In 2023, the global landscape is marked by economic volatility, political turbulence, and environmental crisis. Businesses face unprecedented challenges and uncertainties and struggle to stay afloat while also enduring the pressure from their ecosystem on sustainability action. With climate reporting regulations still being shy on the smallest businesses (European CSRD being a pioneer and lowering the bar to 250 employees+ companies in 2024), one could easily argue that an ESG strategy is nice to have for those companies, and that their focus should be on financial sustainability. However, there are also compelling arguments that leveraging a sustainability agenda can be an opportunity and not a burden and that companies should engage in concrete climate action not only to survive but to thrive in these turbulent times. A serious commitment to sustainability is more than just a feel-good initiative – it’s a strategic imperative.

A competitive advantage in business development

As most businesses are transitioning to ESG strategies, should it be because of the strategic advantages or regulations, sustainability has become a critical factor in business relationships. Companies that can demonstrate a commitment to reducing their environmental impact have a distinct competitive advantage. A good indicator of that is that we observe more and more Requests for Proposals, including questions around climate strategy. When potential customers have the choice between two similar businesses, they are more likely to choose the one with a proven commitment to sustainability. It’s no longer enough to offer quality products or services; companies must also align with the values of their clientele.

This is particularly true in carbon emissions, which are not only qualitative but quantitative: as suppliers, businesses are now part of the Scope 3 (indirect emissions) of their clients. Tick-the-box climate disclosure is no longer sufficient, as the client needs to report the precise amount of emissions of their suppliers and include their reduction trajectories in their own. In that sense, regulations are trickling down the supply chain: as large groups must report their Scope 3, smaller businesses are impacted by reporting directives. 

Essential for brand identity

The above point is mostly B2B-centric, but the same thinking applies to B2C business development and, more precisely, brand identity. A strong brand is a company’s most valuable asset. Sustainability is no longer a peripheral aspect of branding; it’s a core component. A robust environmental strategy contributes to a positive brand identity, fostering trust and loyalty among consumers. As consumers become more and more aware and educated, they are quick to scrutinize a company’s environmental impact. Embracing sustainability isn’t just a marketing gimmick; it’s a long-term investment in brand integrity.

Access to funding

The financial industry being one of the most regulated ones, climate disclosure regulations did not spare banks and investment funds. For example, in Europe, the SFDR and European Taxonomy are imposing more transparency on the concrete actions taken by investment funds, claiming to have a positive impact. And, in the same way, as suppliers are part of the emissions of their clients, the Scope 3 of these banks and investment funds are their borrowers or portfolio companies. The disclosure regulations weighing on the financial sector also flow down the value chain to all companies financed by regulated institutions. 

As capital flows are evolving to favor greener initiatives, companies with solid sustainability strategies benefit from clear advantages when it comes to access to capital. For example, banks are offering interest rate discounts to businesses reporting their emissions and a reduction trajectory. Environmental risk is a financial risk that impacts the cost of capital. When it comes to business survival, this is maybe the most concrete argument for the opportunity that lies in setting an ambitious and well-defined climate strategy. 

Attracting and retaining top talent

Talent acquisition and retention have always been at the core of a company’s success. In a post-COVID era with millennials and Gen Z entering the workforce, employees place a high value on sustainable practices. Companies that embrace sustainability demonstrate a commitment to a better future, making them more appealing to top talent. Moreover, a strong sustainability agenda can boost employee morale and engagement. Employees want to work for organizations that align with their values and offer a sense of purpose beyond profit.

But this trend is not confined to just the younger generation. Even experienced workers are now increasingly inclined to switch jobs in favor of companies focused on making the world a better place. My own journey is a good example of this. Before the COVID-19 pandemic, I worked in investment banking. I thoroughly enjoyed my role and my team, but I felt a strong calling to contribute to a mission aimed at addressing the pressing issue of climate change. Initially, I began by making personal lifestyle changes, but it quickly became evident that my daily work tasks weren’t aligned with my personal aspirations. 

Fast forward three years, and I find myself now at the leadership of the world-leading carbon management platform, guiding thousands of companies on a path to net zero. My ecological anxiety has vanished. Importantly, my story is not an isolated one. Increasingly, my colleagues are reaching out to seek advice on how to transition into roles with a climate-related focus.

How to get there

All of this being said, while sustainability may be a great opportunity, it is paramount that it becomes accessible to all companies. While large groups can hire an army of ESG professionals and pay for extensive men-hours from top consulting firms, smaller businesses might not have this luxury. Some aspects of setting a sustainable strategy, notably carbon accounting, can be very technical and seem out of reach for some firms. 

Technology and innovation have a crucial role to play in the democratization of sustainability across businesses. Big data, artificial intelligence, software, low-code applications, or APIs can be leveraged to make climate and social action intuitive, collaborative, and cost-efficient. In the past 5 years, an ecosystem of startups emerged to support companies with limited budgets in embarking on a climate journey and making significant strides in reducing their impact on the planet. The excuse of limited resources and maturity is becoming increasingly untenable as cost-effective solutions proliferate, which feed virtuous effects as more companies engage their ecosystems in a path to net zero. 

In conclusion, the notion that sustainability is a luxury that companies can afford to ignore in the pursuit of survival is misguided. In fact, embracing sustainability is not only compatible with survival but is a pragmatic imperative for thriving in the modern business landscape. Reporting carbon emissions and committing to sustainable practices offer competitive advantages, enhance brand identity, lower cost of capital, and attract top talent.

As the macroeconomic environment gets harder to navigate and companies fight for survival, they must recognize that the sustainability agenda is not just a moral obligation – it’s a strategic necessity for long-term success. Companies that fail to act will lag behind and miss key strategic opportunities, while those that embrace sustainability will position themselves as industry leaders. And this is just the beginning.