This is an original article written by Haziqah and edited by Global Initiatives.
Customers want more sustainable products.
In recent months, you may have heard a lot of buzz around businesses “going green”. But what exactly does “going green” even mean? Among customers, they are demanding for more sustainable alternatives and eco-friendly brands – and their voices have only been getting louder.
Businesses hear them and are paying closer attention as consumers are choosing to associate themselves with sustainable companies.
Front-page news headline or business strategy?
It seems these days that everyone is jumping on the sustainability bandwagon. However, despite more than 80% of consumers favouring brands that adopt eco-friendly practices, the actual turnover rate of Singapore businesses incorporating these “green” strategies have been much lower. Furthermore, compared to the global average of 74%, only 64% of Singapore firms have concrete green policies in place.
Singapore claims to be a leading sustainability hub, retaining traits of “liveability” and “sustainability”. However, why haven’t these traits been well reflected among our business communities?
Going green: Does it make cents (economic ‘sense’)?
In recent years, companies have started to initiate a plethora of simple green initiatives. For example, paying an extra 20 cents for using a plastic bag at the grocery store as a bid to incentivize consumers to choose responsibly and sustainably. These measures are motivated not only by green governmental priorities, but just as importantly, the preferences of a more sustainability-conscious consumer base.
In fact, surveys conducted by Harvard Business Review and National Climate Change Secretariat found that younger consumers, especially millennials, are notably more aware of green issues. Arguably, with millennials set to be the next generation of young investors, businesses and brands that are in favour of and exemplify tangible efforts towards environmental and social causes will be receiving considerably more support.
Companies willing to invest in sustainable businesses strategies therefore stand to gain a competitive advantage by following the shift in consumer behaviour.
In a poll done by Morgan Stanley, it was found that three-quarters of individual investors were interested in sustainable investing, with just a slightly smaller percentage believing that a focus on environment and social goals will translate to better returns for companies.
Harvard Business School’s study proved this worry to be for naught.
|Motivation of the Invested-In Firm
||20 years later
- Focused on environmental and social responsibilities
- Associates business growth with important environmental causes
(twice the amount of returns!)
Suppose that you invested $1 some 20 years ago – in a portfolio of public companies driven purely by business growth – the value of that dollar would grow to $14.46. In contrast, if that same dollar was invested in a portfolio of companies cognizant about environmental and social responsibilities simultaneous to their business growth, the value would have grown to $28.36. This is twice as much in returns!
Cost-saving and income-generating?
Unfortunately, a BCG/MIT study found that only 24% of companies regard sustainability as a competitive advantage. Many regard it as something “nice” and not a “must”, throwing it out once it proves too difficult. However, sustainability shouldn’t be regarded as something that is “nice to have” or chucked aside once proven to be too difficult to integrate into existing business frameworks. In fact, with mega companies like Unilever hopping onboard the sustainability agenda, there is cause to contemplate sustainability as a worthwhile business strategy.
Achievements from Unilever’s efforts (compared to 2010) Source: Unilever
Other big companies such as Apple have been cutting energy costs through their use of solar panels. Since the switch to using renewable energy, their shares have increased by 1.92%. It has proven that investors favour companies that prioritise corporate social responsibilities.
Closer to home, RedMart has chosen to make eco-friendly products under the company’s label more affordable than other known brands. While promoting a green cause, this offers RedMart a competitive advantage over other E-Commerce platforms as a differentiating business model for their customers.
It is inevitable that a revision of existing less sustainable business practices will involve an initial cost. But it is more important for companies to look at economic returns in the long term, and the savings are extensive. Switching to LED lights, for example, while initially more expensive than incandescent bulbs, actually lasts 40 times longer and uses only one-tenth of the energy. This translates to savings on the energy bills and cheaper options in the future.
Are our local (Singapore) businesses doing enough?
Despite Singapore ranking high within ASEAN on business sustainability reporting and disclosure, globally there is still PLENTY of room for improvement. This is in spite of the vast majority of Singaporean firms (88%) being cognizant to the importance of sustainability strategies.
Remnants of prejudices attached to a transition towards sustainability may explain the low acceptance and slow shift of local companies.
A survey done by HSBC highlighted a disinclination to use sustainable policies such as sustainable financing due to a higher possibility of encountering obstacles and the cost difference. Statistics show that while Singaporean firms are aware of green financing, 64% of them do not partake in it – a larger proportion than the global average of 58%.
The current sentiment persists that sustainable financing doesn’t make financial and commercial sense despite studies and statistics proving otherwise. These perceived barriers seem to be transferable to other sustainable strategies.
What needs to be addressed, then, are the perceptions of businesses in Singapore with regards to the challenges of sustainable financing as well as other green strategies.
The climate crisis does not discriminate.
Although Singaporean businesses are increasingly aware of shifting trends and the importance of sustainability, this green transition is still yet to be universally accepted here. While businesses have already begun adopting greener measures, more work remains to be done for business environmental consciousness in Singapore.
The current climate crisis does not discriminate. Every business will be impacted. But what differentiates a firm from survival and failure is dependent on their adaptability and resilience in taking the necessary steps to prepare for uncertainty.
Sustainability can no longer take lower priority in business strategies, policies, and frameworks. It is time for all businesses to lead the change it wishes to see.