Sustainability might be more important to businesses than hiring top talent. According to a 2023 Deloitte survey, chief experience officers ranked climate change—just one aspect of corporate sustainability—as more important than seven other concerns like supply chain challenges and finding new talent. And 61% of respondents believe that in the next three years, climate change will become a central part of companies’ operations and strategies.
Learn more about what sustainability means in a business context and how leading companies incorporate sustainability initiatives into their value systems and business models.
What is business sustainability?
Business sustainability—or corporate sustainability—refers to a company’s impact on social, economic, and natural resources.Sustainable businesses minimize or eliminate negative social and environmental impacts and implement internal systems that support long-term financial performance.
3 pillars of sustainability
- Environmental sustainability
- Social sustainability
- Economic sustainability
Business leaders divide sustainability performance into three categories: social, environmental, and economic—or people, planet, and profit, for short. Here’s an overview of each:
Environmental sustainability
Environmental sustainability refers to a business’s impact on natural resources and environmental systems. It can involve increasing energy efficiency and using renewable energy sources, investing in sustainable waste management strategies, and prioritizing renewable resources over nonrenewable inputs.
An eco-friendly apparel company, for example, might create products from sustainable materialslike deadstock fabric, install solar panels on its warehouse roof, and partner with a sustainable third-party logistics company to optimize supply chains and reduce greenhouse gas emissions.
Social sustainability
Social sustainability focuses on a business’s impact on social and economic systems. A socially sustainable business might offer high-quality healthcare benefits to its employees, follow equal opportunity hiring practices, and invest in economic development initiatives in its local community.
For example, an Omaha-based hot sauce company might provide paid parental and caregiver leave benefits to its employees and establish a scholarship fund for students in the area.
Economic sustainability
Economic sustainability refers to a business’s ability to maintain its financial performance over time. Sustainable economic practices include implementing transparent accounting standards, maintaining regulatory compliance, and adopting an ethical and transparent corporate governance structure.
For example, a publicly traded renewable energy company might hire a third-party compliance expert to audit its governance structure and accounting practices, ensure regulatory compliance, and advise on any anticipated regulatory action.
How is business sustainability measured?
Although there’s no standard measurement system applied to corporate sustainability efforts, there are two primary frameworks to consider. The best option for your business depends on your budget, the scope of your sustainability objectives, and your reasons for measuring performance.
Environmental, social, and governance (ESG)
An enterprise business hoping to validate sustainability achievements to investors, on the other hand, might hire a third-party consulting firm with expertise in a reporting framework like environmental, social, and governance (ESG). A descendant of the 20th-century corporate social responsibility movement, ESG emphasizes data collection, accountability, and transparent reporting across quantitative and qualitative metrics.
Many large investment and consulting firms offer comprehensive ESG assessment services. S&P Global, for example, analyzes over 1,000 data points in a full ESG report and issues ESG Scores on a 100-point scale.
Key performance indicators (KPIs)
If undertaking a comprehensive sustainability assessment doesn’t fit your current budget or goals, you can also narrow your focus to a specific area of opportunity, identify key performance indicators (KPIs), and record baseline numbers. For example, an ecommerce business seeking to reduce its carbon footprint to increase brand loyalty among younger consumers might start by calculating total shipping emissions and then aim for a 10% reduction.
Examples of sustainability in business
- Increasing energy efficiency
- Reducing cybersecurity risks
- Optimizing supply chains to reduce emissions
Sustainable business practices can take many forms—from installing an energy-efficient heating system that will reduce your business’s carbon footprint to investing in communication training to support an inclusive work environment. Here are three examples of sustainability actions:
Increasing energy efficiency
Increasing energy efficiency can help businesses reduce their carbon footprints. A business might install smart thermostats that automatically turn off heating and cooling systems when they aren’t needed, upgrade the office building’s insulation, install energy-efficient windows, and use natural lighting whenever possible.
Reducing cybersecurity risks
Increasing economic sustainability involves proactive business risk management. For example, a business might audit its data protection and cybersecurity systems and require a training course for all employees to reduce potential risks.
