The “why” of sustainable business


Here is a note from Nawar Alsaadi:

Here are the four key slides out of the thirteen I presented at IFRS Sustainability Symposium. These four slides cover four consequential research papers demonstrating the relationship between ESG/sustainability performance and financial performance.

I didn’t choose these studies randomly. These studies capture the three key dimensions of sustainability value creation: New business generation (slide 1 ), risk mitigation (slide 2, 3), and cost reduction (slide 2, 4).

The discussion around sustainability integration in business and the investment process needs not be moral or political. By understanding the linkages between sustainability and value creation we can build bridges between mainstream investment/business professionals, and the sustainability community.

ESG/Sustainability professionals who express frustration by the lack of buy-in for their initiatives by their superiors need to dedicate a significant effort to identifying, narrating and quantifying the business case for their initiatives. I promise you that the business case is there, all you need is to connect the dots.

Sustainability benefits such as those to reputation are often cited as hard to explain and justify. Any yet, S&P 500 companies are sitting on over $4 trillion dollars in “goodwill” much of it is tied to reputational value.

A 2021 paper by California State University and the University of Wisconsin observed a positive relationship between improved firm reputation and better risk adjusted investment returns:

“𝘞𝘦 𝘧𝘪𝘯𝘥 𝘢 𝘱𝘰𝘴𝘪𝘵𝘪𝘷𝘦 𝘳𝘦𝘭𝘢𝘵𝘪𝘰𝘯𝘴𝘩𝘪𝘱 𝘣𝘦𝘵𝘸𝘦𝘦𝘯 𝘧𝘪𝘳𝘮 𝘳𝘦𝘱𝘶𝘵𝘢𝘵𝘪𝘰𝘯 𝘢𝘯𝘥 𝘳𝘪𝘴𝘬-𝘢𝘥𝘫𝘶𝘴𝘵𝘦𝘥 𝘪𝘯𝘷𝘦𝘴𝘵𝘰𝘳 𝘳𝘦𝘵𝘶𝘳𝘯𝘴. 𝘈𝘴 𝘨𝘳𝘰𝘶𝘱𝘴, 𝘤𝘰𝘮𝘱𝘢𝘯𝘪𝘦𝘴 𝘳𝘢𝘵𝘦𝘥 𝘌𝘹𝘤𝘦𝘭𝘭𝘦𝘯𝘵 𝘢𝘯𝘥 𝘝𝘦𝘳𝘺 𝘎𝘰𝘰𝘥 𝘪𝘯 𝘵𝘩𝘦 𝘏𝘢𝘳𝘳𝘪𝘴 𝘏𝘘 𝘗𝘰𝘭𝘭 𝘰𝘶𝘵𝘱𝘦𝘳𝘧𝘰𝘳𝘮 𝘵𝘩𝘦𝘪𝘳 𝘣𝘦𝘯𝘤𝘩𝘮𝘢𝘳𝘬 𝘚&𝘗 500 𝘐𝘯𝘥𝘦𝘹 𝘰𝘯 𝘢 𝘳𝘪𝘴𝘬-𝘢𝘥𝘫𝘶𝘴𝘵𝘦𝘥 𝘣𝘢𝘴𝘪𝘴 𝘢𝘤𝘳𝘰𝘴𝘴 𝘢𝘭𝘭 𝘧𝘰𝘶𝘳 𝘮𝘦𝘵𝘩𝘰𝘥𝘴 𝘰𝘧 𝘳𝘪𝘴𝘬-𝘢𝘥𝘫𝘶𝘴𝘵𝘮𝘦𝘯𝘵 𝘶𝘴𝘦𝘥 𝘪𝘯 𝘵𝘩𝘪𝘴 𝘴𝘵𝘶𝘥𝘺.”

It is part of our job as business sustainability professionals to understand, communicate, and elucidate these relationships to this business community. This is critically important because if businesses understand the business “why” of sustainability, they will be far more open to understanding and investing into the “how”.

Sustainable business professionals have an incredible story to tell. Let’s go out there and tell it!