Although investing in renewable energy and other sustainability efforts can benefit a business in many ways, you may want to make sure it’s the right decision for your company’s bottom line before going ahead.
In an effort to show corporate social responsibility, many investors push for the adoption of business sustainability strategies. But some businesses that are not prepared to make smart sustainability planning choices often see a decrease in market value according to a recent Harvard Business School study featured in this Greentech Media article.
The article makes a distinction between “material” and “immaterial” sustainability requests. The Harvard study explains how the Sustainability Accounting Standards Board (SASB) defines material: “SASB considers material issues to be those with evidence of wide interest from a variety of user groups and evidence of financial impact, the same evidence used by the SEC in determining the materiality of financial information.”
It goes on to explain how the companies they tracked who invested in what were deemed to be material sustainability issues performed substantially better than those who didn’t.
From the Greentech article:
“In 2015, Unilever evaluated 191 issues, grouped into 38 key topics. At the end of the process, the team identified 15 material issues (water, deforestation and sustainable agriculture topped the list), developed action plans, and updated its "sustainable living plan." Unilever’s approach is a textbook example of emerging best practices that focus on data-driven decision-making, communication and transparency.”
Many businesses are quick to react to potential improvements in ESG (environmental, social and governance) issues for all the right reasons. But growing evidence now suggests a relationship between high-performing companies and a strong sustainability policy—not just “a” sustainability policy.