Globally, corporate leaders increasingly agree that good sustainability is simply good business and recognise the value sustainability brings to the organisation.
Considering the interests of parties concerned about a company's impact is one way of better anticipating and managing risk.
Companies that perform well in sustainability are able to enhance their reputation and build goodwill with the public and non-governmental organisations. Conversely, companies that ignore sustainability or those that do not perform well can damage their brand and reputation.
Greenwash is a term used to describe companies that may not operate in a sustainable manner but brand their products and policies as environmentally-friendly in order to gain a competitive advantage. Amongst key traits observed in greenwash reporting include:
In an increasingly intense war for talent, good sustainability practices by companies increase differentiation and have the potential to attract and retain employees and foster greater productivity.
In January 2009, a Gen-Y survey by PricewaterhouseCoopers Malaysia found that 77% of Gen- Y's in Malaysia said they would consider leaving an employer whose social responsibility values were no longer in alignment with their own.1
Companies that adopt sustainable practices have also reported increased cost savings through areas such as reduced energy use and raw material wastage, and lower waste disposal costs.
Companies who undertake sustainability activities may be eligible for tax deductions, tax exemptions and other tax benefits depending on the qualification criteria. The Malaysian Government has introduced various tax incentives to encourage more sustainable practices, e.g. pioneer status and income tax exemption of 100% for generation of energy from renewable sources and energy efficiency activities until 31 December 2015.
Financial institutions are increasingly incorporating social and environmental criteria into their assessment of projects and general lending. When making decisions about where to place their money, investors are looking for indicators of sustainable management in companies in response to pressure from their own stakeholders to finance more environmentally and socially acceptable projects and businesses.
Engaging stakeholders and drawback from a diverse audience can be a rich source of ideas for new products, processes and markets. Demand for more energy or resource efficient products is driving innovation, and companies that respond best have a market opportunity.
With increasing focus on labour and environmental issues in global supply chains, a Malaysian company that is certified to environmental and social standards may be a more attractive supplier to particular retailers in Europe and the US, for example. A sustainable supply chain will also increase foreign viability. The history of good business has always been one of being alert to trends, innovation and responding to markets. Mainstream advertising increasingly features the environmental or social benefits of products.
Some companies adopt sustainability to differentiate themselves from the competition. These companies offer more sustainable products and services to their customers, whether it is by sustainable sourcing, products free from animal testing or offering future savings during the lifetime of the product.
Good sustainability can help companies build "social capital". Improved community understanding of the company, its objectives, and its people can help build stronger links with society, e.g. reduction in crime, higher retention rates and reduced disruption to operations.
There is increasing regulation related to employment and environmental management. Maintaining and improving relations with governments and regulatory stakeholders could support a company's reputation, especially so for those looking to expand their operations overseas. Strong management of sustainability will help companies in maintaining their license to operate through enhanced trust and demonstration of responsibility.
1 PricewaterhouseCoopers, "Malaysia's Gen-Y Unplugged", 2009