Is Environmental Sustainability Good for Business?
We should all be aware that being environmentally aware is a good thing for the planet, but is environmental sustainability good for business, too? If you’re reading this, chances are you are aware of some of the latest sustainability trends, and are already a believer that businesses must be at the forefront of environmental progress.
But...perhaps you need to convince your boss, your CEO, your investors, or your advisory board that this is true. If so, this piece was written for you. We’re here to cover two of the biggest environmental trends in business, and why they’re not just good for the planet, but also the bottom line.
This piece is written to explain why all businesses should embrace sustainability. We’re here sell you on more than just making a few green choices in your business (though, if that is all that’s possible right now - please do it!). We wrote this article to convince a business leader to take a bet on sustainability as a core differentiator and value proposition for the company. We have seen that a business commitment to sustainability and ethics can (if it is executed well) give a business a significant leg up over their competition. There are many more benefits of being sustainable, but we know you don’t have all day.
The internet is awash with articles whose headlines read “ Sustainability Is Good for Business,” but it’s important to remember that there is a very real tension between economics and sustainability. In many cases, making the more eco-friendly or ethical choice is more expensive, time consuming and risky for a company, and while that company may be able to secure a price premium for their offerings; that premium doesn’t always cover their higher costs or complexity.
If this tension was NOT there, then sustainability would already be core to how all businesses operate and we wouldn’t need to write a piece like this. While we might relish the break in having to write about environmental trends in business, this tension is (very) bad news for the planet.
The silver lining is - since this tension DOES exist - it opens opportunities for businesses like yours to set yourself apart. The other good news for the environment is that the tides are changing on consumer expectations- over time, a true environmental commitment will likely become essential for every business. By taking the eco plunge now, you’ll be poised for even more success long-term.
While the reasons why sustainability is good for business are many, here are two of the current environmental trends in business underscoring our passion for sustainability as a business differentiator.
Sustainability is Good for Business- Trend 1: The Environment is Fundamental to Customers
More and more customers don’t just “care” a little bit about sustainability; but actually see reversing climate change and preserving the environment as the most pressing issues of their time.
As a result, they consider the planet in almost all of their decisions as consumers and citizens.
Today, the majority of consumers consider sustainability in their purchasing decisions, and would select the more sustainable business when given the choice.
A smaller, but still significant percentage of them actively put sustainability, health and ethics at the center of their purchasing decisions and are willing to spend significantly more to ensure what they buy aligns with their values.
A 2019 Accenture Survey found that 72% of customers surveyed reported that they were actively buying more environmentally friendly products than they did five years ago, while 81% said they expected to buy even more over the next five years.
Nielsen’s 2015 Global Corporate Sustainability Report found that 66% of consumers would spend more on a product if it came from a sustainable brand. About one-third (35 percent) of surveyed respondents indicated they would be willing to pay 25 percent more than the original price for sustainable products. Gen-Z was found to be willing to pay 50 percent-to-100 percent more compared to other age groups.
Don’t believe customers actually do what they say in a survey? The numbers tell the same story!
In a study of sales trends from 2013 to 2019, products that had a sustainability claim on packaging accounted for 16.6% of the market in 2018, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from 2013. Sustainable products grew 5.6 times faster than conventional products.
These consumers, especially those willing to spend 25% or more to ensure their purchases don’t conflict with their ethics, get angry at companies like Amazon and H&M. Consumers who see their purchasing decisions as activist opportunities feel that big corporations are often making flimsy, greenwashed commitment to sustainability in favor of accelerating their sales as fast as possible, with no genuine consideration of their people or the planet.
These customers are looking for alternatives, are willing to do their research, and look deeply and beyond more superficial eco traits that may have historically passed muster.
Which brings me to our second trend.
Sustainability is Good for Business- Trend 2: Ethics Differentiate Your Business
Sustainability and ethics should be considered a fourth form of differentiation in the world of business strategy.
A business 101 class will say that a company can compete on one or more of three different platforms: price, quality (such as taste, style, comfort), and service (including speed). That same professor will probably say that “brand” is a fourth differentiator but that a company’s brand is often essentially driven by whether or not it is strong in price, quality or service.
For example, McDonalds and Amazon are two companies that differentiate themselves by being low price and high speed (and are not considered to specialize in very high quality products). Their brands are synonymous with these characteristics. Say what you will about Starbucks today, but when Howard Schultz first started the company, the focus was on high quality coffee, an option that was not commonplace across the entire US. By differentiating on quality, they were able to charge much higher prices than what most people spent on coffee back in the day! Business school case studies have famously called out the decline of the Gap, once a very popular clothing brand, because it basically stopped differentiating on anything (its clothes were neither high nor low quality, and its prices were also just in the middle). Using sustainability as a differentiator works in much the same way- you have to go the extra mile for it to matter.
