Sustainability: Path to Profitability
Sustainability might also serve as a business approach to create long-term value to an organization’s operations.
Significant awareness of society towards environmental issues has led to emersion of new and growth of existing “Greentech” startups in the past decade. Increased corporate initiatives towards environmental sustainability also plays a significant factor as it is embedded as part of their business operations as opposed to merely being CSR-only initiatives. Pushing sectors ranging from waste management, renewable energy, energy management platform, carbon footprint, and sustainable solutions brand to emerge.
This trend is also supported by the increase in the volume of green bond issuance, especially in emerging market, with East Asia and Pacific region holds 76% of the total emerging market cumulative green bond issuance since 2012, while ASEAN countries issued a combined US$ 3.8billion in 2020, showing 8.6% increase from 2019.
Big corporates like Microsoft, Walmart, Amazon are on track in implementing sustainability technology standards, such as minimizing CO2 emissions and recycling product materials, among others. As for Indonesia itself, the Ministry of Energy and Mineral Resources will issue a new regulation regarding PLTS Atap (rooftop solar photovoltaic) that will have positive impacts towards renewable energy targets, investment in renewable energy, and policies to reduce greenhouse gas emissions. This regulation has a positive impact towards renewable energy targets, investment in renewable energy, and policies to reduce greenhouse gas emissions.
Sustainable Profitability
Many studies have shown that eventually, sustainability will become more than just an initiative, but also a business approach to create long-term value by taking into consideration the ecological, social, and economic environment aspects to an organization’s operations. Consumers, especially millennials, have also exhibited a strong interest in sustainable products. A study shows that about 90% of consumer’s put more value and trust into environmentally friendly companies more so than companies who are not so environmentally conscious.
A study in 2018 by Bank of America Merrill Lynch found that found that publicly traded firms with better ESG records have produced a higher three-year return compared to their peers, and are more likely to become high quality stocks, and rather less likely to go bankrupt. As quoted from the CEO of PT Bank OCBC NISP Tbk., Parwati Surjaudaja, Bank OCBC NISP has strengthened its commitment to keep customers’ trust and to environment by providing financing to support SMEs and sustainability. In 2020, Bank OCBC NISP signed a US$ 200million agreement with IFC for issuance of green bond and gender bond.
“The end justifies the means” may not be applicable for businesses that practice sustainability as the means may now as well justify the end. A businesses’ ethics and responsibility towards the sustainability of current and future communities will play a significant role in how the business will thrive and survive. As a result, we see sustainability becoming a dimension of corporate decision-making, just like cost, growth, or any other critical metric.