In my role, I often get involved in discussions about the correlation between sustainability versus profitability. Following, I describe my thoughts and main advice on the subject. At the end of the article, you can download a presentation, where I share the three things I would prioritise if I were CEO at a manufacturing company.
I continuously read and hear about reasons why companies need to become sustainable from an environmental perspective. For example, we are currently consuming 1,75 more resources than the planet can regenerate per year. However, my experience is that it's not very common among CEOs that the environmental arguments are the fundamental driver to becoming a sustainable business.
The main responsibility among CEOs is to maximise the value for the owners. Traditionally, many CEOs have done this by creating high-quality products at a low cost. To preserve margins, many did not look at sustainability as an option when maximising the value for owners.
During the last years, market conditions have changed rapidly. Today, all CEO's that strive to maximise the value for the owners need to make sure their companies are sustainable. Below, I have summarised three arguments on why sustainability needs to be a top priority from an executive management perspective.
The growing demand for improved sustainability from people and society forces you to design and manufacture sustainable products in a sustainable way. If you don't respond to this demand, there is an apparent risk your products will become neglected.
As a natural consequence of the increased demand for sustainability, there is a growing number of sustainable companies. If you do not keep up with competitors today, you run the risk of falling behind.
In most industries, there's still an open position to become a leading sustainable company. The primary key to take the open position is to become both sustainable and profitable.
Let's face it. Most of us are aware of why companies need to become sustainable and minimise their carbon dioxide footprint. Still, many companies are hesitant whether they can keep profitability while becoming more sustainable. We all know that profitability is necessary for all companies to survive and maintain growth. Fortunately, you can combine the two and create a profitable and sustainable company.
The math is simple; profit equals revenue minus cost. If you make the right sustainability investments, you can both reduce cost and increase revenue. In other words, sustainability equals profitability.
The math is simple; profit equals revenue minus cost. If you make the right sustainability investments, you can both reduce cost and increase the revenue. In other words, sustainability equals profitability.
Sustainable solutions can be very cost-effective. For example, decreasing waste is a great approach to cut your disposal costs.
Based on the increased demand for sustainability and the opportunity to take a leading position, there is an excellent chance of expanding market share by becoming a sustainable company.
I am pleased to see how sustainability slowly is becoming an essential topic among owners and decision-makers. A while ago, a CEO at a manufacturing company asked me what I would prioritise if I took his role. The question got me thinking, and I have summed my answer in a PowerPoint presentation, which you can download below.
I hope you'll find it useful, and feel free to re-use it internally when discussing how to think about sustainability versus profitability.
Fredrik Pettersson is CEO of Stena Recycling since 2019. He has many years of experience from the process industry as well as from business and market development, most recently as CEO of the Nordic region's leading producer of aluminum through recycling, Stena Aluminum.