The Business Case for Sustainability
People working to solve environmental and social issues have been fighting an uphill battle on 2 fronts: one battle to save the planet and another to fight a perception issue.
For decades, social enterprise has been dominated by “top down” donation-based philanthropy rather than economic partnerships between equals. This reinforced the general perception that the first (and only?) motivation of social entrepreneurs should be purpose, not profit. And as a professional, you have to choose between a career and a calling. But combining both is surely too much to ask for, right?
All too often, corporations have displayed a similar thinking pattern: sustainability was relegated to CSR (Corporate Social Responsibility) departments. Donations and partnerships were justified by pointing out a link to the company’s values, rather than the value they created.
Luckily the tide has started to turn quite dramatically. More than ever, sustainability and economic opportunity go hand in hand. Suddenly, Profit and Purpose turn out to be brothers from the same mother.
In its annual letter to boards sent recently, the CEO of State Street Global Advisors, the $3 trillion-plus investment arm of State Street, stated that "shareholder value" is increasingly driven by challenges such as climate change, labor practices and consumer product safety. Responding to these challenges is "a matter of value, not values," he contends.
In this week’s newsletter, we wanted to share a couple of pointers on the business case for sustainability – to help you fight that good fight. And as you will see, borrowing from a famous James Carville phrase: “It’s the value, stupid!”
In community,
Venky & Peter
Co-Founders — Ubuntoo
For those in need of additional ammunition to make the sustainability case, here are some powerful learnings:
- Stock market performance
Stocks of companies with material ESG (environmental social governance) investments outperformed others by 6% annualized. (Khan, Serafeim, Yoon. Harvard Business Review, 2015 )
An investment portfolio with high ESG risk show an alpha of -3.5% per year. The negative alpha stems from unexpected costly ESG issues and from negative earning surprises. (Gobner. University of Eichstatt-Inglostadt, 2017)
- Company growth
Companies with a focus on eco-innovation are growing at an annual rate of 15% while many competitors remain flat (Europe focused. WEF, March 2017)
- Brand & Product performance
NYU Stern’s Center for Sustainable Business conducted an extensive research into U.S. consumers’ actual purchasing of consumer packaged goods (CPG), examining the performance of more than 71,000 SKUs between 2013 and 2018.
They found that 50% of CPG growth from 2013 to 2018 came from sustainability-marketed products. Products that had a sustainability claim on-pack accounted for 16.6% of the market in 2018. But they grew 5.6 times faster than those that are not; hence contributing to more than half of the market growth. (Whelan, Kronthal-Sacco. HBR, June 2019)
EVENTS
Don’t miss the Expo 2020 conference in Emmen, Netherlands – April 7 & 8, 2020. The expo will focus on a wide variety of bio-based and circular solutions, ranging from biomass, raw materials, monomers, polymers and intermediate chemicals to chain integration, recycling, upcycling and bio-renewables.
MUST READ
The Recycling Partnership USA has just released its 2020 State of Curbside Recycling Report. Besides some sobering datapoints (e.g. only 32% of what’s available to capture in single-family homes in the U.S. is recycled), the report also outlines an integrated strategy to help the U.S. recycling system achieve its full potential.
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“He who has a WHY to live for can bear almost any HOW” - Nietzsche
