Summer heatwaves, melting glaciers and catastrophic forest fires in Australia and Europe. The climate crisis has arrived. We know the path we must take to halt rising temperatures. We need to stop producing greenhouse gases and burning fossil fuels.
Operating sustainably is no longer only a question of moral stance. It is also a competitive advantage from an economic point of view. Better conditions on the financial market. Cheap, renewable energy instead of unpredictable oil and gas prices. A better image among employees and consumers. Sustainable businesses help to preserve our planet and contribute to a secure, green future.
There are several solid economic arguments which show that sustainability pays off. Here are eight reasons to move your business toward sustainability:
1. People are happy to work for sustainable companies
People value meaningful work. Sustainable companies have a clear advantage when searching for a talented workforce. A recent Stepstone survey in Germany found that one in two employees looks for a sustainable company when job searching. 76 percent of respondents say it is essential that sustainability is a high priority at their company.
2. Consumers prefer to buy sustainable products
Consumers are moving sustainability criteria to the center of their decisions. To satisfy customers, companies need to offer sustainable, fair and environmentally friendly products. Some important factors are regional production, low CO₂ footprint, organic quality and fair working conditions.
3. Sustainability criteria become part of competitive tendering processes
In the B2B sector, suppliers are increasingly being assessed for their sustainability. In tenders, it is often no longer only relevant who produces the cheapest. Sustainability criteria come into play. Supply chain laws in Germany and Switzerland further reinforce this development. Companies that are in the supply chain for a B2C product are coming under scrutiny. This is because 80% of climate-damaging greenhouse gases are produced in the supply chain. To make a product greener, companies are looking for green suppliers.
4. Sustainable companies get funding more easily
The number of shareholders focusing on green investments is increasing — and so is the pool of potential investors. Countries give priority to green investments and favor them fiscally. In the future, this will be regulated in an uniform manner by the EU taxonomy, which has set a goal of creating clarity as to what counts as a green investment.
5. Insurance companies increase rates as a result of environmental risks
Investing primarily in activities harmful to the climate can have extensive consequences. Financial service providers and insurance companies are already excluding entire industries or encouraging them to withdraw from their climate-damaging activities. If they do not withdraw within a given time frame, the funds are cut. Currently, this is happening in the coal industry. There is a clear advantage for climate-friendly companies. These can secure financing faster and on better terms.
6. Renewable energies enable companies to become independent of the unpredictable global oil and gas market
Fossil energy sources are often imported from countries with authoritarian regimes. This represents a financial risk. Diplomatic disagreements or even wars have a direct impact on the energy source prices concerned. Europe is becoming painfully aware of this as Putin's war in Ukraine is rising energy prices. A supply of renewable forms of energy ensures regional production and weakens dependence on the international oil and gas market.
7. Saving CO₂ emissions saves increasing amounts of money
In recent decades, the market has not reflected the environmental and climate damage. However, this is now changing. European emissions trading, which covers about 200 energy-intensive companies in Austria, is picking up speed. The costs these companies have to pay for annual Co2 emissions have increased by 163% since Jan. 1, 2021. This increases the incentive to switch to climate-friendly, energy-efficient production. In addition, CO₂ prices and taxes are being established. These will have similar steering effects on companies. Climate-damaging and energy-intensive products will become more expensive and less attractive to customers.
8. Number one reason: Renewable Energies are getting cheaper
Fossil energies are subject to strong price fluctuations. They remain unpredictable and are increasingly subject to taxes and levies. On the other hand, the costs of renewable energies are falling. Solar power is one of the cheapest ways to produce energy already today.
nista.io Industry example
In the wake of Russia's aggression on Ukraine, a medium-sized Austrian forging company is considering converting its forging furnaces from gas to oil. At first glance, this seems reasonable. The necessary conversion work is comparatively small. However, significant additional costs are to be expected over the plant's lifetime.
To cover the heat demand of ~10 GWh, costs for gas currently amount to 663,000 €/year (all prices are calculated at pre-crisis level). Switching to oil would increase the security of supply in the short term. However, costs would increase to ~€1,125,000/year. To make matters worse, heating oil has much higher specific emission values (490 g/kWh in the case of gas versus 970 g/kWh for oil). If we assume a CO₂ tax of ~50 €/t CO₂, which is still expected, the tax cost of switching from gas to oil increases from 245,000 € to 485,000 € per year. In total, an oil-based heat supply costs ~702,000 € more per year in this example. Substantial investments are being made in alternative heating systems. Now is the time to free ourselves from dependence on fossil fuels.
The big challenge for companies is to adapt, act and become fit for the future as quickly as possible. Sustainability pays off and shouldn't be seen as a 'burden'. It is a great opportunity to finally throw old methods which are not working overboard. This is not an easy task in everyday life, in which companies deal with operational challenges. Change, conversion, and adaptation mean work, time, and often uncertainty.
Although there are good arguments for changing the course, the road will not be an easy one. Setting a political framework to make climate-friendly and energy-efficient business practices the most attractive form of corporate management is necessary. In turn, companies have an obligation to become more sustainable on an ongoing basis. Finally, the challenge is to publicly advocate for a green future and to demand laws that give climate-friendly companies a boost. Be it by lobbying as a company or by joining progressive climate protection associations.