Enough Resources and
a Clean Environment,
Now and in the Future
Sustainability is a one-way street. Getting there first provides competitive advantage.

Environmental Sustainability

Companies that are trying to become more sustainable often struggle with the question: how good is good enough? What does it take to become truly sustainable?

Scientists use different definitions of sustainability. Some include economic and social matters, while others focus more on the environment. But even when sustainability is limited to the environment, it is still unclear what constitutes environmental sustainability. Is it about maintaining biodiversity? Is it about the health of ecosystems? And what is the benchmark?

In the business world, several organizations are trying to establish standards to measure sustainability and certify companies accordingly. While there are many standards related to particular activities or products, a single standard that defines what is required for a company to be sustainable is still elusive.

A pragmatic approach towards this issue could be the following. For societies to be environmentally sustainable, i.e. to preserve the resource base and the environment for future generations, three conditions need to be met:

Components of environmental sustainability

For businesses, these three conditions can be translated into the following challenges:

  1. Reduce the use of finite resources such as metals and oil-based materials like plastics & chemicals, and find alternatives in less scarce finite materials or renewable, bio-based materials
  2. Ensure that renewable resources such as water, rubber, wood and paper come from sustainably managed sources
  3. Reduce greenhouse gas emissions and reduce the use of chemicals (fertilizer, pesticides, industrial chemicals) and other pollutants

Companies face a double challenge: to not only achieve these tasks, but to do so while remaining competitive with other companies who choose to continue unsustainable business practices. Ultimately though, the road towards environmental sustainability is a one-way street, driven by increasing scarcity, government regulations, and customer demand. Getting there first provides competitive advantage: lower cost, lower risks, and a more attractive product offering. To achieve environmental sustainability, companies need to focus on resource effectiveness.

There is a growing body of evidence that suggests that sustainability leads to better financial performance. For example, researchers from Harvard and London Business Schools compared the performance of 90 ‘high sustainability’ companies and 90 ‘low sustainability’ companies over a period of 18 years (1993-2010), and concluded that the former group dramatically outperformed the latter in terms of stock market performance. Similarly, an analysis by the Carbon Disclosure Project of the world’s largest 500 companies revealed that companies that demonstrated leadership in disclosure and reduction of greenhouse gas emissions yielded twice the average return between 2005 and 2011.