Can Sustainable Business Be Profitable?

Jan 22, 2020

6 min read
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Trends in business come and go at the speed of a hashtag, however, it seems like business and sustainability as a couple are not going anywhere anytime soon. The hype about sustainability in business has been building up for years and it’s about to reach its zenith. With Greta Thunberg being TIME’s person of the year we should clearly expect that activists and institutions are going to put even more pressure on companies to go green in 2020.

Nevertheless, businesses, whether large or small, seem to not be ready to accept the fact that sustainability is the future. Not surprisingly, their biggest concern is whether sustainability in business is profitable. Some reports confirm that a staggering 35% see financing as a barrier to make their business more green. Another research confirms that while 60% of companies have a sustainability strategy, only 25% have developed a clear business case for their sustainability efforts.

It turns out that we are all more concerned to keep our pockets filled rather than to prevent our planet from collapsing. But here the question imposes itself: Is it really true that sustainability is not profitable? Or are we just demonising it because we’re scared of change and accepting science facts?

Is sustainable business profitable?

Truth is, heading down the green road will impose additional costs on your firm. 

Enterprise League member and Founder of Fabric For Freedom, Esther, points out certificates are really burdensome for the budget of a small enterprise and they can rarely afford them. So even though she’s been working hard to make her supply chain sustainable, the price of the certificates are still too high for her to get them.

Furthermore, replacing old equipment with eco-friendly alternatives, switching to a sustainable energy power and ditching non recyclable packaging materials are just a small portion of the costs coming with sustainable business practices. 

Then again, MIT research shows us the assumptions that, sustainability is not profitable, are wrong:

  •  37% of businesses are reporting profit from sustainability
  • Corporations that actively plan with climate change in mind secure an 18% higher ROI than companies that don’t.

Additionally, Oxford University and Arabesque Partners have concluded that companies that have adopted sustainability practices have better cash flows and ROI.

So can sustainable business be profitable? Yes, it can. In the long term, sustainable businesses should expect better financial performance than those resisting to evolve.

Under what conditions can a business activity be both profitable and sustainable?

According to Rebecca, the Founder of Conscious House London, you have to pick your battles in terms of sustainability. One cannot fight on all fronts and expect to stay above the water, at least not for now. 

Correspondingly, Marianna, the Founder of Flair Atelier goes on to give us an example of how this should work in reality: “One of our clients work in swimwear and their priority is to care about water and then once this is achieved they can continue on the next one.”

This step-by-step process is due to the outdated system that still favours non-sustainable business. Governments and institutions are still behind with implementing strategies and creating laws and regulations that will help businesses go 100% sustainable without risking to run out of money. The system needs a change and it must come from inside out and on a global scale.

Fashion: Sustainable Business Practices

Since the fashion industry has one of the biggest impacts on climate change and environmental sustainability we feel it’s our duty to ignite discussions that will help change come faster. That’s why our Founder Irina, together with our Enterprise League member and Koua founder Erika, hosted an event in Mayfair, London, tackling many questions arising about this issue. 
 

Pictured left to right: Rebecca Dallimore, Irina Georgieva, Marianna Ferro, Erika Alvarez, Sabinna Rachimova and Esther Knight at the Entrepreneurial Breakfast meeting organised by Enterprise League Founder Irina and Koua Founder Erika in Mayfair, London

As Marianna put it “Fashion and sustainability is a complicated balance. We need to change the way we consume fashion. At the moment there is a huge desire to buy the novelty as soon as possible. Conscious brands are suffering in profits especially when due to sustainability they are missing out on sales like Black Friday and similar.” 

It is evident that the biggest adversaries to sustainability are actually the large fashion houses. Although, we’ve noted some progress in that field in the past few years. For example, Vivian Westwood, the brand Esther worked for, is focusing on overall sustainability in fashion, and especially environmental.

When asked how to make your business sustainable, especially in fashion industry Esther was firm in her opinion that sustainability and profit can go hand in hand if enough effort and thought is put into it: 

“It [can be profitable]. A lot of people don’t think so, a lot of people go into business with the mindset ‘profit first’. However, if we didn’t have the same margins as we do in fashion (70%) meaning when we go into sales we still make profit. If we scrub that whole model, where things don’t go on sale and we scrub the 70% margin which doesn’t have to be on all products and we work together on a production line to reduce the cost of that, there are methods to make this profitable. Not being profitable is just an excuse. You have to have a 360 approach to sustainability whilst understanding that it’s not 100% possible and work on the parts that you think are important to you (whether social or environmental).

The verdict about sustainability in business

Marianna had the right words to end the discussion about sustainability in business:

“Sustainability and Greenwashing is everywhere and we should rethink our usage of sustainability as a buzzword. ‘Conscious’ is alright for now.”

While your business can’t be 100% sustainable because of obvious reasons, it can be conscious if you continually put an effort towards making it greener and less hazardous for our environment and society. Like we said before, we have to pick the right battles.

As for profitability, steps into sustainability usually require a one-time investment which ultimately results in good ROI and cash flows. It will press your budget initially, but will also open door to new opportunities in the long run.

You can start being more conscious with steps as simple as changing light bulbs. The important thing is to start and continuously keep improving.

“You must be the change you want to see in the world.” – Gandhi

P.S. If you want to attend such events in future, please reach out to us. Many hot topics are about to be brought on the table.

 

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