The costs of ignoring sustainability in business operations

In today’s fast-changing business environment, business sustainability has become an essential element for achieving long-term success. A sustainable approach is not only better for business, the planet, and people but also pivotal for remaining compliant and competitive in the future. Where sustainable businesses are future-fit, the ramifications of unsustainable practices are far-reaching. Continue reading as we dive into the costs of neglecting sustainability in business operations. By understanding these impacts and implementing proactive measures, businesses can not only mitigate risks but also unlock new opportunities for growth and innovation.

Environmental costs 

Ignoring sustainability in business operations can lead to substantial environmental costs. Businesses that do not implement sustainability practices, for example, generally have higher carbon emissions. This accelerates global warming and climate change.  Unsustainable practices also often lead to the overexploitation of natural resources such as minerals, water, and fossil fuels. This causes not only resource scarcity but an increase in costs over time. 

Sustainable sourcing is an important part of business sustainability. Unsustainable sourcing typically means relying heavily on natural resources. This contributes to habitat destruction, deforestation, and loss of biodiversity. Waste management is another important area of business sustainability. Businesses that do not have recycling and waste management initiatives contribute more waste to landfills. This has additional impacts from water and soil pollution to disrupting ecosystems. 

Economic costs 

Similar to how ignoring sustainability in business operations results in environmental costs, it also leads to substantial economic costs. Inefficient waste management practices are one example here as the lack of waste management initiatives can lead to increased disposal costs. For instance, the World Bank projects that global waste management costs will rise to $375 billion by 2025, with much of this cost burden falling on businesses. 

Businesses that do not embrace sustainability are also likely to face regulatory fines or penalties as a ramification of not being compliant. A prime example of this is in 2020 when Volkswagen was fined 1 billion euros by German prosecutors for violating environmental regulations concerning emissions. Loss of market share is another considerable factor here since today’s consumers increasingly prefer sustainable products. 

Brands yet to integrate sustainability into their business operations risk potentially losing business to more eco-conscious competitors. With this in mind, failing to address sustainability threatens their brand reputation as well. To put this into perspective, a study by Harvard Business Review discovered that 70 percent of consumers avoid purchasing from companies they perceive to be unethical. However, it is not only consumers who are in favour of sustainable business practices, investors are too. 

A report by Morgan Stanley found that 85 percent of individual investors are interested in impact or sustainable investing. Therefore, businesses that are yet to kickstart their sustainability journey may find it more difficult to attract investment. Litigation and compliance costs should also be a concern for businesses that are yet to embed sustainability. For instance, oil giant BP faced over $60 billion in legal and clean-up costs following the Deepwater Horizon oil spill in 2010.

Social costs 

There are a number of social costs associated with ignoring sustainability in business practices. The World Health Organization (WHO) has highlighted there are potential health impacts. They estimate that 4.2 million people die annually from outdoor air pollution​​. Other research finds that improper disposal of industrial waste can lead to toxic chemicals, causing long-term health issues in nearby communities. 

Moreover, companies failing to address sustainability may engage in exploitative labour practices, including poor working conditions and inadequate wages. This can exacerbate social inequalities and lead to social unrest. For instance, unsustainable land use practices, such as deforestation and mining, can displace local communities, disrupting their livelihoods and cultural heritage.

Trust is another important factor of business and companies neglecting sustainability often face a loss of trust from their communities. A 2020 study by Edelman found that 71 percent of consumers lose trust in brands perceived as placing profit over people​​. On the topic of trust and reputation, businesses that cause environmental degradation may face opposition from local communities, leading to protests and potential shutdowns, as seen in cases like the Dakota Access Pipeline protests. 

Strategies for integrating sustainability 

Integrating sustainability into business operations requires a comprehensive approach that encompasses strategic planning, stakeholder engagement, and continuous improvement. Here are some key strategies for integrating sustainability:

Develop a sustainability vision and strategy

Establish long-term sustainability goals aligned with the company’s vision and mission. For example, Unilever’s Sustainable Living Plan aims to decouple growth from environmental impact while increasing positive social impact. 

When developing a sustainability strategy and vision, it is also essential to embed sustainability into business strategy. Patagonia, for instance, integrates sustainability into its business model by focusing on environmental responsibility in all aspects of its operations.

Engage stakeholders

Educate and involve employees at all levels in sustainability initiatives. For example, Google’s sustainability programmes include training and workshops to engage employees. It is vital to collaborate with suppliers, customers, and communities to drive sustainability throughout the value chain. IKEA is an example of one brand that works closely with suppliers to ensure sustainable sourcing of materials.

Implement sustainable practices in operations

Investing in energy-efficient technologies and practices is critical to driving sustainable operations. Walmart, for example, has committed to being supplied with 100% renewable energy and has already achieved significant reductions in energy use across its stores. 

Similar to this, it is wise to optimise the use of resources like water and raw materials. Nestlé is doing this by implementing water-saving measures in its manufacturing processes, significantly reducing its water footprint. 

Adopt circular economy principles

Implement practices that minimise waste and promote the reuse and recycling of materials. The Ellen MacArthur Foundation works with businesses to transition to circular economy models, reducing waste and environmental impact. 

You should design products with their entire life cycle in mind, focusing on durability, repairability, and recyclability. Apple’s products, for example, are designed to be recyclable, and the company has a robust recycling programme.

Focus on sustainable supply chains

Source raw materials sustainably to minimise environmental impact and ensure ethical practices. For instance, Starbucks sources 99% of its coffee through ethical sourcing standards. 

Increased transparency in the supply chain will ensure sustainability practices are upheld. Nike is one example of a brand that fosters transparency by publishing information about its supply chain, including the sustainability practices of its suppliers.

Invest in green technologies 

Transition to renewable energy sources such as solar, wind, and biomass. For example, Amazon has committed to powering its operations with 100% renewable energy by 2025. Additionally, invest in technologies that improve sustainability. Tesla has been heavily investing in electric vehicle technology and battery storage solutions to support the transition to sustainable energy.

Monitor and report progress

Regularly measure and report on sustainability metrics. Microsoft publishes annual sustainability reports detailing its progress on various ESG goals. Use data and feedback to continuously improve sustainability practices. Global flooring company Interface, for example, has set science-based targets and continuously monitors its progress towards becoming a carbon-negative enterprise by 2040. 

Conclusion

The bottom line is that ignoring sustainability comes at a high cost and these costs can be broken up into different categories – environmental, economic, and social. There are so many actors around the world from consumers to governments and organisations calling for stronger climate action. While businesses are responsible for a significant portion of environmental impacts, they can be part of the solution by contributing to a more sustainable future for all.