Melbourne Business School News #OnlyOneEarth: Why sustainability is good for business

#OnlyOneEarth: Why sustainability is good for business

Learn how sustainability and profitability can go hand in hand to celebrate World Environment Day 2022.

The theme of this year's World Environment Day is "Only One Earth", the same slogan used 50 years ago for the 1972 United Nations Conference on the Environment in Stockholm – the first world conference to make the environment a major issue.

To mark the anniversary, members of the Melbourne Business School community explain why embracing a sustainability mindset is crucial for success.

'Shareholders expect a sustainability mindset'

Glenn Hoetker

Professor Glenn Hoetker, Director of the Centre for Sustainability and Business:

Companies should adopt a sustainability mindset because stakeholders increasingly expect them to do so. And because customers, employees, finance providers, regulators and others care, shareholders do too.

For example, we were fortunate to host Tania Archibald, the CFO of Bluescope Steel at one our events last year. She shared several relevant facts with us. First, BlueScope has committed $150 million dollars over the next five years towards their climate-related technology plan, including moving towards zero-carbon 'green steel'.

BlueScope is making that investment because they see it as a driver of competitive advantage.

It's clear that their shareholders do too. In fact, there was so much interest in their sustainability results that the process of sharing those took longer than sharing their financial results.

So, a company's return on investment will increasingly depend on how well it meets increasingly demanding expectations on the sustainability front.

In most of the companies I've worked with, profitability and concern for the environment conflict less than most people expect.

Think about it — for most firms, lowering their impact on the environment begins with reducing waste. Right there, you start to see cost savings.

A strong sustainability story can also help companies attract and retain talented employees. In the midst of our ongoing skills shortage, that's key to driving growth.

Now, that's not to minimise the challenge. Mindsets and practices have to change. Managers need to balance different trade-offs than before. Leaders need to develop new skills.

But, at the end of the day, there is nothing mysterious about how sustainability can improve a firm's bottom line. Like any strategic initiative done right, it can reduce costs, increase revenue and mitigate risks.

'Sustainability is about future-proofing'

Karin Ditchfield

Karin Ditchfield, Full-time MBA student and member of the MBS Sustainable Business Club:

Adopting a sustainability mindset is critical for companies to build resilience in their portfolios, to enable them to deliver value to society for many decades to come. In addition, key stakeholders such as investors, financiers and the government are placing increased emphasis on sustainability every year.

Sustainability is now a critical metric that is influencing investment decisions. For example, Blackrock, one of the largest global investment funds, announced that it will no longer invest in companies that generate significant revenue from thermal coal production. So, adopting a sustainability mindset will allow businesses to attract investors and financing and to strengthen their brand equity.

Companies can combine profitability and concern for the environment by incorporating sustainability metrics in key stages of their decision-making process. This enables companies to make investment decisions that create value and generate profit, while keeping sustainability front of mind.

Very often, the most sustainable choices also lead to the greatest long-term value. For example, some companies now use organic cotton to make clothes or invest in future-facing commodities linked to renewable energy and electric vehicles. A company can be sustainable and profitable at the same time.

A common misconception is that you have to choose between profit and growth, and sustainability.

A better way to think about it is to view sustainability as an enabler, as a tool to help you to develop a robust long-term strategy. By integrating sustainability in all key business decisions, you are future-proofing your business. You are making sure your business will thrive in a low-carbon economy that values sustainable practices. Driving sustainability is not only the right thing to do for the planet and for future generations, it is also good for business.

'Directors face consequences for greenwashing'

Candice Colman

Candice Colman, Full-time MBA student and member of the MBS Sustainable Business Club:

As a business student, I'm really excited to see corporate Australia really adapting that sustainability mindset. I think that's important as a lawyer from a risk perspective, because directors who mismanage their climate risks or who greenwash their business practices to make it look like they're more sustainable than they really are, are actually now subject to personal liability in Australia's corporations law.

There's a whole bunch of really awesome start-ups around the world doing some amazing things in terms of things like regenerative agriculture, biodegradable alternatives to plastics, and low-emissions alternatives to meat products. Historically outside of the renewable energy space, we have seen businesses struggle to achieve profitability in the environmental space. But one thing that Australia is really well-positioned to do is to capitalise on our knowledge economy.

You know, 20 per cent of the Australian workforce are actually knowledge workers, professional service workers, and that's our fourth largest industry by revenue. So there's a real competitive advantage for Australia in terms of helping those businesses globally achieve profitability in tandem with environmental concerns.

One of the key misconceptions that businesses tend to have around sustainability is that it's all about risk mitigation. And yes, it's important to minimise the decrease in asset value and minimise the increase in the cost of doing business that climate change is generating for businesses. But outside of the risk lens, there's a real opportunity to monetise solutions that help us to both mitigate the climate risk but also adapt to what a 1.5-degree future globally is going to look like.

For more information on sustainability, visit the Centre for Sustainability and Business.

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