What is sustainability in business?

Sustainability in business refers to a company's strategy and actions to eliminate the adverse environmental and social impacts caused by business operations

Female farm worker using digital tablet in greenhouse

Sustainability in business defined

Sustainability in business refers to a company's strategy to reduce negative environmental impact resulting from their operations in a particular market. An organization’s sustainability practices are typically analyzed against environmental, social, and governance (ESG) metrics.

As we face irreversible changes in the Earth’s system, the threat of climate change has become too risky to ignore. The exceedance of environmental thresholds is raising concerns about domino effects in global natural systems and societies. Businesses are seeing both pressure and opportunity to establish sustainability goals if they haven’t already. Even in the ongoing COVID-19 pandemic environment, companies continue aligning to the United Nations General Assembly sustainable development goals (SDGs) set in 2015 and intended to be achieved by the year 2030. The SDGs establish universal goals that provide a roadmap for sustainability in business in target areas such as poverty, inequality, environmental degradation and climate change. 

Examples of sustainability in business:

• Improving energy management efficiency using alternative power sources and carbon accounting

• Deploying infrastructure that reduces GHG emissions, preserves water resources and eliminates waste 

• Operating dynamic and efficient supply chains to empower a circular economy, encourage reuse, design out waste, promote sustainable consumption and protect natural resources

• Enabling sustainable development by assessing risks and improving resiliency while adhering to external regulations and development goals


Why is sustainability in business important?

We’re doing business in an unpredictable world. Climate change, dwindling natural resources, and ever-increasing demands on our energy and food supply are disrupting business operations and supply chains in unexpected ways. It’s more important than ever for private and public organizations to fundamentally rethink the way they function. Transforming into a successful sustainable business requires new levels of resilience and agility, rooted in responsible practices that preserve our planet.

Sustainability is a business imperative and should be core to the strategy and operations of every business. The reasons for this are both ethical and financial:

• Employees are increasingly looking for mission-driven, purpose-led employers who care about the planet when deciding where to work. 71% of employees and employment seekers say that environmentally sustainable companies are more attractive employers.1 

• Consumers are willing to pay a premium for goods from brands that are environmentally responsible. 80% of consumers indicate sustainability is important to them.2

• Governments, investors, employees, and customers are demanding new levels of enterprise accountability, including action to address climate change.

• Many of the world’s top economies have or are developing, corporate disclosure requirements around environmental impact, driving businesses to curb GHG emissions.3

• The rise of environmental, social and governance (ESG) investment criteria and sustainable investing means that a sustainable business is inherently more attractive to the rising numbers of responsible investors. Investment in ESG assets may reach $53 trillion by 2025, representing over a third of global assets.4

To safeguard our planet and our future, companies need to drive decarbonization, meet environmental regulatory requirements and compliance deadlines, and improve resource consumption. Those paving the way in sustainable business practices are embracing new business models to win customers, increase brand loyalty, and uncover new opportunities to lower costs.


Benefits of sustainability in business

Companies that conscientiously integrate sustainable practices into their operations are seeing valuable business benefits. These include:

Competitive advantage

55% of consumers say environmental responsibility is very or extremely important when choosing a brand.5 Being known as a sustainable business can improve your brand awareness and help you attract consumers that are favorably predisposed to companies actively engaged in sustainable practices.

Investor appeal

4 out of 5 personal investors plan to act on sustainability or social responsibility factors in the next 12 months.6 

Compliance with regulatory requirements

Governments will continue to expand regulations and corporate sustainable development goals (SDGs). Stay ahead of the curve by implementing sustainable solutions early on to meet these new regulatory requirements and continually capture, measure, benchmark and report on ESG performance.

Increased longevity of transformation investments

The COVID-19 pandemic has accelerated digital transformation in most companies. If that transformation is sustainable, you’re building a more resilient business that is ready for disruption and new opportunities.

Talent acquisition

Employees seeking purpose-driven employment want to work for sustainable and socially responsible companies. By building a reputation as a sustainable business, you can attract and retain the right employees for your company.

Revenue growth

By implementing sustainable practices that reduce resource consumption and optimize operational efficiencies, today's change agents become tomorrow’s winners as they improve their bottom line. While efforts that have greater overall impact may be more costly to implement at the outset, the long-term gains will justify the investment.


How to create a sustainable strategy

Early leaders in enterprise sustainability are applying digital technologies such as AI, IoT data, blockchain and hybrid cloud to help operationalize sustainability at scale. In the process, many are uncovering opportunities to increase efficiencies while creating more motivated, inspired employees and more satisfied, loyal customers. The key to a successful sustainability strategy is to balance environmental drivers with key differentiators and market demands. 

Step one to creating a sustainable strategy is to ensure stakeholders have a clear and agreed-upon vision for the future state of the business. This might require outside help to get everyone on the same page. IBM® Garage for Sustainability experts can help your organization identify top challenges and opportunities, prioritize critical actions, and measure outcomes against sustainability and business goals to realize results in weeks instead of months. 

Next, follow a timebound framework approach to implementing the sustainable vision across every aspect of your organization. Document everything in an environmental management system with defined roles, responsibilities and accountability. 

Finally, start with concrete initiatives that can generate tangible, measurable results and show value. This will demonstrate the value of sustainability in business to obtain more buy in, create momentum and scale. 


Corporate sustainability areas

Five key focus areas to plan a resilient and profitable path forward:

Climate risk management and ESG reporting

The past decade had the largest natural disaster impact on record. Organizations must factor the impact of climate change, which is causing extreme weather and climate events, into their business operations in a scalable and repeatable manner. Prepare for disruption with solutions that bring together multiple data sources, including proprietary, third-party, geospatial, weather and IoT data, with advanced analytics. Predict and plan for critical weather events to enable sustainable development and ensure business continuity. Reduce the operational costs and complexity of ESG compliance and reporting.