We would argue that those three points of differentiation do not do nearly enough to highlight the different ways a business can be successful.
In particular, we believe that a deep focus on sustainability and ethics is an important fourth form of differentiation. Beyond the actual environmental importance, this is a key reason why sustainability is important in business.
Seventh Generation and Method are two companies that found a hugely successful niche by bringing eco-friendly, healthy, clean thinking to the world of household cleaners. Whole Foods went from being a single Texas grocery store to a widespread nationwide chain through its single minded focus on health and sustainability. These three brands have since been acquired by behemoths; but their origins were all humble, and their success was self made.
Okay, enough of the business school lesson - what does this second trend mean for you?
These days, industries are getting more and more crowded with new entrants. This is especially true of ecommerce, which has very low barriers to entry. Within days, or even hours, you can have a shop up and running in Etsy or your own storefront on a platform like BigCommerce.
There are hundreds of different independent ecommerce shoe companies, sunglasses companies, fashion brands, maternity and baby brands, jewelers, skincare and makeup companies. How do you set yourself apart and catch the attention of online shoppers?
We have seen that truly sustainable companies have figured out not only how to be “green” here and there, but how to make sustainability CORE to how they operate. These sustainable businesses have carved out extremely successful niches by differentiating themselves from the pack in this regard.
By core, we don’t just mean sustainable packaging (though of course that is one component!). We are referring to the entire business - how you source, manufacture, fuel, package, ship, give back, and support your workforce. Some of the most successful independent ecommerce brands out there are ones rooted in ethical, transparent and environmental principles. Looking for some of the best companies for sustainability? Check out these awesome examples of ecommerce businesses embracing environmental best practices as part of their core identity (and making money as a result):
Not convinced? Here are five specific reasons why sustainability can be the foundation for a brand’s success:
Brand awareness and customer acquisition: Your new storefront selling generic t-shirts goes live...then what? You need people to find your brand! Chances are you don’t have the budget for an extensive PPC campaign. You have an Instagram account but you aren’t sure what to write about. You reach out to a few micro-influencers but they don’t respond.
Now let’s say you are selling t-shirt that are each made out of 6 water bottles, you’ve made a public commitment to reclaim 500,000 water bottles in your first year, you screen print your t-shirts with algae ink, and for every 1,000 t-shirts you sell, your team participates in a local litter cleanup. THAT is a company that bloggers want to write about and people want to learn about on social media! This is just one fake example of how unique sustainability commitments can make it much easier to get initial attention when you are just getting started.
Customer loyalty and referrals: You got your first orders! You can ship them out in plain white, generic, virgin poly mailers and wait for more orders to come in.
Or, you can package them in custom branded, 100% recycled Paper Apparel Mailers, with a We Care Card that you use to handwrite a note of thanks, explaining to the recipient all the different ways their purchase has contributed to a better planet. Perhaps you even add detail on how your recipient can use the package for any returns or exchanges, and remind them to reuse or recycle their packaging. That kind of packaging inspires customers to purchase from you again, and share your brand with their friends or on social media, helping to expand your base.
Innovation and growth: If you’ve decided to make stylish t-shirts as low cost as possible (i.e. if cost is your differentiator), you may find yourself constantly seeking out new designs or finding ways to make your operations more cost efficient, but you may find that your core business stagnates.
If sustainability comes first in your business, you’ll always be on the lookout for new, more eco-friendly fabrics, better printing inks, more sustainable screen printing drying processes, etc. Sustainability helps drive innovation, and innovation not only is essential to sales and customer growth, it also makes a business more interesting. Which brings us to the next point.
Employee engagement: Selling the cheapest t-shirt just isn’t that satisfying for an employee. Unsatisfied employees are less productive, more absent, and have shorter tenues. Companies rooted in ethics and the planet are often better places to work. They are more dynamic, they tend to be more open to feedback from their customers and employees, and they are a place where people are proud to work.
On the other hand, companies that shut down employee feedback and put things like efficiency above all else don’t just have less engaged employees, they often (especially when this is true of big companies) come under assault. Amazon employees’ recent outrage and protest over their threat to fire team members who publicly decried the company’s environmental practices is a very current example of this.
Self satisfaction and joy for a company’s owner and/or CEO: What is more affirming to the soul? Selling 100 cheap t-shirts or 100 t-shirts that help reclaim materials and clean up litter. Not really much of a question.
Click here to download our presentation: The Business Case for Sustainability.
Promoting sustainability in a large business? This document can be shared with colleagues, managers, investors, or anyone else you want to bring on board the eco business train. And as always, we'd love your perspectives, feedback and contributions. Share any counterpoints or perspectives with [email protected]
Ready to Green Your Ecommerce Business? Or, if you're already a sustainable company, looking for tips to keep taking your eco initiatives to the next level? Check out our Comprehensive Guide to Greening Your Ecommerce Business.