The global economy has been rocked by unprecedented disruptions in recent years, and the outlook remains grim. A combination of the pandemic, inflation, trade tariffs and Russia’s invasion of Ukraine have sharply restricted economic activity, and the World Bank expects global growth to slow even further in 2023.
Recent research from Gartner finds that investments in sustainability are among the first to be cut by organizations that are struggling with rising inflation – despite CEOs rating sustainability as a top strategic priority.
But new research by Fujitsu suggests that they could be making a big mistake.
In a survey of 1,000 business leaders across 15 countries and 10 industries, we found that companies that prioritize sustainability tend to have better financial results, and the ones that go beyond the bare minimum are three times more likely to strongly outperform their revenue expectations.
Companies understand how critical sustainability is: 55% fear that they won’t have a successful business in 10 years’ time if they don’t address it now. Despite this, as Gartner suggests, many companies are quick to ignore environmental pressures to focus on economic ones.
In today’s disruptive world, Sustainability Transformation brings financial advantages companies can’t afford to ignore. So why is it being side-lined when it’s more important than ever?
Sustainability should remain a priority
The vast majority (77%) of business leaders surveyed by Fujitsu agree that becoming more sustainable is the right thing to do. But more than that, they can see it makes good business sense.
The results speak for themselves. Seven in 10 companies say that implementing a sustainability strategy has had a positive impact on their revenue, profit, brand reputation, customer satisfaction and retention; at least 65% have also seen improvements in business efficiency, new customer wins, employee satisfaction and retention.
Despite this, we often see companies abandoning their sustainability ambitions in times of economic downturn, as the Gartner research shows. After mergers and acquisitions, investments in reducing environmental impact are the first to be dropped when the going gets tough. Unfortunately, this attitude is also reflected among consumers, too: research by Kantar has found that the rising cost of living is preventing 64% of people from doing more for the environment.
That mindset is familiar to Anna Rahikainen, Sustainability Director at Kotipizza Group. “I think you can see a bit of an attitude change when the economy is doing worse and you have a challenging market situation,” she says.
The initial reaction is often to scale things down, put it on a shelf, close the curtains and say, ‘We’ll just put all sustainability development initiatives on hold, we’re going to save a bit of money, wait it out and see what happens next.’
Alongside the obvious environmental benefits, our research finds a clear link between Sustainability Transformation and tangible business outcomes.
Companies that go above and beyond the bare minimum in their Sustainability Transformations have better incremental financial results: 54% reported above-expectation revenue, compared to 49% of companies that only did the bare minimum, such as meeting legal requirements. When it comes to strongly outperforming revenue expectations, those that went above and beyond on sustainability outpaced the rest by three times (9% versus 3%).
Further, companies that see sustainability as a passing fad are significantly less likely to have strong financial performance. Only 25% of these report above-expectation revenues, compared with 60% of the companies that are taking sustainability seriously.
But companies need more than good intentions for sustainability success. To achieve a meaningful transformation they must have the right tools at their disposal, and more than two-thirds (68%) believe that their sustainability strategy will not succeed without significant investments in technology. It can be hard to justify these investments in a time of economic uncertainty, but advanced technologies such as artificial intelligence, machine learning and data analytics could give businesses the boost they need to drive sustainability through global disruptions.
DBS’s long-term sustainability strategy centers on technology-enabled solutions that strengthen profits as well as the planet. For example, the bank recently supported the creation of a digital trading marketplace for sustainably processed rubber. The data shared on the platform promotes greater price transparency across the market, allowing the bank to provide better financing terms to smallholding farmers while encouraging a shift toward more sustainable rubber practices. It is technology that makes all this possible.
Stable and sustainable
Businesses should not see sustainability as a drain on resources, but as an enabler for financial resiliency. Ultimately, Muenkel says, today’s economic pressures should strengthen a company’s commitment to sustainability, not weaken it.
“Senior leaders need to understand that sustainability is not just a risk and compliance matter – done well, it’s the business case of the century,” he says. “We need to shift from this mindset of, ‘I have to do it because somebody tells me to do it,’ to, ‘I want to do it because it’s the right thing to do and it’s a great business opportunity.’”
