As all stakeholders of climate change increasingly allocate their efforts towards urgently limiting rising global temperatures, sustainably continues to be a leading focal point for businesses who wish to avoid the risk of losing strategic business opportunities. risk of opportunity loss. However, while many companies understand that corporate social responsibility (CSR) is an ethical imperative; many businesses are yet to unlock the wide-ranging benefits of reducing greenhouse gas emissions (GHG). As such, many businesses are missing out on the immense value that the implementation of a decarbonisation strategy unlocks when looking to secure large business deals.
Nevertheless, as the global economy undergoes a rapid transition towards a low-carbon state, sustainability will fundamentally reshape the landscape for B2B companies. Global businesses that take action to transition towards net-zero carbon emissions will be exposed to wide-ranging growth opportunities, whilst companies that do not take action will take on immense financial and non-financial risk.
The role of sustainability within B2B relationships
As companies embark on their sustainability journey, they are required to set net-zero targets whilst implementing sustainable actions, such as reducing waste, greenhouse gas emissions, fossil fuels, energy and water consumption. In doing so, they are increasingly recognising the imperative role that their suppliers and partners play in achieving these goals and making a long-lasting impact.
Suppliers & partners:
For the majority of large entities, as much as 95% of their supply chain consists of a broad list of vendors. Despite many of these partners being small and midsize companies, they still hold the potential to hold an immense impact on the overall sustainability and performance of the entire supply chain. Suppliers that take action to ensure decarbonisation, circularity, sustainable distribution, and fair labour practices are key strategic priorities will unlock a newfound level of transparency, and therefore desirability, to existing and prospective business partners that are undergoing sustainable transformation.
Businesses are increasingly prioritising sustainability within every aspect of their supply chain in order to achieve set targets and reduce their scope 3 emissions. Consequently, large corporations are placing transparency around sustainability as a critical factor when dealing with suppliers, vendors and external firms; with many large corporations using requests-for-proposals (RFPs) so that prospective partners can provide proof of sustainable practices. For instance, Landsec has a stringent tender process whereby an RFP document is issued to prospective suppliers and requires full responses to a suite of sustainability questions in line with their sustainability requirements. Suppliers must supply information specific to the goods and services being procured, such as details of emissions performance of a supplier's vehicle fleet. Furthermore, once Landsec appoints business partners, they must then report against specific key performance indicators on a quarterly basis.
This means businesses - irrespective of their size or industry - will ultimately be left no other choice than to implement an aligned sustainability strategy if they wish to secure lucrative business opportunities. Meanwhile, carbon is money; and with new EU regulations such as the Corporate Sustainability Reporting Directive (CSRD) coming into play - not acting on carbon emissions will increase costs in the long run due to increased regulations and carbon taxes.
Investors play a crucial role in the growth and development of businesses. In parallel to the critical role that sustainability plays within the decision-making processes of corporate boards, investors are progressively directing capital towards sectors and companies based on their sustainability and ESG strategy. Oxford University found that 80% of mainstream investors now consider environmental, social and governance (ESG) criteria when making investment decisions. Correspondingly, businesses that don’t prioritise sustainability inevitably risk misalignment with the ever-so sustainable demands of investors, and thus the wide-ranging financial opportunities associated with external investment.
Meanwhile, research shows that sustainable and low-carbon products perform better than those of peers on capital markets; achieving greater shareholder returns, profit margins and growth. Nevertheless, businesses must whilst ensuring clear, open and consistent communication to internal and external stakeholders when integrating sustainability as a key focus within their overall strategy. In doing so, businesses will create value via enhanced investment returns and allow for long-term investment and asset optimisation.
The wider business benefits of sustainability
Organisations, especially those operating within a B2B environment, that are not proactive in taking measures to bolster their stance on sustainability will ultimately be exposed to immense financial, competitive and regulatory risks. Meanwhile, economists are predicting ‘catastrophic outcomes’ for businesses should they fail to take proactive action against climate change before it’s too late and businesses that do not take sustainable action will ultimately miss vital business opportunities and deals – forgoing growth, and expansion.
However, business leaders have the opportunity to leverage the benefits of sustainability to effectively align their long-term strategy with the sustainable demands of stakeholders. Taking advantage of ESG and sustainability will be fundamental to reaping the vast financial and non financial benefits associated with sustainability, allowing businesses to become attractive prospects to both existing and prospective parties. A few of the strategic opportunities associated with sustainability include:
- Stakeholder trust
Most importantly, implementing an aligned sustainability strategy is critical to unlocking enhanced business opportunities due to the key role that sustainability plays in building trust among internal and external stakeholders. Over a 15-year period, sustainability programs on average have increased shareholder value by $1.28 billion. As such, a fundamental step for any company looking to secure business deals is making sustainability a key focal point within their wider business strategy due to the vast business opportunities associated with increasing trust among stakeholders, such as receiving external investment.
