Beyond cost: How businesses are learning to balance sustainability and profitability

Emissions abatement efforts are considered by some companies to be complex and costly. But as pressure to address climate change and sustainability increases, businesses are learning that investing in sustainability and company profitability are not mutually exclusive.

The first generation of ‘green champion' companies is already generating shareholder returns at levels similar to those of tech firms like Amazon and Apple. According to Boston Consulting Group (BCG) analysis, the returns for those defined as ‘second generation' green champions - think Beyond Meat and Tesla - have ranged from almost 70 per cent to 80 per cent.

Of course, while the business agenda may recognise the importance and the opportunities of investing in sustainability, both for their own future growth and the wellbeing of the economy and planet, full emissions abatement can be challenging. It can be particularly expensive for those in sectors such as steel, cement, chemicals, aviation, and shipping. 

BCG believes there are collaborative options for these hard-to-abate sectors, even when the decarbonisation costs of steel or chemicals seem prohibitively high. For example, ecosystem collaborations among peers, suppliers, customers, and governments can help players across the value chain to share costs, scale innovations and manage risks, while building momentum for emissions reductions.

"Companies in hard-to-abate sectors can take ecosystem action on initiatives that enable risk sharing of large investments in the research and deployment of new technology such as green hydrogen, synthetic fuel and carbon-capture-and-storage," said BCG. 

Net zero supply chains are also a real possibility if you work across the entire value chain. While the decarbonisation cost of steel or chemicals is high, in BCG's work with the World Economic Forum (WEF) it estimated that moving to net zero emissions would increase end-consumer costs for items such as cars or electronics by only one per cent to four per cent in the medium term. 

First mover advantage

For businesses that invest in sustainability, there are the added advantages of being a first mover, including accessing capital and influencing policy and regulation. Over a longer period, businesses that develop a reputation for innovative sustainable solutions are likely to have the edge when it comes to recruiting, retaining and developing climate talent.

Companies can take rapid action by accelerating climate initiatives that already have positive standalone business cases. For example, BCG research shows that most companies can achieve energy- and process-efficiency gains of 20 per cent to 40 per cent with relatively short payback periods. Inaction doesn't make sense for business or the planet.

With the moral case for action on climate change becoming clearer every day, increasingly it is no longer a matter of choice.

For many businesses, sustainability now goes hand-in-hand with value creation and profitability, meaning there is an even greater need for leaders to reimagine their corporate strategy with sustainability at the forefront.

Learn more about how your business can act on sustainability opportunity. Click here for more information.

This article is sponsored by Boston Consulting Group.