How Entrepreneurs Can Build Sustainable Businesses

Simply maximising shareholder returns has been the overriding priority in business strategies for decades. Today, many companies are taking a broader approach towards building a business.

A leading hospitality and real estate group, which owns and operates hotels under the iconic Peninsula brand, is embracing what it calls “sustainable luxury.” This concept is influencing, among other things, how the group sources seafood, offers customers single-use plastics, builds new hotels, heats and cools its buildings and procures wood products. [1]

In Thailand, another hospitality business is extending the same focus on sustainability in a different direction. ORI9IN, a joint venture between an international hospitality brand and chef James Noble, has just opened for business as the first gourmet organic farm and restaurant in Chiangmai which is partnering with a network of Thai restaurants and hotels looking to reduce their carbon footprint by sourcing the best quality ingredients locally. The venture has also created cooperatives in the community for the livestock farmers, fishermen and artisans who contribute to its restaurant menu.

As purpose-driven businesses spring up across Asia across hospitality and other industries, it is clear that these are not vanity projects but a response to consumers’ growing focus on health, positive social impact and the environment – especially in the light of the Covid-19 pandemic. [2] As environmental awareness grows among consumers, employees and even investors, a strategic focus on sustainability can realise a range of advantages for any business. [3]

Benefits of A Sustainable Business Approach For Entrepreneurs

A good first step is establishing a sustainability strategy, which demonstrates and entrepreneur's business commitment to long-term success for all its stakeholders. Its potential benefits include:

Long-term value : Growing numbers of investors see sustainability strategies as key to long-term value creation. This can help ensure access to new sources of capital and better valuations. [4]

Premium pricing : Increasingly, consumers pay a premium for sustainable products. A 2019 survey by Accenture [5] showed that more than half of consumers in 11 countries across North America, Europe and Asia would be willing to pay more for sustainable products.

Talent : Employees are increasingly looking to work for companies that are driven by a sense of purpose and take a clear position on issues like climate change and inequality.[6]

Reputation in the community : Companies with clear sustainability strategies tend to be well respected where they operate because they are clear about how they seek to contribute to the local environment and community. [7]

Designing a Sustainability Strategy For Your Business: Five key steps

What sustainability issues are the most relevant to your business and its stakeholders? It makes sense to start work on your sustainability strategy by conducting a materiality analysis to identify and prioritise the issues that are the most important to a business and its stakeholders.

1)  Assess the most material issues

Look at the key aspects of your operations, from energy and water use to your interaction with communities and your supply chains.

• Ask yourself who your different stakeholders are and which of them might be most impacted by your business’s activities.
• Check what the potential impact is on your operations, on your stakeholder groups and how these may affect your company’s growth, costs or reputation
• Assess how important each issue or aspect of your operations is to your different stakeholder groups.

The materiality matrix generated from this process should make clear which aspects of your business have the biggest environmental and social impact. [8]

2) Report on your impact

When you have identified the most material sustainability issues for your business, report on them. You won’t be alone in doing this: research from The Governance & Accountability Institute shows a rapid increase in the number of S&P500 companies publishing annual sustainability and responsibility reports since 2011.

Half of these companies use reporting frameworks developed by the Global Reporting Initiative, or GRI. The GRI represents the global standard for sustainability reporting and offers clear frameworks, models and guidance. According to a GRI study, reporting by SMEs (Small and Medium Enterprises) “increases transparency to stakeholders and exemplifies good risk management while driving business development and the optimisation of business processes.”[11]

3) Be realistic, set clear goals

Clear goal-setting is a vital building block for successful sustainable strategies.

For example, as an entrepreneur, you could aim to reduce your carbon footprint by 10% by a set date or ensure a certain percentage of your inputs are sourced from local communities by a certain time.

You may also consider seeking advice from experts and use an industry standard framework in developing your goals and objectives.[12]

4) Align Your Sustainability Strategy and Business Strategy

They must go hand-in-hand. It should be evident that your sustainability strategy supports your business goals and does not mean profits will be sacrificed or shareholder returns impacted.

A good sustainability plan should identify and mitigate operational risks that may be driven by environmental or social factors. Effective use of energy, water and other resources can also go a long way to reducing costs. Strengthening a company’s reputation should also open up opportunities.

These benefits can often be overlooked by entrepreneurs as overall business strategies are developed. Highlighting the benefits of a sustainable approach can go a long way to ensuring that the sustainability strategy forms an integral part of your overall strategy.

5) Involve your teams

Sustainabilityy strategies need to be understood and supported by staff. Entrepreneurs should empower employees to make decisions based on sustainability goals. Attaining these goals could also be a factor in employee appraisals and incentive payments.

As well as helping to meet sustainability goals, engaging employees in the process brings the added benefit of better staff engagement and retention. A recent study showed that “...several opportunities can be gained from a more ethical and participative approach to environmental and staff management. The greatest benefits are, among others, higher staff motivation and a greater degree of job satisfaction”.[13]

Your mission statement should also focus on how sustainability is a core part of your business strategy.

Strong values, strong value creation

Increasing awareness of how a focus on Environmental, Social and Governance (ESG) factors can contribute to sustainable long-term growth has led to a transformation in business planning and strategy, and deepen the understanding of the long term value this can create for their brands.

Growing evidence suggests that companies with strong sustainability credentials have outperformed their peers during the Covid-19 pandemic.[14] This suggests that companies that have been driven by their values to embrace sustainability are better able to weather crises and continue growing. In an unpredictable world, this makes sustainability a meaningful advantage.

Further Reading

SOCIAL IMPACT EFFORTS THAT CREATE VALUE

YES, SUSTAINABILITY CAN BE A STRATEGY

SUSTAINABILITY STRATEGY SIMPLIFIED

HOW TO MAKE YOUR BUSINESS MORE SUSTAINABLE IN 2020