Sustainability has long been regarded as one of those "nice to have, but expensive" things. In their private lives and businesses, people have been putting sustainability on the back burner.

Times change -- and so do consumer sensibilities. Together with a renewed (albeit much delayed) focus on climate change, people are becoming increasingly aware of the need to reduce their carbon footprint and live sustainably.

This awareness has come with business changes too. More and more organizations focus on environmental sustainability across various verticals: from their processes and products to their supply chain. This isn't just a matter of morality -- it's good business sense as well. Consumers are showing an increased interest in buying from sustainable companies, and research shows that sustainability can lead to increased profitability.

Sustainability and organizational efficiency are strongly linked. Sustainable enterprises are more likely to be optimized for long-term success and create new products without excessive waste of resources. Achieving a balance between environmental and economic goals is no longer just a nice-to-have -- it's become an essential part of business.

In this article, we’ll look at some statistics that prove, beyond a shade of doubt, that sustainability is not only in demand (and here to stay), but also a financially sane, performance-driven decision for your business. 

TL;DR:

• Consumers are more careful about the types of companies they support (more than 75% of them are influenced by how sustainable a company is) 
• Products marketed as sustainable have a larger market share than those not marketed as sustainable
• Brands with sustainable environmental policies have a customer retention of 34% (while brands without this type of policies have a customer retention of less than 30%)
• More than three quarters of employees consider a business’ commitment to sustainability before they accept a job 
• …And 25% of them would turn down a job if the company wouldn’t practice sustainability 
• 90% of all studies on the topic say sustainability policies lower business’ cost of capital
• Organizations focused on sustainability innovation outperform peers that don’t focus on sustainability 

76% Of Employees Consider a Company’s Sustainability Commitments When Deciding Where to Work…

According to recent studies, Millennials especially are increasingly looking for employers who share their values and commitments to sustainability. In fact, 76% of employees report that a company’s commitment to sustainability is important when considering where to work.

Your company is only as valuable as the talent defining it. As such, it’s important to consider how a sustainability commitment can positively impact employee morale and engagement. The more committed your business is to sustainable practices, the more engaged your employees will be. 

What’s more, engaged employees are not just happy employees – they’re also high-performing ones. According to Gallup, companies with a more engaged workforce are also 21% more profitable than those with less engaged employees. 

...So Much So That 25% of Employees Would Turn Down a Job If the Company Wasn't Practicing Sustainability

According to a study run in the UK, almost a quarter of all 1,000 office workers surveyed said they'd turn down a job offer if the company wasn’t practicing sustainability. Regardless of industry, many employees across the world are now looking for employers who demonstrate a genuine interest in sustainability-related practices. 

Employee retention and organizational performance are tightly linked. It is estimated that losing one employee will cost the business 1.5-2 times their salary – but the numbers can vary (quite wildly!) across different types of workers. What’s more, the total turnover amounts to massive numbers – like $1 trillion in the US, in 2017 alone, for example. 

Companies That Set Specific Sustainability Targets Had a Median ROA Of 6.4%...

...Compared to those who don't, which get a median ROA (Return on Assets) of 4.8%. 

A good Return on Assets is determined by reduced asset costs and increase in income. Sustainability initiatives are particularly good at reducing costs: from electricity saving to reducing hot water consumption, environmentally-friendly best practices can lower not just pollution but also expenses. 

Furthermore, according to empirical evidence suggested by a research paper published in 2021, when 116 Swedish companies were analyzed, it was revealed that those that implemented sustainability practices showed better financial performance across several key performance indicators: from earnings yield to return on asset, return on equity and return on capital employed.

This shows, quite clearly, that setting specific sustainability targets can have a positive impact on the bottom line. This indicates that companies increasingly value sustainability as more than an ethical commitment.

Businesses That Set and Achieve Tangible Sustainability KPIs Have Better Access to Funding

For instance, in 2021, Saur raised 950 million Euros with sustainability-linked bonds -- and they're not a singular example. It makes sense: if more people are interested in doing business with sustainable companies, companies that manage to set and achieve tangible sustainability KPIs will have better access to capital.

Unilever is another example of a company that has turned towards environmental sustainability – and reaped impressive gains as a result. When, in 2021, they created a plan to reduce greenhouse emissions by 2030, 99.6% of their shareholders voted for the solution. This shows climate change-related issues and sustainability are no longer the ideas of the “fringe” political activists and that investors are fully aware of the wide range of benefits this type of changes brings along. 

Products Marketed as Sustainable Have Grown Their Market Share

According to the same aforementioned study, sustainable products had a 17.0% market share in 2021, up 3.3 points from 2015. If you run a B2C company, promoting your business and your products as sustainable can give you an edge and increase your market share.

