Fundamentals

5 Reasons Why Your Company Should Become Carbon Neutral

Climate change and climate action can often evoke slightly negative associations as we are constantly surrounded by devastating news of glaciers melting and pollution scandals. While it can be difficult to keep a positive attitude, there is actually a lot of positive news to share as more and more companies take climate action and become carbon neutral – and they benefit from doing so in many ways. There are many sustainable solutions that your company can easily put in place to help fight this battle step by step – after all, sustainability is a journey.

We would like to help you understand the short and long-term benefits of taking climate action and becoming carbon neutral. In this article, we have outlined 5 important reasons to help convince your company to start this journey towards carbon neutrality.

5 Reasons Why Your Company Should Become Carbon Neutral

1. Employees are looking for employers that think and act sustainably

The current generation of top talent is evaluating potential job offers also based on a company’s environmental and social sustainability engagement. Our customers also report that they are increasingly asked in job interviews whether the company is committed to sustainability and is carbon neutral.

Deloitte recently revealed that Millennials seek meaningful work and want to have positive social impact. Two thirds of them are reluctant to take a job if an employer does not have a strong corporate social responsibility (CSR) agenda. They would even rather accept a lower salary than work for a company that is not environmentally responsible. Some would even go as far as to agree to a pay cut of between 5,000 to 10,000 US dollars.

As Millennials will account for 75% of the global workforce by 2025, employers have to understand their needs and align their company strategy accordingly in order to continue to attract and retain top talent.

The good news: a variety of companies have already set great examples here that you can follow. One of them is Unilever which has launched a new business initiative called ‘Unilever Sustainable Living Plan’ which enables them to successfully engage all employees into their corporate sustainability efforts. Other examples include Starbucks who make a point to train their employees about the company’s four main sustainability programmes: recycling and waste reduction, climate change, water and energy conservation, and LEED certification for stores.

2. Customers are showing a growing preference for carbon neutral brands

Environmental concerns have also increasingly influenced buying decisions of customers, leading to a fundamental change in consumer and buying behaviour: today, customers demand more than just quality. They are looking for brands that align with their personal values and operate transparently.

Today, many customers are more willing to change their consumer relationships: In fact, of those that feel sustainability is an important issue, 70% would be willing to pay a premium of 35% for brands that are sustainable and environmentally responsible. In this context, companies who thrive are those willing to adapt their strategies. Not only will this help them attract customers, but they are also more likely to gain competitive advantage.

Patagonia has become the pioneer of sustainable fashion retail, as they use 100% organically grown cotton and 72% of the products are made of recycled materials. Furthermore, they have implemented The Worn Wear Campaign which educates and encourages customers to repair their clothing by themselves and avoid rebuying other products. These initiatives have proven to be effective, considering Patagonia has managed to gain a large customer base and generates nearly $800 million in annual revenue.

We can observe similar increasing transparency demands within the B2B space with 50% of buyers monitoring the environmental and social performance of their suppliers and business partners. In addition, a large proportion of businesses (73%) already include a sustainability clause in their procurement contracts. Microsoft, for example, released a detailed code of conduct that requires suppliers to disclose their carbon emissions. The tech company wants to continuously reduce not only its own carbon footprint but also that of other players in the industry.

3. Incorporating sustainability into your business lets you grow your topline and manage your costs

Companies often debate whether sustainability “undermines or improves financial results”. According to research by non-profit organisation CDP, companies who diligently plan and manage climate change are able to gain an 18% higher return on investment than businesses that did not. Additionally, companies have seen their sustainable products grow 5.6 times faster than non-sustainable products.

On top of that, McKinsey has found that focusing on environmental, social, and governance (ESG) objectives can reduce costs substantially, for example by helping to combat rising operating expenses (such as raw material costs and the true cost of water or carbon). Energy efficiency, for example, can drastically reduce energy costs, delivering an internal rate of return (IRR) of 48% on average.

Case in point: Unilever, for example, disclosed that their sustainable brands – such as Ben & Jerry’s or Dove – have grown 46% faster than other brands from their portfolio and thereby generated 70% of the company’s turnover growth. Since 2017, 109 of Unilever’s manufacturing sites in over 36 countries have used 100% renewable grid energy which accounted for 65% of their total grid electricity consumption.

Unilever effectively demonstrates that companies incorporating sustainability into their values and business operations, do not only save costs but are able to make a profit from it and thereby gain a competitive advantage.

4. Investors are looking for businesses who are future-oriented and not afraid to move first

In addition to companies gaining a competitive edge in their industry, businesses will also have to make themselves noticeable to investors looking for future-oriented and innovative business models.

Despite the long-standing belief that sustainability and environmental efforts interfere with the wishes of shareholders and are unprofitable, examples show that the topic is already top of mind among investors. Large companies such as BlackRock Investments have shifted their investments, thus reflecting the changing preferences for investors. At the beginning of 2020, BlackRock CEO Laurence D. Fink announced that sustainability is now a core component for investment decisions.

Global sustainable investments have now reached a high of $30 trillion which is an 68% increase since 2014. BCG found that when companies focus on environmental, social and governmental (ESG) objectives, it has a long-term impact on the companies’ financial success. Nonetheless, they also observed that, so far, only some companies were prepared to profit from more sustainable investors: Even though 90% of managing directors view sustainability as a critical component of their strategy, only 60% have implemented sustainable measures, and only 25% have incorporated it into their business model. This is a great opportunity for you as a company to be a first mover in your industry.

5. It’s only a matter of time until climate-focused regulations will heavily impact the way you conduct business

Climate-focused regulations are changing and will bring benefits for companies that incorporate sustainability into their business practices. While some companies can still voluntarily disclose information regarding their sustainable initiatives, non-financial reporting is already mandatory for many companies. The EU law, for example, requires large public-interest companies with more than 500 employees to disclose information on the social and environmental impact of their activities.

We can expect more regulations moving forward as there is growing pressure from within companies as well as from governments and other external shareholders to make it mandatory for even more companies to implement and be accountable for sustainable practices.

It is, therefore, truly important that businesses prepare for mandatory environmental reporting rules, especially for publicly listed companies as they will be among the first ones to be subject to disclosure regulation. Companies need to stay ahead and be aware of the rules, as it is also crucial for maintaining a competitive advantage. Apart from that, failing to stay on top may result in penalties and potential legal issues.

Sustainability is a journey

Climate change can appear intimidating and overwhelming, yet we hope to have eased your mind and helped you understand what benefits your company can gain from going green. Not only will you save time and costs, but you will attract a loyal customer base and top talents of the next generation. This is a great opportunity to be the pioneer within your industry, to take that bold step and gain that competitive advantage. Becoming more sustainable is a journey and now is the best time to get started.

You would like to lead your company into a carbon neutral future? Planetly can support you on this journey, helping you to introduce and automate your carbon management, from data collection to reduction strategies and offsetting measures.

Reach out to us to get started: hello@planetly.com.

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