Why are there still many companies that do not apply any sustainability practices?
If being sustainable brings profitability to businesses
Sustainability is a hot topic in business. We are at a turning point where companies can no longer ignore the impacts of business on the environment. However, there is still tension between businesses and the environment.
Many companies, even the largest, most destructive ones, will purport to have sustainability initiatives. Some people suggest increased profitability from sustainable practices, while others doubt the truth in this concept.
Environmentally conscious practices conflict with a business model that puts profits over everything. Sustainability as an economic trend is much more complicated than telling your consumer you recycle and them, in turn giving you all their money.
The past 150 years of industrial capitalism have placed profits over everything. A company values profits, thus all actions it takes will work to ensure profitability. Profit-first models have destroyed communities, human health, and the environment.
There is no question that industrialization has dramatically impacted the environment, from carbon dioxide and global warming to the destruction of wildlife. We are still entrenched in profit-driven capitalism, even as companies state their commitment to the community and environment.
All efforts to show Corporate-Social Responsibility are shallow, used to convince the consumer that the company has values other than profit.
The sustainability-profitability correlation
As environmentally sustainable business practices become more popular, many have tried to prove that sustainability can bring profitability. Consumers are demanding more ethical products, which companies produce to meet that demand.
If a company can be sustainable-or at least appear to be-then consumers will buy the product and the company will have a net profit. Unfortunately, this theory is hard to prove, as sustainability cannot easily be defined, and consumer demand is not so black and white.
If an ethical consumer learns that the glass cleaner they use in their home comes from a massive corporation that destroys the environment, the consumer may stop using the glass cleaner. They may choose to use a glass cleaner from a smaller company with stronger environmental values.
The large corporation may see a drop in sales of this cleaner and create a campaign to show how sustainable this company is. This campaign could dissuade the ethical consumer from switching brands, and thus the multinational corporation keeps their consumer base loyal.
While there is a growing demand for sustainable and ethical products, we are not yet at market saturation. Billions of people will continue to buy unethical products. For every ethical consumer, there are millions of consumers who will buy anything. The shift from unassuming to an ethical consumer is also convoluted.
Many consumers face other pressures, such as price or accessibility, that limit their ability to buy ethically made products. Large corporations know this and thus continue to sell the same destructive products they always have.
The largest 100 companies in the world do not have dire financial pressure to become “sustainable.” The power these companies have, as well as their hold on the market and consumer loyalty, will allow them to continue to profit without sustainability. People will still buy their products.
These large corporations are also more likely to greenwash their products, convincing the public that they have always been environmentally friendly.
Barriers to sustainability
Smaller companies choose to be less sustainable because of the upfront costs of ethical production. Labor, materials, production, and shipping are more expensive and business owners may be unfamiliar with the sustainable and ethical techniques.
A company may want to transition to solar, but they cannot afford the upfront cost. If they do not see a direct profit from installing solar, then they will not take the chance. Sustainability is difficult to achieve, and many businesses do not want to complicate their business any further. Sustainability, while important to the health of our earth, is not an obvious or easy choice to make as a business owner.
Different sectors may benefit from sustainability more than others. Health and beauty products have a higher demand for natural and sustainable products, and thus sustainability is more correlated with profitability. Other industries do not face the same consumer pressure, and thus will not see increased profitability through sustainability.
Many industries are moving, albeit slowly, towards sustainability, but not in an extreme way. It is a risk few are willing to take. The consumer base for sustainable products is still small. For a sustainable business to be as profitable as its counterparts, it must be well situated. Affluent, educated, left-leaning, and otherwise privileged people are the primary consumers of sustainable products.
If we ask a profit-driven company to apply environmental and ethical values to their business model, we are asking the company to act against their values. Sustainability will become a necessary trait in the future, but there is a lack of pressure currently.
Some advocates would say that sustainability may not be immediately profitable, but in five to ten years, there will be a significant return on investment. Small businesses may not have the flexibility or risk tolerance to wait that long. Larger businesses may not invest in future sustainability because they are not yet feeling the pressure to change.
Sustainability is defined by prosperity for both the current generation and all generations to come. This is not a trade-off profit-driven businesses are inclined to take.
In the end, the tension between environmental sustainability and profitability is about values. Business owners will value profits over risking the investment into sustainability. If sustainability is not part of their values, they will not choose to act accordingly.
While climate change is threatening all life on earth, there is no immediate pressure for businesses to change their practices. The profits we see are driven by trends rather than facts.
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