Sustainable Business Practices: Balancing Profit and Environmental Responsibility
What do you mean by sustainable business practices?
Sustainable business practices refer to those practices by which companies reduce their negative impacts on the environment while earning profits. In every organisation, sustainable practices can be external and internal (Caldera et al. 2019). The internal efforts comprise an in-house recycling program, reducing the energy use at offices or factories, shifting to natural gas or electric vehicles and necessitating the purchase of green products. On the other hand, external sustainability efforts include manufacturing products that create less environmental damage. Furthermore, selecting green vendors and suppliers is a sustainable business practice.
Sustainability in business focuses on two key areas: its impact on society and the environment. So, at least in one of these categories, sustainable business practises seek to have a beneficial impact (Raut et al. 2019). When businesses fail to fulfil their obligations, serious problems like environmental deterioration, social injustice, and inequality may result. When making decisions for a business, sustainable business practises take into account a wide range of economic, social, and environmental factors.
Why do successful organisations participate in sustainable business practices?
Successful organisations participate in sustainable business practices, which are unique to every organisation. Sustainability in business practices not only comprises relying on renewable energy sources, optimising supply chains or using sustainable materials in the business practices (Shakeel et al. 2020). Sustainable business practices also can be sponsoring or providing education funds for developing youths in the local community.
Sustainability is crucial since it contributes to reducing global problems. In addition, sustainability helps in boosting productivity. The benefits comprise the developed efficiency, and sustainability, thereby encouraging innovation. Making sustainability an important value for the colony helps set transparent goals for all the employees who can work collaboratively towards sustainable production.
How can companies derive profits from a sustainable business?
In recent years, many businesses have made sustainability a primary concern. Business practices that are sustainable are good for the environment, the workforce, and the organization as a whole. Many firms have been obliged to adapt their business practices in response to the COVID-19 epidemic in order to protect the customers, the environment, and the workforce (Nosratabadi et al. 2019). This implies that organisations need to alter their operational practices or incorporate new technologies to meet sustainable standards while generating profits for the business.
Suggested below are the eight ways in which sustainability can help business to gain profits:
- It helps drive business innovation internally (Caldera et al. 2019). Innovation implies that businesses are given new opportunities which they can implement in the business. In addition, innovation also helps bring more profits to the business.
- When businesses invest more in sustainable practices, they can manage their supply risk and environmental risk management. With the help of renewable resources, the company can control security over the energy resources. This also helps in earning financial benefits (Nosratabadi et al. 2019). For instance, if an organisation uses clean and green energy instead of coal, it can avoid the cost and the hassle as the price of coal increases.
- Adopting sustainability in business help in attracting and retaining employees. An organisation with a strong, sustainable program can retain 70% of its employees. Employee retention implies good organisational productivity and profits (Caldera et al. 2019). When an organisation commits to sustainability, it implies that the company’s core values are placed at the forefront. This helps to draw the attention of job seekers and employees who share the same values. Hence hiring and recruiting the right employees saves the money and time that would otherwise have been spent for hiring employees for various roles.
- Adopting sustainable business practices helps expand the audience reach and promote brand loyalty. Research conducted by the Harvard Business Review shows that organisations that implement sustainable financial practices can acquire financial gains compared to their counterparts who adopt unsustainable business practices (Caldera et al. 2019). When businesses implement sustainable business practices, they can reach out to market segments that are sustainably minded which helps create brand loyalty among the customer base.
- Sustainable business practices assist in the reduction of production costs as it acquires only those resources that are sustainable. Organisations examine their supply chain and implement those sustainable practices that fetch them maximum profits. For instance, using biofuels and recycled materials in the supply chain helps earn profits.
- Sustainable business practices help in garnering positive publicity. This helps organisations in increasing referral rates and customer loyalty. In addition, as a result of positive publicity, organisations can stay ahead of others n a competitive market (Caldera et al. 2019). By adopting sustainable business practices, organisations can also set industry trends and encourage other organisations to follow them. With the persistence of the sustainability trends in the industry, many organisations consider it a norm.
Examples of organisations that follow sustainable practices
This organisation aims to transform into a circular business by 2030. They use recycled or renewable materials for the creation of their goods. The Swedish furniture retailer identifies the effect of its operations on the environment. Forsoiung so organisations invested a lot in renewable energy sources, and it is shifting away focus from using fossil fuels (Caldera et al. 2019). In addition to this IKEA works to inspire other organisations to implement sustainability. They are also educating their customers about using sustainable products and their benefits. This organisation generated a revenue of about EUR 27.4 billion in 2022.
