In the business of being green: is there really a business case for sustainability?
The ‘millennial’s moment’, a long anticipated generational shift has seen those aged 21 to 34 become the primary economic group in society. Now the world’s most powerful consumers, their preference for what they feel they can trust and associate themselves with has realigned the focus on corporate sustainability. As a result, businesses are increasingly looking at the idea of sustainability beyond the traditional capacity of cost reduction and instead, as a prime business imperative. However, is there really a business case for sustainability, especially at the SME level, and how can those smaller organisations compete with the ‘green giants’ who have capital to risk on large sustainability-first projects?
Those ‘green giants’ include the likes of Unilever and Target who have been able to leverage the dominance of their brand to drive sustainability in their supply chains. Launching ‘green’ product lines, both companies offer a strong business case for sustainability-led strategies. Targets’ ‘Made to Matter’ portfolio – consisting of 20 brands committed to addressing issues such as reducing waste through decreased packaging and ‘closed loop’ recycling – experienced 30% growth in 2015; 1.5x the normal growth rate for Target products. Likewise, Unilever’s ‘Sustainable Living Brands’ grew 46% faster than the rest of its business in 2017 and accounted for 70% of the company’s turnover growth.
It’s a trend that’s still in its infancy but one that has been propelled by the ‘coming of age’ of the world’s millennials. An investigation into corporate social responsibility by market research company Nielsen shows that millennials are the greatest drivers of sustainability in business. They are prepared to pay more for sustainable products and the most likely to check product labelling for positive social or environmental impact than any other generation before or after them.
The generational ‘power shift’ has provided market conditions ripe for sustainability focused businesses, but are small to medium sized enterprises capitalising on it in the same way as their larger counterparts? Wear2, a technology company come textile innovator has developed a decomposable fibre for clothing seams that can be unpicked when exposed to microwave radiation. Using this technology, clothing manufacturers can easily disassemble garments and repurpose old material for future use so that it doesn’t need to be deposited in landfill. Perhaps then, the supply chain is an effective route into the sustainability-focused market for smaller organisations that enables them to work alongside the larger brands instead of competing against them.
It’s something that natural beauty company Faith in Nature is utilising alongside direct customer sales. Millennial’s gravitate towards local and original – a key ingredient in Faith in Nature’s brand DNA and story. The company was founded in the 1970’s but it’s in the last five years that it has seen the most significant growth, doubling in size and securing listings with Booths, Holland & Barrett and Superdrug – a testament to the shifting buying behaviour of a new generation of consumers.
That’s not to say that cost-cutting by sustainability is an outmoded approach. Wyke Farms is one example amongst many of an organisation that reduces its costs through green practices, saving itself £100,000 a year on energy bills by sourcing energy from solar panels and biogas. What is clear however is that it’s no longer the only approach to viable green business strategies. According to a global study from Unilever, 33% of consumers choose to buy products from brands they believe are doing social or environmental good. What’s more, the study found that one in five consumers would choose brands if they made their sustainability credentials clearer on their packaging and in their marketing. It’s a trend that chimes with perceptions on the business side. A survey from Censuswide of a 100 CEOs across a range of UK SMEs, found that 43% believed the adoption of ethical business practices would boost their customer base.
Sustainability is therefore no longer an ‘optional risk’ solely for larger firms to consider, but a sound business strategy that can boost growth and profitability of organisations large and small. Millennial purchasing behaviours favour organisations who share the same values as them and who can demonstrate sustainability efforts, making the matter of size redundant and levels the playing field for smaller firms to compete with larger ones. Ultimately, being in the business of being green is not about how you can save money but about how you can make more of it.