing sustainability-related regulations to address climate change, pollution, and other environmental challenges. Failing to comply with these laws can result in hefty fines and legal consequences.

For example, the European Union’s Sustainable Finance Disclosure Regulation (SFDR) requires financial institutions and advisors to integrate sustainability criteria into their investment decision-making process, provide transparency on how they integrate sustainability risks into their operations, and disclose the environmental and social impact of their investments.

By proactively implementing sustainability practices, businesses can ensure compliance with current and future legislation, avoiding any legal issues that could affect their profitability.

Future-Proofing Your Business

While markets and buying behavior are constantly changing, they’re always moving towards greater efficiency and less waste. The ability to operate sustainably is becoming a standard requirement for businesses, so businesses that are already sustainable won’t have to make such significant changes as consumers become more conscious and governments impose stricter regulations.

Rather than investing millions into sustainability initiatives to catch up with competitors, businesses that prioritize sustainability from the beginning can make a few small changes and continue reaping the benefits.

Challenges of Implementing Sustainability

Of course, no major initiative is without its challenges. There are significant considerations businesses need to take into account when implementing sustainability practices:

  • Upfront investment costs. While sustainability efforts vary wildly from one company to the next, they always require large investments in technology, infrastructure, and cultural changes.
  • Employee resistance. An all-encompassing sustainability shift will be challenging for employees. Lack of buy-in from team members happens when your team doesn’t see the point of a sustainability measure, or the transformation makes their workflow more difficult.
  • Lack of education or understanding. Companies run into issues when their employees don’t know why sustainability matters, what they’re supposed to do, or how a certain change benefits the company.
  • Uncertainty about ROI. While the benefits of sustainability are clear, making such major changes sometimes creates high ongoing costs and can slow down processes. For example, clothing brands using sustainable materials often pay more for these materials upfront.
  • Difficulty in measuring progress. Sustainability efforts often come with a complex reporting process and can be challenging to measure accurately. Attribution for sustainability initiatives is also difficult — for example, increased sales could be due to a new marketing campaign rather than just sustainability efforts.
  • Greenwashing. With the rise of sustainability as a trend, some companies may falsely claim to be sustainable for marketing purposes. Misleading customers about your sustainability efforts will damage your reputation and could carry serious legal consequences.

Initially, it’s on C-level leadership to embrace change. But in the long term, it’s essential to get buy-in from all employees. It’s also crucial to take these challenges into account and have a carefully crafted plan before diving headfirst into business sustainability. 

Examples of Sustainability Strategies

Every company approaches sustainability differently. A huge part of how it’s implemented depends on the company’s operations, size, resources, and the type of business.

To help you understand the concept, here’s a look at how different companies leverage their business model and operational resources to create sustainable practices:

Nike

Nike’s “Move to Zero” is a company-wide initiative aimed at achieving zero carbon and zero waste. This involves reimagining processes and products to minimize environmental impact, with ambitious targets set for 2025 and beyond.

As of 2023, 96% of the energy used in Nike’s operations came from renewable sources, and the company has achieved a 69% reduction in Scope 1 and 2 emissions since 2020. It has also diverted 100% of waste from landfills in its extended supply chain, with 80% of this waste recycled back into Nike products and other goods.

While many of these are related to operational efficiency and energy use, Nike has also introduced sustainable materials and processes into its supply chain. For example, its Flyknit technology uses recycled polyester yarns (which reduces carbon emissions by about 30% compared to virgin polyester) to create lightweight and durable shoes.

They’ve also implemented circular solutions to extend the lifecycle of products and reduce waste, including:

  • Encouraging customers to recycle or donate worn athletic shoes and apparel to reduce landfill waste
  • Sourcing eligible returns and open-box footwear to offer gently used shoes at lower prices
  • Utilizing materials from vintage and deadstock products to create new designs

To improve its supply chain, Nike also supports suppliers in their transition to renewable energy and sustainable practices.

Salesforce

Salesforce leverages its own technology to manage and reduce its carbon emissions. The Net Zero Cloud platform helps Salesforce and its customers track, analyze, and report on environmental data.

The company is involved in various initiatives to support environmental conservation and climate action. This includes participating in global efforts like the Trillion Trees initiative, which aims to conserve and restore one trillion trees by 2030. Additionally, Salesforce’s Nature Positive Strategy outlines actions to improve biodiversity and ecosystem health.