- Brand value
The implementation of effective ESG & sustainability programs has enabled companies to see up to a 60% increase in customer commitment. Meanwhile, sustainable product sales have grown four times more than conventional product growth since 2014. As society exponentially looks to support sustainable businesses, making sustainability a strategic priority is vital for businesses wishing to unlock enhanced value, and thus wider business opportunities.
- Supply chain
Businesses that prioritise sustainability across their wider supply chain will be able to not only reduce their own scope 1 and 2 (direct) emissions, but also ensure that they are not negatively impacting the overall emissions of their partners. As more-and-more businesses look towards partnering with sustainable businesses to reduce their scope 3 (indirect) emissions; businesses that undergo sustainable transformation, via practices such as engaging with sustainable suppliers, will improve the overall efficiency of their own, and partner's supply chain. Consequently, they will ultimately be able to significantly reduce their internal costs; with findings highlighting up to a 60% potential improvement in operating profits through supply chain optimisation.
- Energy efficiency and waste reduction
Organisations that prioritise sustainability through tracking and measuring their carbon emissions will be able to identify areas with excessive energy usage and waste. The identification of such bottlenecks via technology such as sustainability software allows businesses to implement actions to drastically reduce their energy consumption, water usage and waste; thus significantly reducing their internal costs. Through vast improvements in financial performance, businesses will drastically increase their attractiveness to prospects such as vendors, suppliers, partners and investors.
- Competitive advantage
Studies show that acting on sustainability holds a positive correlation with long-term financial performance and ROI; thus making sustainability fundamental to businesses wishing to reap long-term financial and non-financial benefits. Businesses that implement an aligned sustainability strategy will not only ascertain a competitive advantage, but also meet key sustainability key performance indicators (KPIS); thus ensuring that they are perceived as highly desirable to prospective business partners.
How can businesses implement sustainability to secure large business deals?
Given that there is no ‘one-size-fits-all’ approach to sustainability; many enterprises often do not share the same goals or approaches. Therefore, companies must ensure they are flexible to adapt to a wide range of requirements, such as KPI’s, reporting formats and communication channels; thus ensuring they are able to easily adapt to the dynamic requirements of other business’ sustainability strategies.
Businesses who wish to secure vital business opportunities will therefore need to implement a comprehensive sustainability strategy. This involves calculating the business’ scope 1, 2 and 3 emissions, setting science-based targets, developing decarbonisation pathways, and gradually moving towards long-term carbon capture, storage, and sequestration for any emissions which cannot be reduced. Meanwhile; two key areas that businesses must prioritise when undergoing green transition include:
Undertaking a data-driven approach to drive meaningful change
At the forefront of driving sustainable transition is becoming data-driven. Prioritising data collection, measurement and tracking is fundamental to adapt to the ever-changing needs of the wider business landscape and thus becoming an attractive prospect to other businesses. According to an SAP Insights survey, less than one-third of mid market executives are completely satisfied with the quality of data at their disposal to drive sustainability transformation. Meanwhile, it was reported that 86% of organisations still use spreadsheets to measure emissions data.
In order to ensure that businesses can flexibly adapt to the sustainability requirements of their existing or prospective associates, businesses must therefore take a data-driven approach whilst focussing on sustainability metrics, current and anticipated future regulatory compliance needs, and embedding sustainability at the forefront of corporate strategy. By focusing on those requirements, organisations can leverage their data to holistically measure, manage, and optimise environmental, social, and governance (ESG) performance in ways to ensure that they are attractive prospects to current and future partners.
Sustainability officers and departmental leaders can collaborate whilst utilising a data-driven sustainability software to bulk upload data from various departments and stakeholders, and measure their total corporate carbon footprint and value chain emissions; thus drawing deep insights and enabling energy savings, cost savings, and overall environmental impact reductions.
Pursuing alignment with reporting standards
Following third-party ESG reporting standards and frameworks is a key step that should be taken to ensure accuracy and efficiency within reporting processes; thus ensuring accuracy and transparency. Frameworks, such as those developed by the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI), provide fundamental guidance on reporting material across a range of industries. As reported by CDP, there has been a 24% jump in companies asking their suppliers for environmental transparency; including companies such as Nike, Airbus, Sainsbury’s and Ørsted. These standards utilise robust and systematic disclosure processes that assist in making reports more accurate and comparable, thus increasing the value of these reports to the internal and external stakeholders of companies, and ensuring businesses are able to generate more business.
Ultimately, business leaders who wish to secure lucrative business opportunities will soon have no other choice than implementing a comprehensive sustainability strategy. Businesses that adopt an aligned decarbonisation strategy; through calculating scope 1, 2 and 3 emissions, setting science-based targets, developing decarbonisation pathways, and gradually moving towards long-term carbon capture, storage, and sequestration for any emissions which cannot be reduced, will be exposed to wide-ranging growth opportunities, whilst companies that do not take action will take on immense financial and non-financial risk.
Sustainability is quickly becoming a must-have for business looking to secure strategic opportunities. Book a demo with Plan A today to realise the vast benefits sustainability can provide to your business.