One of the multinational conglomerates Unilever, has also heavily invested in achieving environmental sustainability. The company ensures that its business operations, from sourcing materials to the supply chain and production, implement sustainable practices. The organisation set the first sustainable goal in 2010 under a plan named the Unilever Sustainable Living Plan (Caldera et al. 2019). The three goals used by USLP are developing health and well-being, promoting fairness in the workplace and reducing the environmental impact. As of 2022, the company earned a revenue of 60.07 billion euros.
The Panasonic Environmental Vision 2050 was launched by the organisation in 2017 to work towards the most efficient energy utilisation. They develop technologies capable of manufacturing energy-saving products (Caldera et al. 2019). In addition, they believe in product recycling, and their factories in Belgium and Japan do not emit CO2. In addition to this, the organisation installed the ” HITN325″ to contribute towards the sustainable development goals.
The giant e-commerce online retailer focuses on sustainability. Considering the advantages of sustainability, the organisation has plans to be carbon neutral by 2040. They are also encouraging customers to use Amazon Renewed to shop sustainably. The customers are offered pre-owned, refurbished products. In addition, the organisation is a buyer of renewable energy, which is evidence of its sustainability (Shakeel et al. 2020). They also added a low-power mode to their Fire TV devices and Echo so that they consume less energy. As of March 2023, the revenue earned by Amazon is $524. 897B an increase over the last few years.
This technological giant has also shown its commitment towards sustainable business practices. The organisation optimise the cost and the operations, which reduce carbon emissions and waste. Since 1960 the company has invested in environmental stewardship and corporate social responsibility since the 1960s. Even today, the organisation encourages and promotes green procurement and increases the demand for natural resources (Shakeel et al. 2020). The revenue earned by the organisation is 60.53 billion USD as of 2022.
How organisations balance their profit and purpose?
Organisations can ensure prosperity and long-term growth by considering social responsibility and financial benefits. Strategies that are mainly driven by profits are essential. However, organisations are needed to prioritise sustainability to remain competitive. Sustainable practices are regarded as necessary for creating value for the stakeholders and reducing the negative impact on the environment. Every organisation shall have a plan for handling the obligations of the environment, such as energy consumption, usage of water, air pollution and waste management (Shakeel et al. 2020). Furthermore, the organisations shall also be aware of the effect of their operations on the adjacent community so that they invest in suitable initiatives which can meet the demands of their neighbours. Concerning using financial strategies, the organisation shall use variable loan rates so that they can encounter fluctuations in the rates of interest and can derive benefits from them whenever deemed necessary.
- Caldera, H.T.S., Desha, C. and Dawes, L., 2019. Evaluating the enablers and barriers for successful implementation of sustainable business practice in ‘lean’SMEs. Journal of cleaner production, 218, pp.575-590.
- Raut, R.D., Mangla, S.K., Narwane, V.S., Gardas, B.B., Priyadarshinee, P. and Narkhede, B.E., 2019. Linking big data analytics and operational sustainability practices for sustainable business management. Journal of cleaner production, 224, pp.10-24.
- Shakeel, J., Mardani, A., Chofreh, A.G., Goni, F.A. and Klemeš, J.J., 2020. Anatomy of sustainable business model innovation. Journal of cleaner production, 261, p.121201.
- Nosratabadi, S., Mosavi, A., Shamshirband, S., Zavadskas, E.K., Rakotonirainy, A. and Chau, K.W., 2019. Sustainable business models: A review. Sustainability, 11(6), p.1663.
Ans: Sustainable business practices refer to those practices that enable companies to reduce the negative effects on the surrounding environments without compromising profit maximisation. These business practices are of the types: internal and external.
Ans: The two sustainable areas the organisation addresses are the impact on society and the environment.
Ans: Sustainable business practices are significant as they reduce energy costs, improve customer preference and develop the brand image. Organisations that rely on sustainable business practices can get government or private organisations loans.
Ans: Companies that implement sustainability in their business practices are innovative, and thus they stand ahead of their counterparts. In addition, they are also capable of attracting new and retaining old employees who contribute efficiently towards the production process. Organisations that follow sustainable practices can promote their brand loyalty. Due to all these factors, sustainable business practices enable organisations to earn more profits.
Ans: IKEA and Amazon practice sustainability in their business. These organisations also inspire others who adopt sustainability, thereby increasing their consciousness towards the environment. They believe in using recycled materials and give their utmost efforts to make the environment carbon neutral.
Author Bio: Mark Edmonds is a business writer and consultant with over 15 years of experience helping companies develop sustainable practices. As a regular contributor to Academic Assignments, Mark provides insightful analysis on how businesses can balance profitability and environmental stewardship. His business plan assignments help students understand how strategic sustainability benefits companies, people, and the planet.