Corporate sustainability used to be something only a handful of cutting-edge, forward-thinking businesses embraced.
About fifteen years ago, it was somewhat of a novelty. Today, it’s become a standard. Companies that don’t embrace sustainability will be left behind.
Why Sustainability Needs To Be Prioritized
If you run a business, there are some obvious reasons to prioritize sustainability: it’s good for business and of course it helps the environment.
However, many companies are adopting sustainable practices because reporting requirements are being rolled out that make their environmental impact transparent.
It’s becoming more important for organizations to prioritize sustainable operations now that regulations are pushing for heightened sustainability practices.
Sustainability Transparency Means Companies Can’t Hide
Many global and EU organizations that haven’t given much attention to sustainability are suddenly finding themselves obligated to follow new mandates, like the European Union’s Corporate Sustainability Reporting Directive (CSRD).
Businesses that function in the EU fall under the CSRD must disclose sustainability issues related to their business as well as how doing business impacts people and the environment.
They must also have their data audited by a third party to verify its accuracy.
The CSRD specifies Environmental, Social, and Governance (ESG) reporting requirements that cover things like pollution, the impact on bodies of water, resource usage, climate change, affected communities, and the impact on consumers.
With these reporting requirements in place, everyone can see an organization’s true impact on the environment and community. It’s now impossible to hide unsustainable practices.
Increased concern around sustainability issues, has put companies that bring unnecessary harm to the environment or negatively impact the climate under a microscope.
This creates a massive incentive for organizations to do their best to be as sustainable as possible.
Sustainability Reporting Will Soon Be Required Across The World
Eventually, sustainability reporting will be a requirement in more countries. It’s wise to prioritize sustainability now, even if you don’t currently fall under the CSRD or any other reporting requirement.
If you start now, ahead of time, you won’t have to scramble to figure out what to do when the requirements impact your business.
By the time you’ll be required to make your reports, you will have already figured out what you need to do in your business to ensure you’re being environmentally responsible. You’ll also have a smooth system for reporting already in place.
Currently, ESG reporting requirements exist in Europe, Asia, New Zealand, and a few other places.
It’s only a matter of time before your business will be subject to some kind of sustainability reporting regulation.
For instance, the SEC proposed a similar rule to the CSRD in the U.S., but it won’t take effect until 2024.
In the beginning, only some companies will have to comply, but all businesses will be gradually phased in through 2027.
Some U.S. companies that do business in the EU are subject to the CSRD. For instance, companies that have a net turnover of €150 million and have a large or listed EU subsidiary or an EU branch with a net turnover greater than €40 million the previous year will need to comply.
Prioritizing Sustainability Avoids Hefty Consequences
As with every regulation, there are consequences for CSRD non-compliance: monetary fines, public denunciation, and administrative sanctions.
EU states are responsible for setting penalties for violations. Since the environment is serious business, the monetary fines could reach tens and even hundreds of millions of dollars.
Investors And Customers Care About Climate Impact
Prioritizing awareness and management of your environmental impact protects your bottom line.
For instance, when you start looking for a new round of funding, potential investors will want to know how your company’s activities impact the environment. The more conscious your practices are, the more likely you’ll be to get funding.
Where other stakeholders are concerned, the CSRD ensures they’ll have access to the data required to assess risks that arise out of sustainability issues and climate change.
Likewise, customers want to do business with companies that take their environmental impact seriously.
According to survey data, 60% of people are willing to pay more for a product just because it comes in sustainable packaging.
Companies that go even further to prioritize sustainability at the root are more likely to see the lion’s share of business in their industry.
Your Success Is Tied To Your Commitment To Sustainability
If you want to compete in today’s marketplace, it’s essential to prioritize sustainability.
Consumers and stakeholders expect it, and investors assess your commitment to decide whether or not to provide funding.
Sustainability directly impacts success, and with a little diligence, you can make that work in your favor.