Sustainability Driven Business Optimisation – how adopting sustainable practice can improve your business performance

Through this progression, sustainability is no longer viewed as merely an environmental or social issue, but rather as a key factor in company innovation, efficiency and long-term success.

This necessitates a strategic synergy between a business’s main corporate objectives and its environmental and social aims. Businesses need a thorough understanding of the potential benefits and challenges of implementing sustainable policies, the ability to recognise and apply pertinent practices, and the flexibility to adjust to a regulatory and environmental context that is changing quickly.

For businesses that navigate this challenge well, a commitment to sustainability can pay off in improved business performance, through more efficient practices, lower costs, better brand recognition, increased competitiveness and adherence to changing legal requirements.

A successful sustainability strategy is inextricably tied to your company strategy.

Businesses should ask themselves four key questions:

• “Why am I doing this?”
• “What do I want to achieve?”
• “What are the sustainable goals it meets/ works towards?”
• “What are the business benefits (or detractors) from this course of action?”

When the financial benefits of a commitment to sustainability are clear, such as through improved efficiency and reduced costs, the rationale for change is easily squared with your business strategy.

However, often the business benefits may be less tangible or longer term, but no less valuable. For example, enhanced brand reputation may result in increased sales and customer loyalty over the medium to longer term, whilst investment in local communities could make them more likely to lend support where needed, for example, supporting planning applications or expansion plans.

Existing businesses have adopted innovative ways to connect their sustainability and business objectives. For example, a number of businesses are appointing joint finance and sustainability director roles, and one business we know of seeks to tie the two together by each investment decision having an ESG £ cost as well as a financial £ cost, both with equal weighting in making business change decisions.

One key action to tie sustainability into your business optimisation strategy is through the adoption of sustainable procurement policies. For example, the John Lewis Partnership are committed to ensuring that all key raw materials in their own-brand products will be from more sustainable or recycled sources by 2025.

We are also seeing increasing numbers of businesses seeking greater understanding of their suppliers’ procurement policies and their commitment to sustainability when making purchasing decisions. For example, the Ikea IWAY focusses on both the environmental and social impacts of its supply chain.

Therefore, businesses not already adopting sustainable business practices, or are not capable of evidencing such, may find their customers moving to alternative, more sustainable suppliers.

Sustainable sourcing helps address longer term issues such as scarcity of resources. It supports a move away from more energy intensive production processes, which in the medium term may lead to reduced pricing.

Likewise, sourcing locally (a key focus of many companies’ sustainability strategy) not only supports local communities but reduces transport costs, establishing providence of supply (which is of increasing importance in the food and drink and hospitality industries), strengthening your supply chain and protecting surety of supply.

Locally sourced products can also help reduce supply chain lead times, which can consequently reduce your stock holding requirements.

Energy efficiency is another area of key focus from many businesses in their sustainability journey.

Energy expenses and carbon footprint can be significantly reduced by a combination of optimal energy usage and consideration of renewable energy sources, such as the installation of solar panels and battery storage technology.

Companies may begin by conducting an energy audit to find areas where they can reduce energy consumption, and therefore cost, whilst protecting the environment.

Many UK manufacturers have already implemented smart building management systems, which automate lighting, cooling and heating. These steps protect the environment and lead to significant cost savings.

Similarly, reviewing routine processes to make them more streamlined can result in significant environmental and financial improvements.

By automating routine processes, energy consumption can be drastically decreased and operations streamlined. Automated systems for inventory management, for example, can optimise stock levels while minimising waste and lowering the requirement for a large physical infrastructure.

A number of large companies have chosen to revisit the design of their products with a view to improving the sustainability of their operations. Nike have redesigned some of their most popular products to utilise recycled material, such as utilising recycled polyester to eliminate waste from landfill and reduce energy usage in their raw material cycle.

Often businesses equate sustainability with their environmental aims. However, it is far wider than this. One area where sustainability can drive business optimisation is in labour and recruitment policies.

However, those businesses that focus on fostering an inclusive and diverse culture and invest in staff development are rewarded with a productive, engaged workforce, which may lead to improved staff retention.

The result? Significant savings on recruitment costs and the elimination of sub-optimal productivity caused by a disengaged and high-churn workforce.

By implementing sustainable practices, companies can proactively manage risks associated with evolving environmental regulations, thereby avoiding potential fines for non-compliance.

For example, a business that reduces its carbon emissions ahead of new government mandates can sidestep penalties and adapt to market changes more smoothly. This can be clearly seen with the recent introduction of the Plastic Packaging Tax, where business already monitoring and working towards reducing the use of plastics in their supply chain and recycled packaging were able to more easily adapt to the measures implemented.

Although big businesses are usually subject to legal obligations regarding sustainability reporting, smaller businesses ought to think about implementing this strategy as well.

Individuals and businesses alike are more inclined to support companies that share their beliefs, especially when it comes to environmental responsibility.

By sharing your sustainability achievements on your website, accounts or other communication channels, businesses can demonstrate a commitment to environmental and social responsibility, fostering stronger relationships with customers, suppliers, investors, staff and the wider community.

This approach not only showcases the company's dedication to sustainability but also encourages feedback and collaboration, which may lead to new opportunities and partnerships.

The process of implementing sustainable practices can be difficult, including the upfront expenses of new technologies, the need to retrain employees and the management of operational changes.

Companies must adopt a strategic approach that prioritises long-term benefits over short-term obstacles to successfully navigate these waters.

Involving all relevant parties in the vision for a sustainable future, from staff members to investors, may encourage support from a wider audience and group action.

Financial strains can also be lessened by utilising government incentives and strategic alliances, and a phased implementation strategy lowers the chance of disruption by allowing for gradual adaptation. Other financial tools such as green bonds or loans, which are intended to finance projects with environmental benefits, are becoming more and more popular to fund sustainable investment activities, and are often easier to obtain than traditional lending.

Incorporating sustainability into your business strategy presents an exciting opportunity to optimise business operations, whilst achieving your environmental and social goals.

We urge company executives to see sustainability as a foundation of innovation and expansion rather than just a compliance need. With an open mind and a coherent plan, significant benefits are capable of being realised, both financial and societal.