Sustainable companies setting new standards, but are they also profitable?

These management practices are what make sustainable companies successful - six recommendations for action towards a successful change

sustainable companies

Author: Sarah-Marie Lau

Can sustainable companies also generate sustainable profits? Many sustainable companies take a stand as a symbol of rebellion in the fight against the climate crisis. However, this is often not enough to achieve sustainable profits as well. High costs and low sales are the main problem, in order to be able to use economies of scale. But how do some pioneering brands also achieve economic success?

The usual approach of emissions reduction is no longer enough to get on the path of value creation. Unfortunately there is still no clear and standardised route that companies, who want to switch to a sustainable business models, could take. The conventional ways, workflows and practices need to be reconsidered, reinvented and improved.

McKinsey's Global Survey however, has shown that there are essential management practices that are closely related to financial success. We took a deeper look at what practices have been recommended.

Recommendations for action for a sustainable transformation

  1. Establish an optimistic vision for the future
  2. Establish strategic sustainability as a corporate culture
  3. Put a clear focus on sustainability
  4. Involve employees in the mission
  5. Meet customer expectations and use them for product improvements
  6. Holistic sustainability with partners along the value chain

1. Establish an optimistic vision for the future

Sustainability endeavors have proven to be economically viable, the myth of sustainable companies making no profits has thus been clearly refuted. The company value can often even be increased further through additional advantages, such as cost savings. 22% of the respondents stated that their company had drawn a medium to significant value from sustainability in the last 5 years.

Study participants are particularly optimistic about the upcoming five years. XNUMX% of those surveyed, expect a significant value increase over the next five years. Amazingly, this includes above all, the companies that have a significant share within the climate change field, like the automotive industry, energy suppliers and the travel, transport and logistics industry.

2. Establish strategic sustainability as a corporate culture

Seeing sustainability as the main agenda seems to play another important role in achieving positive and profitable development. More than half of the respondents say that the company's CEO has made sustainability a priority on the strategic agenda, a clear difference to companies that have not.

A nice side effect that the study points out is the tendency that more companies will align themselves to sustainable practices in order to keep up with the value-adding companies. Above all, it is important that companies learn to understand which sustainable practices have a positive effect on financial development.

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3. Put a clear focus on sustainability

The profitable green companies clearly focus on the implementation of their goals, set targeted priorities and develop important performance indicators for sustainability. The clear formulation of terms, indicators as well Workflows seem to play an essential role in generating value and profit. The goal is thus always clearly in view.

4. Involve employees in the mission

According to the McKinsey study, directly involving employees in sustainability goals is another important factor for successfully sustainable companies. Internal training courses as well as corporate culture and remuneration are important elements in helping employees understand and implement internal sustainability goals and actively participate in improvements.

5. Meet customer expectations and use them for product improvements

Value-adding companies understand the expectations of their customers and consciously include them as a criteria into the design and improvement of their products. Often, targeted and regular research is carried out to understand the expectations and needs of customers. The results of the market research and the customer's requests for improvement can then be incorporated into the marketing communication.

This approach seems to be an essential part of the strategy and secret ingredient of the sustainable market leaders. New products can be created, designs improved, brands created and environmental problems approached in completely new ways.

6. Holistic sustainability with partners along the value chain

According to the McKinsey study, the greatest effect in terms of sustainability is made up of the efforts along the value chain. Suppliers, manufacturers, subcontractors and clients work more closely together than in the usual business model. The involvement of the entire value chain can therefore even be an indicator of how committed a company is to the issue of sustainability.

The market leaders for sustainability are primarily companies that make sustainability a real priority and also include it along the value chain to ensure that their products are holistically sustainable and transparent.

One thing is clear: the key is rethinking!

Companies have to find new ways and rethink their previous process holistically in order to be sustainable and profitable. Short-term and small changes are not enough, but long-term and holistic changes such as the involvement of employees, setting a strategic goal and a clear prioritization of sustainability even have a profitable effect on the realignment of the company. We can look forward to new paths, companies and exciting products that are guaranteed and holistically sustainable.

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