Sustainable Companies Are More Profitable
As we always say: good business is good business. Sustainability is the golden key that unlocks (hidden) revenue while generating profitability and creating impact. Did you know that sustainable companies typically outperform their industry peers on gross profit, EBITDA, EBIT and net profit metrics? Don’t take our word for it. Let’s turn to EY.
According to EY’s 2020 EY Climate Change and Sustainability Services (CCaSS) fifth global institutional investor survey: “ESG considerations as part of company decision-making often leads to operational and process efficiencies within the business, thereby helping to improve profitability. This can typically be achieved through better resource management policies to reduce and eliminate wastage, sustainable supply chain management practices to reduce the environmental impact across the value chain and costs, and cultivation of an innovative culture to reinvent existing processes.”
EY analyzed Corporate Knights’ 2020 Global 100 ranking against that of their respective industry medians. Sustainable companies in the ranking outperformed their industry peers on gross profit, EBITDA, EBIT and net profit metrics. These companies recorded higher EBITDA and net profits than their peers for 73% and 61% of the industries analyzed respectively, with the extent of outperformance ranging from 3.1 to 6.3 percentage points.
What does this mean?
1. Sustainability/ESG can and should be a core driver of corporate strategy
2. Companies that invest in Sustainability from strategy through operations outperform their peers
3. Sustainability/ESG-driven companies are well positioned to capitalize on new opportunities
4. Sustainability/ESG-driven companies are better positioned (than peers) to generate new revenue
5. Developing a smart Sustainability/ESG strategy is not enough – it must be integrated into the corporate mission; clearly communicated to int and ext stakeholders; woven into every fabric of the company at the operational level; and measured and continuously improved upon.
Corporate executives who succeed in integrating ESG considerations as a core driver of their corporate strategy and differentiating their organizations within the global sustainability ecosystem will be well-positioned to capitalize on these opportunities and generate new revenue.
EDITOR’S NOTE: TBG Purpose is a leading Corporate Social Responsibility (CSR)/Sustainability partner for corporations, institutions and governments. We provide an integrated set of solutions and enable organizations to meet their Sustainability and ESG objectives in line with the SDGs and global reporting standards and frameworks. Get in touch with our team for a free TruePurpose Sustainability Assessment and find out your TruePurpose Score.
References:
EY Climate Change and Sustainability Services (CCaSS) 5th Global Institutional Investor Survey
HBR — “Making Sustainability Profitable”
Forbes — “Sustainability and Profitability: Why They Can and Should Go Hand in Hand”
WE Forum — “Sustainability and Profitability Can Coexist: Here’s How”
Industry Week — Sustainability and Profitability Can Work Together