Sustainability presents a dual-edged sword. A threat and opportunity.

Embrace sustainability wholeheartedly, and you can unlock new avenues for rejuvenation and growth. Just keep in mind that the path of sustainability will be difficult and messy. You will face resistance. It's not easy to reinvent yourself. 

Ignore sustainability and you risk facing a slow, painful decline. 

There is also a middle ground of bare-minimummers. According to Cap Gemini, 57% of executives view sustainability as a cost centre and reluctantly invest now to avoid higher potential future costs due to non-compliance. Hardly inspiring, but a sizable group nonetheless. 

This blog post is about the frontiers of decline should you choose to disregard sustainability and the transformative potential of fully integrating sustainable practices, strategies, and tactics.

The High Stakes of Ignoring Sustainability

If your company fails to prioritise sustainability, you are walking a treacherous path marked by increasing challenges and diminishing returns. Death by a thousand cuts. 

The journey of decline unfolds along multiple fronts.

Regulatory Non-Compliance 

Global regulations are tightening. Disregarding sustainability standards will lead to fines, sanctions, and restrictions and hinder your ability to operate effectively. In 2023, the first case was filed under the German Supply Chain Due Diligence Act against Tom Tailor, Amazon, and IKEA by Bangladeshi workers for not "adequately monitoring" the conditions in their factories and for "endangering the workplace safety of employees." 

Supply Chain Vulnerabilities

Industry-leading buying companies increasingly demand sustainability from their suppliers. You can't afford to lose your place in their supply chain to your proactive competitors. How will you win new contracts and avoid the loss of existing contracts and revenues?

According to a Barclays Bank report, 21% of Britain's most prominent retailers collectively cancelled £7.1bn in contracts with suppliers during 2021. Why? The most common reasons cited were suppliers not meeting sustainability criteria and evidence that they were not providing good working conditions, pay and hours to staff.

More and more multinationals are monitoring and surveying their suppliers, working with them through industry associations or other supplier sustainability initiatives such as EcoVadis' sector initiatives. 

Reputational Damage and Consumer Shifts

Public awareness of sustainability issues is growing steadily. A June 2023 Bain survey of more than 23,000 people revealed that globally, 64% of consumers are highly concerned about sustainability, and their worries are mounting. Those that neglect this growing awareness and concern will witness their reputation eroded, drive away customers and will find it more and more difficult to attract top talent or retain the ones they already have.

Who wants to work for a company that doesn't respond to the market and public sentiment about sustainability? Gen Z and millennials certainly don't. According to Deloitte, over half of Gen Zs (55%) and millennials (54%) say they research a brand's environmental impact and policies before they accept a job. 

Operational Inefficiencies

Ignoring sustainability often means missing out on opportunities for operational improvements, such as energy savings and waste reduction, resulting in higher costs and reduced competitiveness.

In this post, McKinsey provides multiple examples of companies from different industries that implemented measures that allowed them to become more efficient and reduce their environmental impacts while saving costs. How do you expect to keep up with competitors who, through their sustainability efforts, manage to reduce operational costs, attract and retain the best talent and build up their pricing power? 

Investment and Financing Challenges

Market sentiment and new regulations also drive investors and financiers to prioritise sustainability. If you don't, how will you attract investment or secure favourable financing conditions?

Getting access to capital is difficult and expensive. By implementing sustainable practices and demonstrating measurable sustainability efforts, you can improve your chances and avoid losing out to your competitors.

As sustainable finance becomes more prevalent, financial institutions increasingly factor sustainability into credit risk assessments, making it essential for companies to prioritise sustainability to access favourable rates. According to Bloomberg Intelligence, the market for ESG investing could surpass $40 trillion by 2030, based on their scenario analysis, anchoring the $140 trillion of projected assets under management globally.

Market Obsolescence

Markets evolve to prioritise sustainability. If you don't keep up, how will you prevent your products and services from becoming obsolete, suffering declining sales and market share? According to Cap Gemini, frontrunner companies in sustainability outperform on total revenue per employee (83% higher than average) and net profit margin (9% higher than average) versus beginners who achieve 13% lower than average revenues and 0% difference in net profit margin (same as average). 

Leverage Sustainability for Growth and Innovation 

Embracing sustainability provides direction and a path to success. Alan Jope, the former CEO of Unilever, explains how Unilever's business case for sustainability centres around four axis.

1. Unilever's brands, which customers regard as purposeful and making a positive contribution to society and the environment, represent 60% of Unilever's turnover and are outgrowing the other 40%.
2. Over its journey, Unilever has taken 1.5 billion euros out of the company's cost base through sustainable sourcing, reducing its carbon footprint.
3. Avoiding risk through investment in regenerative agriculture and water preservation in water-scarce areas where most of their factories are based.
4. Unilever has been a magnet for talent because people want to work for companies whose values are aligned with personal values. 

Webb Chiles, a sailing legend, once said, "A sailor is an artist whose medium is the wind."

Companies that ignore sustainability sail against the wind. They'll experience a constant struggle that requires more resources for lesser gain. Left behind, with their sails in disarray, they'll watch their more agile competitors disappear over the horizon.

Those who leverage the wind of sustainability that is blowing through global markets will steer towards innovation, new opportunities and success. 

The best time to start your journey was yesterday, The second best time is today.