A recent study undertaken at the Harvard Business School found that embedding sustainable business practices into an organisation not only helps society and the environment, but also the bottom line.
In analysing and comparing ‘high sustainability’ companies who have incorporated concern for environmental and social impacts and linked performance outcomes to success in these areas with ‘low sustainability’ firms; those that haven’t, Eccles et al. (2012) found that embedding sustainable policies into a company’s business model may be a source of competitive advantage in the long-run.
Analysis showed that the observed high sustainability companies with institutionalized socially and environmental responsible practices outperformed low sustainability companies in stock market returns over the duration of the 18-year study, and exhibited lower volatility whilst doing so.
High sustainability companies also had a more engaged workforce, better relationships with stakeholders, a more secure license to operate, more loyal and satisfied customers, greater transparency and a better ability to innovate.
The results of this study continue to undermine the long-held neoclassical belief that sustainability practices are a cost to businesses. Companies can adopt environmentally and socially responsible policies without sacrificing shareholder wealth creation, and in doing so, can better position themselves for success in the future.