The same goes for B2B products too, with multiple companies investing in “green sustainability” for enduring profitability. While in B2B selling sustainable products is more direct, in B2B, people can end up associating a brand with green policies that benefit everyone. 

Brands with Sustainable Products Have Better Customer Retention

According to McKinsey, brands that sell sustainable products in a proportion larger than 50% have a better repeat purchase rate (34%), as compared to brands that sell sustainable products in a proportion smaller than 50% (which have a repeat purchase rate of less than 30%.) The more loyal customers you attract, the less you will have to spend on customer acquisition -- and thus, your business will be more profitable.

More than Three Quarters of Consumers Are Influenced by How Sustainable a Business Is

To be more specific, 77% of the respondents in a study run by PwC say their buying decisions are influenced by how sustainable a company's environmental record is. This is no small feat, considering that sustainability-related issues have become more important in customers' eyes, and brand reputation is now dependent on how they handle them.

Furthermore, a study by NYU Stern's Center for Sustainable Business showed that 93% of consumers either maintained or became even more attentive to sustainability. This goes to show sustainable practices are now deeply embedded in the customer decision-making process, and companies that are sustainability leaders are reaping the rewards of their effort.

What’s more, consumers are also more likely to spend more on a product made by a company that supports environmental sustainability. According to McKinsey, 60% of people say they’d pay more for a sustainable product and 78% of people believe sustainability is an important element in their lives. 

Well-Implemented Sustainability Practices Can Lower the Cost of Capital

In a recent research, 90% studies assessing the economic profitability of sustainability say businesses that implement sustainability practices have lowered their cost of capital. This shows sustainability is profitable not just on the consumer front, but on the operational one too.

Sustainability can reduce the cost of capital by increasing the company's access to debt capital, and by reducing the cost of equity capital. This means that well-implemented sustainability practices can make your business more financially viable and resilient. 

Sustainable Innovation-Oriented Businesses Outperform Their Peers in Terms of Operational Costs and Shareholder Returns

According to Accenture, businesses marked as "innovative" in the sustainability department have operational costs 3.3% higher than their industry peers -- and higher shareholder returns too. Not only that, but these companies also report higher employee engagement and better brand reputation.

There are many reasons behind this, including, but not limited to access to more resources, lower costs of capital, the ability to attract better talent, and higher customer and employee retention. In many ways, sustainability can create the growth levers you need in every respect: from how your team perceives your business to customers, their overall sentiments related to environmental-friendliness, and so on.

Conclusion

These are just a few of the many reasons why sustainability is essential for businesses. Not only does committing to sustainability have positive implications from an ethical and social point of view, but it can also lead to tangible financial gains -- either through better access to financing or increased market share, it's a win-win. Businesses must understand that, besides sustainability's ethical and social implications, there are clear financial gains to be made.

FAQs

Does Environmental Performance Affect Financial Performance?

In short, yes, environmental performance can affect financial performance. While environmental best practices can be costly to implement, the Return on Investment is quick to show, with lower overhead costs for office maintenance and a long list of additional benefits that impact financial performance down the line. From better employee retention to access to new markets, sustainability can hugely benefit businesses.

How Does Sustainability Affect Financial Performance?

Sustainability can affect financial performance in multiple ways, from better access to financing to increased market share and customer loyalty. Well-implemented sustainability practices lead to lower operational costs, greater employee engagement, and improved brand reputation. Ultimately, it all comes down to the fact that customers are looking for sustainable products and services -- and that businesses must meet that demand if they want to remain competitive.

What Are the Financial Benefits of Sustainability?

The financial benefits of sustainability span from lower operational costs to increased market share. Additionally, sustainable businesses have better access to financing and improved customer loyalty, giving them an edge over their competition.

How Does Sustainability Affect Business Performance?

Sustainability has a positive effect on businesses in multiple ways. It can boost employee engagement, improve brand reputation, attract better talent, and give access to new markets. Ultimately, well-implemented sustainability measures can lead to higher financial gains in the long term.

What Is a Sustainability Strategy for Business Performance?

A sustainability strategy for business performance puts environmental stewardship at the forefront of operations. From reducing energy consumption to using renewable resources and investing in waste management, sustainability strategies aim to make companies and individuals working for them more aware of how their actions and consumption impact the environment. Additionally, sustainability strategies can also include measures to support environmental causes, like donating or investing in renewable energy projects. By taking these steps, businesses can ensure their operations are environmentally sustainable, allowing them to reap the financial and ethical benefits that come with it.