Having recently returned from the UN Global Compact Summit in Mexico, we ask ourselves the important question – does sustainability make better and more adaptive businesses?
We have reached a pivotal period in history where humanity has turned more decisively toward the development of thriving and sustainable societies. Through increased connectivity we have a greater understanding of our more damaging practices and their impact on the world around us. Guided by the United Nations Sustainable Development Goals, global leaders and corporations have created a vision and destination for building a thriving world with no poverty, zero hunger, improved health and wellbeing, equity and equality, as well as action on climate change.
Never before has there been such a unified effort to solve some of the world’s greatest challenges, and although this has become a vital first step in securing our better future there is yet another significant hurdle to overcome – financing. Rough calculations from the Intergovernmental Committee of Experts on Sustainable Development have forecast a $66 billion cost for developing a social safety net that eradicates extreme poverty, while annual investments in improving infrastructure (water, agriculture, transport and power) could be up to $7 trillion globally. This is a heavy burden to bear for any of the world’s governments and non-profit organizations. As a result, an increasing number of multinational corporations have begun to design strategies and projects that improve the global condition – a trend reinforced by the United Nations Global Compact.
By strengthening Corporate Governance, Stakeholder Engagement, Decision Making Time Horizons and Transparency and Accountability, sustainable businesses are building considerable value for themselves and across all their spheres of influence. Multinational corporations and investors now have financial incentives to join the initiative – investing $1 in 1993 in a value-weighted portfolio of High Sustainability Companies would have grown to $22.6 by the end of 2010. Conversely, investing $1 in a value-weighted portfolio of Low Sustainability Companies would have only grown to $15.4 in the same period. Even during times of recession, the companies who maintained similar levels of sustainability investments saw larger Net Profit Margins of 23% within two years compared to those who made reductions.
Sustainable Investing Offers Competitive Results
Source: Bloomberg, Factset & UBS (2015)
The corporate movement towards sustainability is already occurring worldwide. China’s largest state-owned oil company promoted a strategy to expand its geothermal business unit and will increase the number households in China that tap into geothermal power generation by 10-fold over the next five years. Swedish carmaker Volvo also announced a target to sell 1 million electric vehicles by 2025. French industrial services giant Suez highlighted various partnerships it has brokered with state and local governments in developing countries to engineer more sustainable water delivery or municipal waste management services.
The visionary dialogue between participants at the UN Global Compact Conference in Mexico and the Leaders Summit in New York earlier this month marked a new era in sustainability – what was once the responsibility of governments has now moved towards a shared imperative with the private sector. Driving sustainability around the world can only be achieved by taking responsibility for financial, environmental and social performance in all spheres of human activity and especially in business. At Primal Group, we are proud to be part of this global coalition to drive sustainable growth through responsible business engagement in all of our projects and activities