The CRM software vendor achieved its goal of using 100% renewable energy for global operations in 2021. The company purchases renewable energy certificates equivalent to its electricity consumption and invests in nature-based carbon credits to offset its remaining emissions.

Above all, the company also integrates sustainability into its product offerings. For instance, AI enhancements to the Net Zero Cloud automate ESG reporting for other organizations. Salesforce customers can automate and streamline their sustainability reporting processes, making it easier to comply with evolving regulations.

Ford

Ford is heavily investing in the development and production of electric vehicles (EVs) and batteries, dedicating over $50 billion from 2022 through 2026. The company plans to produce 600,000 EVs annually by the end of 2023 and aims to reach over 2 million by the end of 2026. By 2030, half of Ford’s global vehicle sales volume is expected to be electric.

The automaker maps and audits its EV and battery supply chains to ensure responsible sourcing of nickel, lithium, cobalt, and graphite. And it collaborates with third-party orgs to uphold environmental and human rights standards across its supply chain. And the brand’s involvement with the Manufacture 2030 platform helps suppliers measure, mitigate, and reduce emissions.

Transitioning to renewable energy is a cornerstone of Ford’s sustainability strategy. In 2022, 60% of the electricity used by Ford globally was carbon-free.

Its philanthropic arm, the Ford Motor Company Fund, supports community initiatives worldwide. In 2022, Ford and the Fund made over $64 million in charitable contributions, focusing on essential services, education, and entrepreneurship.

Chipotle

Chipotle aims to reduce its absolute greenhouse gas emissions from direct operations (Scope 1 and 2) and indirect activities (Scope 3) by 50% by 2030, a goal approved by the Science Based Targets initiative (SBTi).

Beyond those goals, the company takes a multi-pronged approach to sustainability:

  • Community engagement — Customers can round up their bill to the next dollar, with the extra funds directed to support local communities. Chipotle’s community fundraisers have raised over $99 million for local schools and organizations. And its Cultivate Foundation supports making real food accessible and promoting sustainability in the communities where Chipotle operates.
  • Employee compensation — The company offers competitive wages and benefits, including career advancement opportunities, to attract and retain top talent from all walks of life.
  • Ethical supply chain practices — Chipotle’s suppliers adhere to a strict code of conduct that prohibits forced and child labor, and ensures compliance with environmental and labor standards. The code also defines high standards for animal welfare and environmental practices.
  • Sustainable sourcing — Chipotle ensures that all beef and chicken supplied to its restaurants are raised without antibiotics or added hormones. Their pork comes from pigs raised outdoors or in bedded barns. Their beef is traceable back to the ranch of origin, ensuring transparency and accountability in their supply chain.
  • Environmental goals — The food chain focuses on scaling efficient agricultural water use and supporting restoration efforts to reduce water stress in priority regions. And it works to minimize waste by using sustainable packaging and promoting recycling and composting initiatives to reduce environmental impact.

People Also Ask

How can businesses get started with sustainability?

While sustainability carries upfront costs and trade-offs, any business can get started by evaluating its current practices and identifying areas where it can become more sustainable. Looking at sourcing, production, packaging, and distribution methods is a good starting point. From there, it’s all about setting sustainability goals, implementing changes, and regularly measuring progress.

What are the biggest sustainability challenges facing SaaS businesses?

When it comes to sustainability, the most significant challenge SaaS companies face is reducing their carbon footprint. They rely heavily on data centers and cloud services, which consume vast amounts of energy. The increasing demand for cloud storage and computing power exacerbates this issue.

They must also comply with stringent regulations (like GDPR in Europe and CCPA in California). These regulations demand robust data protection measures, which are resource-intensive to implement and maintain.

Most SaaS companies depend on a global supply chain for hardware components, like servers and networking equipment. Companies need to enforce strict supplier codes of conduct and engage in supply chain mapping to these components are sourced sustainably and ethically.

In what ways are manufacturing companies improving sustainability in their business operations?

The biggest sustainability advancements in manufacturing come from reducing waste, improving energy efficiency, and optimizing supply chains. Manufacturers are incorporating circular economy principles by recycling materials, reducing packaging waste, and reusing products to reduce their environmental impact.

They are also investing in renewable energy sources and implementing more sustainable production methods, such as using green chemistry processes. Plenty of companies also invest in their local communities, innovate their products to improve sustainability, and adopt sustainable packaging options.