Can profits be increased through adherence to environmental and wellness standards?
One of the most important questions facing companies working towards positive impact is what levels of profitability can be achieved compared with non-impact driven businesses. Here at 8 Dimension Ventures, we believe the two operate in harmony, but only when approached properly!
Fortunately, there are some positive changes on the horizon:
Evidence shows that when consumers demand it, companies will do it. According to research by the global consulting firm McKinsey, buyers will pay 5% more for a comparable product if it’s green.
In the world’s major economies, many governments are mandating reduced carbon emissions. They are adding taxes to companies and products that pollute, thus encouraging them to raise their standards.
Global sustainable investment now tops $30 trillion. Yes, trillion. McKinsey’s preliminary research suggests that ESG compliance leads to higher equity returns.
Cost reduction is one of the key components of higher profitability. Firms can save money on energy, water use and waste disposal in ways that are good for the environment, build profits and allow them to brand themselves proudly in the market.
McKinsey also found that responsible businesses have higher employee productivity because their team members are more engaged. This suggests that these companies can generate more revenue or keep costs under control – without adding more workers.
Can ESG-compliant businesses generate higher revenues? At this point, the jury seems to be out. However, as we mentioned above, consumer demands are shifting and government regulation is growing, which could help companies that follow sustainable practices.
At 8DV, we are concerned about how small- and medium-sized businesses will fare, since we see them as the rocket fuel to help people and the planet. In this case, McKinsey has a warning. There is a growing awareness of the need for ESG certification and regulation, but there is huge variability in standards and expectations. It can be confusing for both consumers and businesses.
Big businesses can dedicate entire departments to compliance; startups simply don’t have the staff. Many small firms have ESG and the 8 Dimensions of Wellness at the core of their mission, but generating data and voluminous reports can be daunting. Business owners are passionate about people and the planet – but can they provide the proof that the market and regulators need?
It’s an issue everyone will have to address as we move forward.
Learn More