Optimizing supply chains to reduce emissions
Supply chain optimization can reduce waste and emissions associated with the process of sourcing materials, creating products, and delivering them to customers. Businesses can increase supply chain sustainability through strategies like sourcing materials closer to end users and using logistics software to increase efficiency.
Benefits of sustainability in business
- Improved profits
- Reputational boost
- Increased investor draw
- Reduced risk exposure
A sustainable business model can benefit businesses in both the short and long term. Here’s an overview of the benefits of implementing sustainable practices:
Increased profits
Sustainability investments can increase operational efficiency, which cuts energy costs and increases average operating margins. A 2023 Bain & Co. study found a connection between sustainability initiatives and revenue growth. Similarly, a 2022 report from McKinsey & Company found that companies that make more ESG claims tend to outperform their peers.
Reputational boost
Consumers across all age groups increasingly report that they care about social and environmental issues and express a preference for environmentally responsible companies. Research also shows that investing in sustainability initiatives can support a healthy company culture and increase employee satisfaction.
Increased investor draw
Both individual and institutional investors increasingly reward companies that prioritize sustainability and put pressure on those with poor sustainability performance. Research shows that over three-quarters of institutional investors are willing to divest from companies with poor sustainability performance and nearly 80% of individual investors are either very or somewhat interested in sustainable investing.
Reduced risk exposure
Investing in a sustainability strategy can reduce multiple types of business risks, conferring a long-term competitive advantage. For example, relying on renewable energy sources instead of fossil fuels can insulate a company from fluctuations in the price of oil. Businesses that proactively address compliance issues can better protect themselves from legal or regulatory action.
How to create a sustainable business strategy
- Identify KPIs
- Set goals
- Track performance
- Hire a sustainability consultant
Sustainability is a comprehensive assessment of a company’s ability to continue operations over time. Therefore, implementing a successful sustainability strategy requires attention to every aspect of business operations. Here are four best practices to help you get started:
1. Identify KPIs
Enterprise sustainability consultants review thousands of data points to evaluate overall business sustainability. If you don’t plan to work with a consultant, start by identifying a few key metrics, measuring baseline performance, and targeting improvements.
For example, you might calculate pounds of waste generated per year, kilowatts of energy used by your office, or the percentage of employees who indicate that they are somewhat or very satisfied with their work and aim for improvements in each.
2. Set goals
After establishing baseline metrics, set sustainability goals and implement sustainable solutions. If you’re taking a DIY approach to developing a sustainability strategy, start with small, achievable goals that you can scale over time.
For example, after you make progress in office energy usage, shift your focus to energy consumed in the manufacturing process or emissions created during the extraction of raw materials. Slowly expanding the scope of your program allows you to make and measure incremental progress.
3. Track performance
Once you identify KPIs, evaluate them on a monthly, quarterly, or annual basis to determine the effectiveness of your solutions. If you’re seeing results, you can continue with your strategy, adding more metrics or ambitious goals as you go. If not, you might need to rethink your solutions or seek help from a third-party sustainability expert.
4. Hire a sustainability consultant
Partnering with a professional sustainability consultant can help you gain a comprehensive understanding of your current performance. Soliciting feedback from a third-party consultant can also lend authority to your findings, which is particularly valuable if you’re hoping to use your sustainability achievements to attract investors or improve your brand image. Many sustainability audits also provide a roadmap for improving performance in the near term and pursuing ambitious long-term goals, such as reaching net-zero emissions.
If your budget allows for it, consider hiring a third-party firm to audit your performance, identify areas of improvement, and help you identify and implement sustainable solutions.
Business sustainability FAQs
What are the 3 pillars of business sustainability?
The three pillars of business sustainability are economic sustainability, social sustainability, and environmental sustainability.
What is an example of sustainability in business?
One example of business sustainability is investing in renewable energy initiatives such as landfill gas capture programs or wind projects to offset business carbon emissions.
Do sustainability efforts drive revenue?
Yes. Research shows that strong sustainability performance correlates with revenue growth and that environmental concerns increasingly motivate consumer purchasing behavior.
