All businesses can be sustainable businesses. You don’t have to be a cleantech or greentech company to be considered a sustainable company.
Teck, one of Canada’s leading mining companies, uses sustainability as a guiding principle. Teck reports sourcing 94% of its electricity from renewable energy, spending $345 million on transactions with Indigenous suppliers, and investing $24.9 million into local communities.
The Canadian National Railway has also stood out with its rapid progress towards their 2030 sustainability targets. The company has reached 40% progress in reducing Scope 3 GHG emissions intensity for fuel-and-energy-related activities, diverting approximately 94% of its waste from landfills, and planting 114,000 trees – a 77% progress towards its 2030 target.
We are living in a time where the benefits of sustainability outweigh the costs, and businesses can indeed be both sustainable and profitable.
In this article, we delve deep into:
- What does sustainability in business mean
- Why sustainability should be a priority for startups
- How to go from strategy to execution in sustainability
- Best practices to report sustainability efforts
- Types of sustainability certifications
- Canadian Government Incentives for sustainable businesses
What Does Sustainability in Business Mean
In business, sustainability means operating without harming the environment, community, or society as a whole.
A business without a sustainable business strategy can directly be responsible for inequality, social injustice, or degradation of the environment to an extent that compromises the ability of future generations to meet their own needs.
Today, subsets like Environmental, social and governance (ESG) are becoming more popular in business, because sustainability can often be a very broad principle. ESG is an accepted set of guidelines that directs companies to operate responsibly, deliver sustainable outcomes, and provide meaningful benefits to a broad range of stakeholders.
Why Sustainability Should be a Priority for Startups
It goes without saying that startups who follow sustainable business strategies can help reduce some of the world’s most dire problems including climate change, income inequality, depletion of natural resources, human rights issues, fair working conditions, pollution, racial injustice, and gender inequality.
It has also been observed that businesses which prioritize sustainability are witnessing better overall growth and improved bottom lines.
Consumer preferences are one of the primary drivers of brand improvement, as a recent study by NielsenIQ found that 78% of consumers say that a sustainable lifestyle is important to them.
Research by Deutsche Bank, analyzing 56 academic studies, also revealed that companies with high ratings for ESG factors face lower costs for debt and equity.
About 89% of the reviewed studies show high ESG-rated companies exceeding market performance in the medium (3-5 years) and long term (5-10 years). Similarly, the Carbon Disclosure Project reports companies selected for their greenhouse gas (GHG) emissions disclosure and performance, also showed superior stock-market returns.
However, this raises a question: if the advantages of sustainability are so substantive, why aren’t more organizations prominently highlighting their impact?
How to Go From Strategy to Execution With Sustainability
Although sustainability is a hot topic in conferences and boardrooms, there exists a significant discrepancy between talk and implementation.
A study by IBM states that:
- Only 35% of companies have acted on their sustainability strategy
- Only 37% have aligned sustainability objectives with their business strategies
- Only 4 in 10 companies have identified either the initiatives to close their sustainability gaps or sustainability drivers for change
- Only 1/3rd of companies have integrated sustainability objectives and metrics into their business processes
These discrepancies have also not been favourably received by investors.
In PwC’s Global Investor Survey 2022, investors expressed that even though ESG outcomes like effective corporate governance, and reducing greenhouse gas emissions, have a solid place in the top 5 investor priorities in a business, they are well aware of the laggard implementation.
They specifically mention how the use of ‘sustainability’ versus actual indicators or descriptors, or fluff in corporate ESG dialogue has led to a massive trust deficit. Almost 87% of surveyed investors believed that companies’ reports on sustainability performance contained unsupported claims and greenwashing.
So, what can you do differently as an incumbent creating a sustainability strategy?
Here are Some Guidelines to Help Establish a Strong Foundation for Your Sustainability Business Strategy:
1. Define your sustainability goals and KPIs:
Clearly articulate your purpose for pursuing sustainability goals before you get started on your journey. Ensure your goals, best expressed in the form of a mission, vision and values, are rooted in clarity. Spend time deeply understanding which sustainability goals best suit your business and sector, and what it would take to get there.
