Introduced by the United Nations in 2015 under the 2030 Agenda, the Sustainable Development Goals (SDGs) constitute a comprehensive framework consisting of 17 goals and 169 targets designed to facilitate transformative changes globally by 2030. As humanity reaches the half checkpoint towards 2030, only 15% of the targets of the SDGs are on track, and the 2030 Agenda progress faces stagnation in the face of multiple crises.
The 2030 Agenda is a shared responsibility in which businesses are relevant actors. Companies are contributors to environmental paradigms, such as climate change, and consumption of natural resources, and tremendously influence social inequalities, for example, through their wage and price policies. This makes companies capable of having a positive role in contributing to a more sustainable society.
Embracing sustainability at the heart of a company's strategy can yield not only environmental and social benefits but also a genuine business case resulting in profit. Notably, achieving the SDGs holds the potential for substantial economic benefits for companies, potentially generating 380 million employment opportunities and unlocking $12 trillion in business prospects by 2030.
But what is a sustainability business case? It is an identifiable sustainable environmental and/or social practice that provides companies with a case (scenario or circumstance) that translates into the economic and financial success of that business.
There are various typologies of sustainability business cases, but we can ultimately resume them into four principal ones:
1. Reducing Costs, when companies can reduce the economic costs in the production of their products and services by incorporating sustainable practices in their operations and supply chains.
Companies can achieve cost reduction as a business case for sustainability by shifting to renewable alternatives and implementing efficient mechanisms, mainly, in energy and water usage. In addition, businesses can reduce costs by identifying and addressing – thus mitigating – risks associated with resource shortages and climate-related hazards; in the context of their operations, businesses can cut present-to-future operational costs. Also, companies can retain talent and avoid substantial expenses in recruitment, hiring, and training, through measures such as investing in work-life balance, caring for the mental and physical health of workers, or providing them with academic or professional training opportunities.
2. Raise Prices, when a company can increase the price of a product or service because it is (more) sustainable when compared to a previous product/service or a product/service from its competitors.
Companies can increase prices through sustainability by offering premium products. For example, in the health sector, companies can develop concierge healthcare services that provide convenience, accessibility, and personalized offers; concerning marine and land sustainability, businesses can offer certified products by institutions like the Marine Stewardship Council®, or the Forest Stewardship Council®. In addition, businesses can develop value-added service options that attribute sustainability credits to their products and services. For example, in the water domain, companies can present value-added services such as water quality testing, water treatment consulting, and water management solutions that offer enhanced water quality, reliability, and efficiency.
3. Increase market share, when a company reaches a new segment of consumers as a consequence of its sustainable practices. It can happen when, for the same segment of product, consumers prefer a sustainable product to a non-sustainable one at the same price.
Both small and large companies leveraging sustainability usually experience a growth in market share, indicating that sustainability can serve as a universal driver for expansion irrespective of company size or brand penetration. Nevertheless, companies can go beyond tapping into the green market, by exploring uncharted geographies and consumers, and understanding and addressing the unique socio-cultural, economic, and environmental needs of different population segments. For example, companies can create value-added products or services that address the needs of low-income consumers, such as affordable housing solutions, basic healthcare services, or nutritious food options, utilizing tiered pricing strategies that offer flexible pricing options for people with less economic power.
4. New business model, when a company adopts a new approach or strategy to create and deliver customer value and more sustainability, such as how a company generates revenue, interacts with customers, leverages resources, and creates competitive advantages in the marketplace. It often can involve new products, new methods for product or service development, production, distribution, marketing, pricing, and customer relationship management.
Businesses can construct new business models, by shifting a company's operations toward emerging and promising markets, deploying the know-how acquired in the sector, and changing its original offer of products and services while aligning it with innovation and sustainability. For example, the shift that most fossil fuel companies have or are making toward the production and development of renewable and green energy. Or companies that create a new product through alternative sustainable production mechanisms. For example, a company that usually uses wood to create its furniture products develops a partnership with a local cork producer to utilize their unusable materials for the construction of unique furniture pieces.
Ultimately, aligning business strategies with the SDGs presents a compelling business case for companies across various industries. By integrating SDG targets into their operations, companies can not only contribute to global sustainability efforts but also realize significant advantages such as cost reduction, increased prices, expanded market share, and the creation of innovative business models.
If you want to know more about the topic of the business case for sustainability, you can explore our research note Balancing Profit and Purpose: The Strategic Integration of the Sustainable Development Goals for Corporate Success.
Have a great and impactful week!
Miguel Guerreiro
Researcher at the Center for Responsible Business & Leadership