Resilient infrastructure and intelligent operations

Global challenges of climate change and environmental degradation, security, privacy and resource management require businesses ensure their infrastructure is designed and managed with resiliency in mind. By using intelligent asset management, monitoring and predictive maintenance organizations can extend the life of assets, reduce downtime and maintenance costs, optimize maintenance, repair and operations (MRO) inventories, reduce C02 emissions and eliminate waste. This will help them deliver against ESG goals with profitability.

Sustainable supply chains and circularity

Consumers are becoming more concerned about the traceability of the goods they purchase, and supply chain leaders are looking to invest in circular economies that encourage reuse. Blockchain solutions can provide greater supply chain visibility with up-to-the minute inventory views and performance insights that help build trust and transparency, assuring authenticity from origin to consumption while reducing waste and lowering cost to serve. Tackle complex Scope 3 emissions challenges by establishing product provenance, and minimize logistics-related emissions by optimizing fulfillment and delivery with advanced AI.

Electrification, energy and emissions reduction

Enabling clean electrification at scale will require leaders to come together in new ways to rethink how electrical systems operate and their role in a net zero GHG emissions economy. Drive the transformation to decarbonization by enhancing grid efficiency, safety, reliability and resilience with intelligent asset management for energy and utilities. By implementing smart metering to better understand actual resource usage, you can keep critical assets and resources operating at maximum efficiency, improve equipment operations, lower costs and enhance services through automation.

Sustainability strategy

Companies must embed sustainability into the fabric of their business to get the insights they need to operationalize at scale. This enables new business models and platforms to achieve sustainability goals, increase operational efficiencies, comply with regulatory requirements, expose innovation opportunities, and improve the customer experience while creating competitive advantage.


Challenges with sustainability in business

There are several challenges to overcome in the pursuit of becoming a truly sustainable business:

• Customer readiness. While the mindset around sustainability is shifting, no business can afford to be left behind, and few can financially afford to be too far ahead of the appetite for sustainable offerings. Co-creating a sustainable future requires a deep understanding of your customers and having partners with the right relationships and ecosystems to bring them along on the journey.

• Cost. Implementing sustainable business practices typically requires higher upfront investments. In the short term, it will often be cheaper to stick with the status quo. Some organizations will need help building an investment case to show how immediate investment will result in more durable profitability over the long run.

• Systemic inertia. While sustainability is an important goal, it often isn’t seen as more important than other key priorities that may provide benefits sooner. Many businesses plan in ten-year increments, so while a 2050 commitment is good, it often isn’t enough to drive sufficient action in this decade, from a planning standpoint. It comes back to reframing risks as opportunities and building the case that acting on sustainability now is necessary to achieving future sustainability in business.

• Lack of tools, insights and expertise. Being unprepared to develop a corporate sustainability vision, strategy and framework is a monumental risk. Companies may lack the ability to implement sustainable solutions or even know where to start. Sustainability in business is evolving and so are the answers. Every business needs an ecosystem of innovation partners to help them reinvent the world and create a sustainable future.


The future of sustainability in business

Insights from environmental data are changing business and societal behaviors, resulting in the emergence of the sustainable enterprise. Thus, sustainability in business is a megatrend that will continue to profoundly affect companies’ competitiveness and even survival in the market. Leaders are looking to harness the power of data, AI and blockchain to manage climate and environmental risk, optimize asset performance and resource utilization, drive decarbonization and build more sustainable supply chains.

IBM continues its own sustainability journey, including conservation and renewable energy procurement, CO2 emissions reduction, product and waste reuse and recycling, reduced water withdrawals, and sustaining critical biodiversity. By driving continual improvements and setting new goals for environmental sustainability across its operations, IBM’s 30 years of environmental leadership can help you build sustainability solutions that are good for your business, your brand, and our planet.

Read about the rise of the sustainable enterprise

Sustainability client stories


Related solutions

Sustainability solutions

Accelerate your sustainability journey by planning a sustainable and profitable path forward with open, AI-powered solutions and platforms plus deep industry expertise from IBM.


Climate risk management

Measure, monitor, predict and report on your organization’s environmental footprint while providing near real-time insights to accelerate sustainability initiatives and reduce impact to your business operations and supply chain.


Resilient infrastructure and intelligent operations

Incorporate sustainability considerations into your operations and create more resilient, sustainable infrastructure by extending their life with intelligent asset management, monitoring and predictive maintenance.


Sustainable supply chains

Reduce waste, cost-to-serve and logistics-related emissions by optimizing fulfillment and delivery with trusted supply chain solutions that are powered by AI, backed by blockchain, and built on an open, hybrid-cloud platform.


Electrification, energy and emissions management

Enhance grid efficiency, safety, reliability and resilience while streamlining maintenance and reducing outages with intelligent asset management and advanced climate and environmental intelligence for energy and utilities.


Sustainability strategy

IBM Garage for Sustainability experts can help you identify top sustainability challenges and opportunities, prioritize critical actions, and measure outcomes against business and sustainability goals to realize results quickly.



Citations
  1. Sustainability at a turning point” IBM Institute for Business Value, May 2021
  2. Meet the 2020 consumers driving change” Research Insights, June 2020
  3. The future of sustainability reporting standards” EY, June 2021
  4. ESG assets may hit $53 trillion by 2025, a third of global AUM” Bloomberg Intelligence, February 2021
  5. Meet the 2020 consumers driving change” Research Insights, June 2020
  6. Sustainability at a turning point” IBM Institute for Business Value, May 2021