For instance, if you’re a mining business, you may want to pursue net zero, however, if you’re a software company you may want to prioritize energy consumption and DEI goals, and if you’re a manufacturing company zero waste might be most beneficial. Streamline your goal or combination of goals based on what is most relevant to your context.
As a startup founder, you may or may not be the right person to outline these goals. Reach out to professionals or agencies that can help. Companies like Junxion help make the triple bottom line a reality for brands, or you can even choose to go industry-specific like Audette which is helping real estate companies turn net zero. You can take it a step further and carry out materiality assessments with larger consultants like KPMG, Deloitte, and BCG.
2. Set up your sustainability framework:
After your goals are aligned, it’s time to establish a sustainability framework. This framework decides the sustainability standard you are choosing to follow and defines your record-keeping system. There are many globally accepted sustainability frameworks, you can choose based on what suits your business best:
- Global Reporting Initiative (GRI): The GRI Standards allow an organization of any size, small or large to report information in a way that covers all its most significant impacts on the economy, environment, and people, or to focus only on specific topics, such as climate change or child labour.
- Sustainability Accounting Standards Board (SASB) Standards: Enables companies to share industry-based information about financial materiality, specifically potential sustainability-related risks and opportunities that could affect cash flows, access to finance or cost of capital over the short, medium or long-term.
- Carbon Disclosure Project (CDP): The Carbon Disclosure Project focuses on the reporting of transparency of corporate impacts on three primary environmental issues – Carbon, Water, and Forests.
Developing a baseline after selecting a reporting standard requires determining and collecting necessary data from assets, facilities, supply chains, and IT infrastructure.
The good news is there’s no need to devise an ESG tech system from the ground up. Many turnkey tech platforms exist that can effortlessly be integrated into your business operations. Canadian ESG software companies like Figbytes and GreenWorksESG are a great solution, and they are already aligned with the above standards.
3. Operationalize your goals:
Now, to turn this into action, connect your ESG data with your operational systems to create automated feedback loops.
- Connect the data to your facilities and asset management systems to spur clean energy transition, better water and waste management, and decarbonization.
- Connect the data to supply chain management systems to encourage responsible sourcing, reduce scope 3 emissions, and reduce waste.
- Connect the data to your IT infrastructure management systems to cut energy consumption and emissions, and stimulate recycling and repurposing of equipment.
This will give you clear directions on where to improve further, and when to celebrate. Hiring a sustainability officer, or team to spearhead the undertaking will help expedite the endeavour.
4. Report ESG progress to your investors, customers, and other stakeholders:
Once you’ve ensured organizational alignment to the unified ESG system and started to monitor progress, it’s time to communicate and report your progress. Investors, regulators, and many other stakeholders are increasingly expecting transparent reporting of ESG metrics.
Although ESG software can offer ready-to-share formats based on the standard you may have selected above, The KPMG Survey of Sustainability Reporting states there is still room for improvement in the quality of reports. In an extensive review of numerous reports they found the following patterns:
- Fewer than half of the globe’s most prominent corporations shared information on ‘social’ aspects, such as modern slavery, diversity, equity, and labour issues, despite the growing understanding of the relationship between climate change and social inequality.
- Less than half revealed their governance-related risks, including concerns like corruption, bribery, and political contributions.
- And, merely a third of N100 companies have an exclusive leadership team member in charge of sustainability.
If you’d like to emerge as a leader in adopting the new wave of best practices in sustainability reporting expected from investors and regulators, here are some tips:
- Prepare for more metrics: The sustainability metrics are ever-evolving and expanding, and more detailed metrics are poised to be added in the coming years to emphasize transparency across the value chain. You can get a head start by preparing strategies and metrics to report on biodiversity loss, pollution, resource and water use reduction, worker treatment, and business conduct policies like corruption prevention.
- Invest in materiality assessments: Materiality is beneficial as a starting point for companies of all sizes. It evaluates the effects of an ESG-related topic within a certain context (for example, your industry). Consider a SaaS tech company that develops software solutions. The company wants to understand the impact of switching to renewable energy for its servers and operations. The materiality process helps them evaluate how this change would affect their environmental footprint and business operations, helping them make a well-informed decision about whether or not to proceed with the switch.
