As companies recognize the significance of integrating social considerations into their operations, they realise the immense potential benefits that investing and operating according to social sustainability can generate. This article explores the concept of social sustainability and discusses the opportunities it presents for a company.
According to the 2020 Global Sustainable Investment Review by the Global Sustainable Investment Alliance, the global sustainable investment market was valued at $35.3 trillion in 2020, a 55% increase from 2016. The increasing attention to the market has caused the rise of ESG-focused investment products, such as Exchange-Traded Funds (ETFs) and mutual funds, which allow investors to rely more on companies that meet certain ESG criteria. In 2020, ESG ETFs and mutual funds attracted a record $51 billion in net inflows, according to Morningstar.
Environmental, Social, and Governance (ESG) strategies have gained momentum in the business world as companies have started to recognize their potential for long-term value creation. However, the growing importance of ESG has also led to increased scrutiny and pressure from stakeholders to deliver on promises of sustainable and ethical practices. In this context, ESG security plays a crucial role in safeguarding an organization's reputation, assets and investments.
Climate change is increasingly being recognized as a major risk to businesses. The physical impacts of the environmental disaster caused by climate change, such as extreme weather events, sea level rise, and droughts, can disrupt supply chains, damage infrastructure, and impact operations. In addition, the transition to a low-carbon economy presents risks and opportunities for businesses, as governments and consumers demand more sustainable practices. As a result, it's important for companies to evaluate their exposure to climate risks and opportunities. This can help them identify potential threats to their business and take steps to mitigate them, as well as seize opportunities to innovate and create value.
In recent years, properly measuring and communicating one's ESG performance has become a competitive lever for companies. However, while the adoption of sustainability-related practices is becoming more common among companies, measurement and governance issues still pose major challenges for many organizations, especially SMEs.
Sustainable business practices are aimed at creating long-term value for stakeholders, including customers, employees, shareholders and the community, while ensuring that natural resources are conserved and protected for future generations. More and more companies today are embracing this triple bottom line concept (People, Plant and Profit), recognizing that there is room to realize business advantages along with social and environmental benefits, as an analysis by the Harvard Business Review points out. But how can a company, and especially a small-medium sized one, achieve that? And why should a business choose a green approach?
Small and medium-sized enterprises (SMEs) play a vital role in the global economy, contributing to job creation and economic growth. SMEs account for 90% of businesses worldwide and more than 50% of global employment. In Europe, such statistics are even more impacting as SMEs represent 99.8% of private companies and more than 60% of employment.
Climate change poses significant risks to businesses around the world. Extreme weather events, such as floods, droughts, and hurricanes, can disrupt supply chains and cause widespread damage to infrastructure. Rising sea levels can threaten coastal properties and infrastructure, while increasing temperatures can impact worker health and productivity. Failure to address these risks by companies leads them to lose market share and profits, as consumers and investors demand more environmentally responsible practices.
The concept of green procurement refers to the acquisition of products with a reduced environmental impact, which provides the same or improved function and performance but are less harmful to human health and the environment. It involves the use of materials with a low environmental impact and that are more sustainable, as well as the implementation of practices that promote sustainability and the choice of the less impacting option of sourcing and production.
In the early days of sustainability, many companies viewed it as a regulatory compliance issue. Businesses would do the minimum required to meet environmental standards and then move on, without giving much thought to how sustainability might actually benefit their operations.