Balancing sustainability and profitability

Today’s executives walk a tightrope, balancing the long-term imperative to protect the planet with the short-term need to preserve the bottom line. In a landscape defined by chaos and disruption, business leaders must hedge against the future costs of inaction while remaining economically viable today.

As climate change intensifies, companies across sectors have transformed their business models to forge a sustainable future—one that protects people, planet, and profits. In the race to reduce emissions, consumption, and waste—while protecting biodiversity—everything is on the table. Supply chains are being recalibrated. Source materials are evolving. Travel requests are carefully scrutinized. 

But companies can’t do it alone. Consumers also play an important part. What they’re willing to pay for defines, in part, how far a sustainable business can go.

Consumers are prioritizing sustainability

Last year, the IBM Institute for Business Value (IBV) found that 93% of global respondents said the pandemic had influenced their views on sustainability. And over the past year, environmental issues have become even more important. 

Our February 2022 survey of 16,000 global consumers found that more than half (51%) of respondents say environmental sustainability is more important to them today than it was 12 months ago. We also found that consumers’ actions are starting to match their intent.

In 2021, we also found that half of consumers said they were willing to pay a premium for a sustainable brand or sustainable products. And this year, 49% of consumers say they’ve paid a premium—an average of 59% more—for products branded as sustainable or socially responsible in the last 12 months.

While a wide variety of factors influence an individual’s ability to make sustainable choices—such as where they live, their income level, and how informed they are about their options—our consumer research has revealed a few common barriers that consistently hold them back.

Half of consumers say they’ve paid a premium—an average of 59% more—for products branded as sustainable or socially responsible in the last 12 months.

The ability to remove these barriers puts businesses in the driver’s seat, giving them the opportunity to make a positive impact on the environment. It all comes down to pulling the levers that will both resonate with consumers and boost the bottom line—from offering incentives to helping them minimize their carbon footprint.

The multiplier effect: A combination of better quality, greater value, and more information would help more than 4 in 5 consumers buy more sustainable products.

To help executives develop sustainability strategies that will support profitability, our research highlights what habits individuals have already changed, where they would like to do more, and how companies can capitalize on unmet consumer demand for more sustainable choices.

Clearly communicating both the financial and environmental impact of a company’s sustainability initiatives—from how it participates in the circular economy across the value chain to the corporate sustainability metrics it chooses to share—may attract a new group of purpose-driven consumers, employees, and investors. 

How business leaders can become stewards of change

While no single nation—let alone a single organization—can reverse the tide, the decisions executives make can have a ripple effect across the global economy. In fact, a recent study by the World Economic Forum found that just 8 supply chains account for 50% of all global carbon emissions.

This opportunity to make a positive impact isn’t lost on business leaders. Recent IBV research found that almost 4 in 10 (39%) executives said that environmental sustainability is a top priority for them today, and more than half (53%) said it will be a top priority in 3 years. However, while 86% of organizations have a sustainability strategy in place, just over 1 in 3 (35%) have acted on that strategy.

What can help business leaders overcome this inertia? It all starts with a mindset shift. 

“One thing that I’ve learned is, don’t wait to be perfect in everything to embrace sustainability or be more proactive on it,” said Guy Cormier, Chair of the Board, President, and CEO of Desjardins Group, in an interview for the IBV’s upcoming 2022 CEO Study. “No one is perfect on the planet right now. We just have to do everything we can to change the situation.” 

Download the report to explore key findings, including:

• Consumer behavior is shifting, with 3 out of 4 consumers reporting they want to do more to reach their sustainability goals at home, including reducing water and energy consumption, recycling products, and generating renewable energy at home.

• The demand for sustainable consumer goods is on the rise, with 3 out of 5 consumers saying socially responsible or sustainable products made up at least half of their last purchase.

• Sustainable investing has matured, with 62% of personal investors taking sustainability into account in their portfolios—up from 48% in 2021. And nearly 2 in 3 of these stakeholders say a company’s climate change exposure impacts their investment risk.

• 2 out of 3 respondents say they are more willing to apply for (67%) and accept (68%) jobs from a sustainable company. However, just over half (55%) say their employer provides learning opportunities for fostering sustainable practices in the workplace. 

• Roughly 1 in 3 consumers say sustainable travel is a priority, ranking environmental impact factors over cost, convenience, and comfort in their purchase decisions. More than 1 in 3 (35%) say they’ve either stopped using personal cars that run on gasoline or use them less due to environmental concerns.