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5 Reasons a Sustainable Business Model Will Be the Only Future Business Model

Achieving sustainability is beneficial for business. If there’s a fact that goes under-reported and misunderstood when we talk about “going green,” it’s this one. Embracing the principles of a sustainable economy is an urgent moral imperative if we care about the planet our children inherit. But it’s also a no-brainer when it comes to succeeding in any industry.

In other words, doing good for the planet can be self-serving. Here’s why:

1. Consumers Prefer Eco-Conscious Companies

Good PR and positive “buzz” are two of the most important reasons for a company to embrace sustainable business practices.

Market research has demonstrated for years that consumers want to purchase products from businesses that take environmental stewardship seriously. Price and availability have bottlenecked this trend and transition for years — but the U.S. economy, at least, seems to have reached a tipping point.

Between 2013 and 2018, 50% of the growth in the consumer packaged goods (CPG) market came from products marketed as sustainable. In the United States this rise translated to $113.9 billion in sales across 71,000 unique SKUs — a 29% increase in earnings in the same period, and close to six times the growth of items not marketed as eco-friendly.

Translation — when companies decide to green their supply chains, consumers will be there, ready and waiting.

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2. Companies Can Greatly Reduce Their Operational Budgets

Good-faith sustainability efforts deliver cost savings that can add up if the company operates multiple properties or facilities. The Environmental Defense Fund highlights Starwood Hotels & Resorts as a case study in what’s possible when organizations take enterprise-wide water and energy savings seriously.

Starwood owns 1,270 properties in 100 countries. Before they got started on their sustainability journey, Starwood used performance models — not actual data gathered from the source — to appraise their energy and water usage. This method is both inaccurate and labor-intensive.

Starwood worked with representatives from the University of Delaware and elsewhere to get a better sense of each property’s resource efficiency — or lack of the same. They set out to create much more accurate regression models to see how occupancy rates, weather, building designs and other factors influence energy and water usage.

They ended up with a measurement tool that automatically populates Starwood databases with data like real-time resource usage for each property. This system facilitated faster decision-making, which made it easier to find and respond to water leaks, air duct problems and faulty equipment. The result was $20,000 in annual savings for each of the 1,270 facilities — or $2.4 million in recovered “free money” every year.

3. Small Efforts Improve Communities and Reduce Waste

Current estimates indicate that the United States recycles around 65% of steel products and between 40 and 65% of aluminum goods. The remainder of these items winds up in landfills, where they can take as long as a century to degrade and return to the environment. That’s a massive missed opportunity, but things get even stranger.

According to the U.S. Geological Survey, the United States exports 15 million tons of steel scrap and 1.6 million tons of aluminum scrap to other countries each year. At the same time, the U.S. imports 36 million tons of new steel and 1.3 million tons of new aluminum in an average year. This trading arrangement amounts to a gigantic and largely avoidable trade deficit and an unnecessary burden on the natural world thanks to resource extraction.

If American businesses engaged in better recycling practices for steel, aluminum and other commodified metals, it could mean replacing two-thirds of imported aluminum and one-third of imported steel with repurposed domestic “waste.”

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There are many thoughtful ways to accomplish this, some of which require minimal effort from companies. One way is for businesses to donate worn-out instruments and tools so they can be refurbished and donated or else reduced to their raw materials for recycling. The result is a tight-knit community that looks closer to home to meet its needs, not to mention excellent PR for the organizations doing the donating and refurbishing.

Slashing the amount of virgin material brought forth from the Earth, and keeping a corresponding amount out of our overburdened landfills, has obvious environmental benefits. But it also means some types of economic nationalism — like tariffs, which disproportionately place the burden on the consumer and hurt sales — could be rendered unnecessary.

4. Sustainability Is Good for Employee Retention

While consumers have made their desires known, employees also regularly indicate their preference for mission-oriented businesses. Companies that make efforts to improve their sustainability — especially if those efforts put workers front and center — are better at retaining their team members. At a time when the cost to replace an employee hovers around 33% of that individual’s salary, it’s in a business’s best interests to keep their attrition rate low.

There are many examples of employee engagement programs that translate to improved sustainability. It works in reverse, too — excellent green strategies means better and more committed workers. When Duke Energy implemented a voluntary “Sustainability Corps” program, it was to empower their workers to make sustainability-minded decisions at home and in the workplace. Naturally, that’s great for cost savings.

It’s also great for engagement. The company reported that 77% of its workforce participated voluntarily. Afterward, 79% of participants said they were very likely to still be working with that employer in a year.

The importance of courting and supporting individuals who have this kind of long-term focus cannot be understated. In their 2014 “U.S. Leadership Core Beliefs Culture Survey,” Deloitte reported that 70% of millennial respondents said they “expect” employers to maintain a focus on solving societal problems.

Little has changed since then. Today, surveys from Gallup and elsewhere indicate that young people want a “purpose” at work beyond earning a paycheck. Some 40% of millennials would take a pay cut on the order of $5,000 to $10,000 per year to work at a sustainable organization, compared to 17% of boomer babies.

Sustainable businesses have more engaged and committed workforces. And an engaged and committed workforce is essential for steady growth and earnings.

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5. A Planet in Poor Health Means a Higher Cost of Doing Business

Finally, it’s worth considering how a planet in ill health affects the bottom line of every company on Earth. The scientific community observes a clear link between climate change and poor public health, a higher likelihood of hurricane property damage and other extreme weather events and rising energy, transportation and distribution expenses throughout our supply chains.

Whether this translates into destroyed property that needs replacement, a higher cost of doing business or rising numbers of employees calling off sick regularly, it’s apparent none of this is advantageous for business. To put off making reasonable changes to our business models — to chase short-term savings and stockholder dividends — is short-sighted.

Endless economic growth has always been a fairy tale, but it’s an especially silly notion if we keep punting the “buck” to the next generation. For a business to stand the test of time, it must stand on a firm foundation. As we’re building that foundation, what could be more important than a stable climate and a healthy and sustainable natural world?

Adopting Green Tactics Within Business

As you can see, companies can benefit in several ways from going green and promoting sustainable strategies among their workers. As the need for a healthier environment and smarter business tactics increases, more employers will turn to sustainability to answer their questions.