- Create integrated reports: KPMG claims many ESG disclosures predominantly focus on narrative descriptions rather than quantitative or financial data pointing to impact. The future of ESG reporting combines both financial and non-financial data in a single annual report offering a more comprehensive and holistic view of a company’s financial performance, impacts, and progress toward sustainability.
Sustainability Certifications for Your Company / Products
In addition to adopting a corporate sustainability standard aligned with your business needs, you can also choose to have your company or product certified.
Corporate sustainability frameworks like GRI, SASB, and the sustainability certifications listed below are complementary in nature, and not replacements for each other. Corporate sustainability frameworks are standards that you, as a company, are choosing to follow as your accountability parameters. Whereas certifications put companies under rigorous application and audit processes to prove their parameters and reward them with a certification logo or score they can display on products or service locations.
Certifications act as a direct validation to your end customer, of your commitment to sustainable and responsible business practices. Some certifications are as follows:
B Corp: B Corp certification is an evaluation for small and large companies that confirm a business’s high standards in social and environmental performance, public transparency, and legal accountability, covering areas from employee benefits to ethical supply chains and charitable giving.
Fairtrade: Fairtrade is designed to support the sustainable development of small producer organizations and agricultural workers around the world. They certify your supply chain, give you permission to trade on Fairtrade terms and accept you as an official Fairtrade partner.
GreenSeal: Green Seal, a founding member of the Global Ecolabelling Network, is a trusted ecolabels certification for cleaning, sanitary and facilities for care products and services.
LEED: Leadership in Energy and Environmental Design (LEED) is a globally recognized symbol of excellence in green building, helping reduce carbon emissions, conserve resources, and cut costs.
TRUE: A Total Resource Use and Efficiency (TRUE) certification helps facilities define, pursue and achieve their zero waste goals, cutting their carbon footprint and supporting public health.
UL ECOLOGO®: Ecologo-certified products and services, evaluate various criteria including materials, energy, manufacturing, and health, confirming reduced environmental and health impacts based on a product’s life cycle.
Canadian Government Incentives for Sustainable Businesses
Canada is already a leader across many aspects of sustainability:
- 3rd largest producer of hydroelectricity in the world
- 20% of the world’s major carbon capture, utilization, and storage projects are in operation here
- Renewable energy sources currently provide about 18.9% of Canada’s total primary energy supply.
- Wind and solar photovoltaic energy are the fastest growing sources of electricity in Canada.
Among the top 20 global oil producers based on ESG metrics, Canada stands tall at:
- 2nd in Governance according to the Worldwide Governance Indicators
- 2nd in Social Progress as per the Social Progress Index
- 4th in Environment based on the Environmental Performance Index
With the Canadian government setting a robust example, Canada emerges as a fertile ground for startups aiming to champion sustainability. Some government incentives available for sustainable businesses in Canada include:
- National Adaptation Strategy & Hydrologic Prediction and Innovation: Funds projects in priority climate data, services, and assessments; flood hazard identification and mapping; hydrologic prediction; and innovation in hydrometry
- Output-Based Pricing System Proceeds Fund supports clean technology projects that reduce greenhouse gas emissions to help decarbonize Canada’s industrial sectors, while returning OBPS proceeds to jurisdictions of origin.
- Low Carbon Economy Fund (LCEF) supports projects to reduce Canada’s greenhouse gas (GHG) emissions, generate clean growth, build resilient communities, and create good jobs for Canadians.
- The National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) is Canada’s leading innovation assistance program for small and medium-sized businesses.
- Sustainable Canadian Agricultural Partnership (Sustainable CAP) is a new $3.5-billion, 5-year agreement, between the federal, provincial and territorial governments to strengthen the competitiveness, innovation, and resiliency of the agriculture, agri‐food and agri‐based products sector.
- Green Infrastructure stream supports the completion of water and wastewater infrastructure, disaster mitigation and adaptation projects, building retrofits, solid waste treatment, and the installation of electric vehicle charging stations and other refuelling stations.
- Sustainable Development Technology Canada is a government-funded organization that further funds innovative startups which can be future sustainability market leaders.
Want to Start a Sustainable Business in Canada?
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