Sustainability Isn’t Just a Nice-to-Have. It’s Good Business.

For years, under political and economic pressure, companies have been stepping away from sustainability – or at least, from talking about it publicly. My colleagues at AFF have covered the phenomenon of “greenfreezing” – companies slowing or halting their net zero commitments – in a previous blog. To some extent, this is not surprising. For too long, we have been talking about corporate decarbonization in a way which makes it a “nice to have,” a marketing enhancement for sunny days that you can and should set aside when times get rough.

I think it’s time we set aside this outdated notion and instead acknowledge the critical role sustainability has in a business context.

Sustainability is a “need-to-have,” not a “nice-to-have,” and the businesses that make decarbonization a core part of their values and activities enjoy a competitive advantage that will deepen over time.

I began to make the case for this in my last blog post, where I talked about climate action as a way to reduce costs, improve operational reliability, and reduce the costs and risks posed by the evolving regulatory environment. Companies that are able to decarbonize will simply spend less, and be subject to fewer disruptions, than their competitors who have not decarbonized. This will allow them to compete for investors or customers much more effectively.

Today I want to talk more about that competitive advantage as it regards customers and consumers.

“A satisfied customer is the best business strategy of all,” says business author, Michael LeBoeuf. Well, today, both B2B customers and individual consumers expect your business to be decarbonizing, so if you want them to be satisfied with your product or service, stepping back from your climate commitments is counterproductive.

I have spoken to several companies for whom “pressure from customers” is clearly the number one reason for them to engage in sustainability initiatives. I have heard about the consequences of inaction and the benefits of positive action:

• Companies losing big contracts based on a competitor’s superior sustainability performance.

• Customers requiring companies to improve their reporting and performance.

• Companies co-investing, along with their suppliers, in new processes or resources in order to reduce carbon footprints.

Chances are, if you are reading this you also have heard of these and other examples.

But don’t take my word for it! Here’s a quick glance at some recent findings:

• PWC recently found consumers were willing to pay a 9.7% sustainability premium.

• A 2024 survey of B2B buyers by Bain showed that sustainability was one of the top three criteria in evaluating suppliers, and 36% said they would leave suppliers over sustainability concerns.

• More intriguing, 60% said they would be willing to do so three years from now, and almost half were willing to pay a premium for sustainability attributes.

A company that demonstrates progress on decarbonization is going to be more likely to meet customer and consumer expectations, and therefore secure revenue, than a company that is unable to demonstrate such progress.

Now a very interesting question is, “Why?”

I would suggest two separate but overlapping answers:

First, regarding B2B customers, we should remember that all companies are trying to reduce their own exposure to the risks we talked about in the first part of this series. If they can get their supply chain to reduce energy costs, improve operational reliability, and reduce the costs of regulatory compliance, then in turn it will reduce their own exposure to the risks associated with all of these things. This will also reduce their expenses over time and give them a competitive advantage over others who have not been able to implement these changes.

The second and related answer is implied in those intriguing Bain survey results that indicate procurement officials expect their willingness to pay premiums or switch suppliers over sustainability issues will go up with time. Clearly, procurement professionals expect the cost and risk of unsustainable business practices to increase over time. But perhaps even more intriguing, it shows that those professionals expect their competitors will increasingly be securing highly sustainable products and goods over the coming years. This explains in large part why they are asking about these topics today – because, in short, they want to be ahead of the game!

Companies, here’s the bottom line: if you can demonstrate you are currently ahead of the game, or if you can show you have a plan to get ahead of the game, you can meet the expectations of more customers and improve your business.

Now, you may be a company that is doing its best to decarbonize but is struggling. Here you can begin to think about the purchase and retirement of voluntary carbon credits as a way to demonstrate to customers and consumers that you take climate action seriously, in spite of the difficulties you have had decarbonizing internally. I will have much more to say on that topic soon.

For now, it’s enough to realize that sustainability is good business, period. It reduces your costs, mitigates your risks, and delights your customers. For those of you working in sustainability, your work is not only helping address the environmental challenges we all face – it’s also adding value to your companies!