Firms adopt sustainability as lofty goal

Studies find links between protection of environment and business returns

Mention sustainability and one immediately thinks of lofty goals set forth by the United Nations: biodiversity, recycling, gender equality and other objectives.

But apart from these noble causes, how about the challenge of nurturing sustainable businesses?

Today, a growing body of research is being carried out that suggests a relationship between reduction of private sector environmental impact and business returns.

For instance, in a recent survey, International Finance Corp found evidence that if companies look after the environment better, their workers and community relations normally do well financially.

The organization－under the auspices of the World Bank－looked at the performance of 656 companies in its portfolio and found that companies with good environmental, social and corporate governance practices tended to outperform their peers having worse practices by 210 basis points on return on equity and by 110 basis points on return on assets.

There are of course other elements to consider including corporate operations and stakeholder engagement, which can also help improve profitability.

Tensie Whelan, founding director of the New York University Stern Center for Sustainable Business, said sustainable businesses are redefining the corporate ecosystem by designing models that create value for all stakeholders, including employees, shareholders, supply chains, civil society and the planet.

"So through regular dialogue with stakeholders and continual iteration, a company with a sustainability agenda is better positioned to anticipate and react to economic, social, environmental and regulatory changes as they arise," Whelan said.

Apart from the supply end, other studies show that customers are avidly embracing the trend and willing to pay for the idea of sustainability.

Kantar Worldpanel last year polled some 65,000 people in 24 countries and regions asking how they felt about the use of plastics by fast-moving consumer goods companies. The study found that nearly half (48 percent) of all consumers expect manufacturers to take the lead, saying they have the most responsibility to act on these issues.

"And making changes to account for this is clearly a matter of 'when', rather than 'if', for all businesses," said Natalie Babbage, a director at Kantar.

French skin care brand L'Occitane en Provence has found its main consumer groups－typically white-collar workers and family decisionmakers such as many mothers－avidly embrace the sustainability trend.

"Every other year we conduct a brand image survey, asking why people choose our products. The top two reasons cited by our consumers are the use of natural ingredients and a number of environmental-protection initiatives," said Queenie Lin, L'Occitane China managing director.

"And the percentage keeps rising as time goes by."