The Economy of Sustainability

There’s no doubt about it, times are tough: New Zealand is in a recession and the costs of living and operating a business are making it increasingly difficult to stay afloat. In an economic downturn, the idea of addressing environmental and social sustainability within businesses often falls by the wayside – we are hearing more and more frequently “we can’t afford this right now” or ” it’s not a strategic priority”. Making any kind of organisational change when you’re trying to cut costs can feel reckless and counterproductive – we’re here to argue the opposite.  

Not only can we not afford to keep doing business in the same way in terms of its impact on our environmental and social wellbeing, we also can’t afford to keep doing it the same way if we want our businesses to have longevity. Our longstanding, linear economic model of ‘take, make, waste’ is not working – it is continuing to drive environmental degradation, climate change, and massive societal inequality. In order to effectively combat climate change and societal inequity, our economic system must become circular and we must decarbonise, which most countries have already pledged do under the Paris Agreement (New Zealand has set a target for net zero emissions of all greenhouse gas (GHG) emissions (other than biogenic methane) by 2050). Some countries have already implemented circular economy strategies, like China and Europe, which New Zealand is lagging behind on, however businesses can expect to be increasingly regulated to help meet our ambitious emissions reduction targets, as well as future related policies.  

Pressure from consumers will also continue to build on businesses to address sustainability, with Consumer NZ finding last year that “almost 90% of New Zealanders adopt more mindful shopping habits amongst cost of living and climate concerns.” Furthermore,  evidence shows that employees are increasingly attracted to and likely to stay with employers taking action on sustainability; a recent Mercer report finding “one in four employees admit they’d quit if they found out their employer had a poor sustainability record” and Gallup estimating that “the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary”. Businesses may think sustainability is “too expensive”, but the reality is that they are delaying the inevitable from a regulatory perspective, and if they don’t act now they are poised to lose more and more money by alienating increasingly mindful customers and staff. The longer businesses wait to act, the less relevant and profitable they will become, and the harder it will be for them to adapt in the future. Businesses that will succeed in the 21st century are ones that are proactive about sustainability, rather than reactive, and right now is an excellent time to highlight good news stories – with the bar so low, the potential for positive PR and an increase in staff and customer morale is high (our client Kowtow’s recent transition to going 100% plastic free is a great example of this). 

Even if we disregard the more abstract benefits of addressing sustainability, such as employee attraction and engagement, it also makes business sense in more practical terms. When we reduce our emissions (from energy, staff travel, etc) and our materials to landfill, we reduce our overhead costs. “Most recent studies show a correlation between sustainability and financial performance. Our own research finds that for many companies, nonfinancial metrics such as carbon emissions can reveal hundreds of millions of dollars in sustainability-related savings and growth. In large companies it can be billions.” 

That isn’t to say that there aren’t costs associated with implementing sustainability-related systems and initiatives. Activities such as developing strategies, mapping emissions, and electrifying fleet vehicles all come with a price tag, and – as a small business with our own financial stressors – we totally empathise with businesses feeling the strain of the current recession. However, any short-term costs to get sustainability-related processes or initiatives in place will reap long-term benefits through attracting and retaining staff and customers and cutting overhead costs. Businesses also don’t need to start big and expensive – but they do need to start. As Albert Einstein said, “insanity is doing the same thing over and over again and expecting different results”, and we cannot expect the state of our planet and society to improve if we continue to do business the way we have always done it. We all need to evolve for the sustainable future, so the question is: do you want your business to stay ahead of the curve, or do you want it to become a future dinosaur?  

If you’d like help understanding the bigger picture around sustainability, as well as improving your confidence and capability to address it within your organisation, then get in touch – we’d love to help. 

Written by our Sustainability Consultant, Kate Lodge.

Photo by micheile henderson on Unsplash