Does sustainability pay?

Picture of Dylan McGurk

Dylan McGurk

During my week’s work experience at Grain, I took the opportunity to explore the economics of sustainability and how the cost of sustainable solutions impacts their much-needed implementation. My research uncovered many examples where sustainable technologies have become cheaper to access than ever before, generating far more economic benefit than I had previously thought.

The decreasing cost of sustainable technologies

Driven by continued fast-paced R&D in the field of renewable energy and resulting improvements in technology, becoming ‘more sustainable’ has never been better value. According to the International Renewable Energy Agency (IRENA), between 2010 and 2021, the cost of solar panels fell by 88%. The costs associated with offshore and onshore wind energy have fallen as well, by 68% and 60% respectively.

The rise of global oil and gas prices due to Russia’s invasion of Ukraine in February 2022 was an important driver in reducing the price of renewable energies compared to fossil fuel alternatives. It made the switch from non-renewable to renewable energy for companies more attractive than ever before, and this was equally true for domestic and commercial consumers. In March 2024, for example, CarDealer Magazine reported a fall of 15% in the cost of EVs over the previous month. With the cost of unsustainable energy solutions rising and the price to switch to a sustainable solution ever cheaper, it’s no surprise families and firms are adapting to the new reality.

Increasing demand for sustainable practices

With growing public awareness of our negative effect on the planet, increasing stakeholder demand on companies to adopt sustainable business practices has made transparency and sustainability an effective source of competitive advantage. Consumers want the brands they buy from to share their concerns and actively contribute to a healthier, happier planet.

The same is true when organisations sell products or services to other businesses or local or national government institutions. Procurement departments are more conscious of their organisation’s effect on the environment, their communities and their workforce, and they increasingly aim to achieve compliance with self-imposed or regulatory targets. Annual reporting and disclosure on ESG topics have reached a ‘new normal’ level in many sectors and industries.

Increasingly, people want a more sustainable lifestyle and are happy to pay for it. According to NielsenIQ, in 2022, 78% of consumers say that a sustainable lifestyle is important to them. This means that a commitment to sustainable practices can differentiate companies and generate brand loyalty. However, it should be recognised that what an individual says during research does not always translate to actual behaviour. Recognition of this fact has had one undesirable effect: the rise of greenwashing. As defined by Investopedia, greenwashing is the process of conveying a false impression or misleading information about how a company’s products are environmentally sound. Thankfully consumers are becoming increasingly savvy to these practices and are voting with their wallets.

One way that companies can demonstrate their sustainability commitments is through B Corp certification. B Corp standards hold companies accountable for the actions they take, ensuring they are for the benefit of all stakeholders, not just shareholders. This new way of framing enterprise can increase the attractiveness of a company to consumers who seek to associate themselves with sustainable firms, increasing the sales and profitability of the business.

At a business-to-business level, the UK Government’s PPN 06/21, released in June 2021, has mandated that bidders for large government contracts exceeding £ 5 million per year must produce a Carbon Reduction Plan on how it will reach net zero by 2050. This and the Government’s 10-point plan has made it clear that sustainable business in the UK will be the driving force for the ‘green industrial revolution’ in the years to come. Once again, however, it should be noted that this business co-operation is needed to create this change.

ESG strategy integrated with overall business strategy

Whether motivated by compulsory legislation or simply to improve consumer perception of their brand, it is safe to assume that adopting sustainable—also known as environmental, social, and governance (ESG)—business practices has now become a critical part of an organisation’s competitive armoury. Fortunately, with real and comparative costs decreasing, the barriers to adopting sustainable practices are coming down, and taking a sustainable approach can definitely be good for business.

Get in touch with the Grain team if you want to be part of the change!

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