“Green business is profitable” has been the resounding clarion call from the business sector this year, with more corporates turning a profit from sustainability—to the tune of billions of dollars. Millennials are driving the demand for sustainable business brands, and more investors are demanding companies report on their environment, social and governance (ESG) performance.
New sustainability standards have been unveiled and gender equality makes progress with new mechanisms to seal the gap being introduced. These are the top 5 CSR stories in 2016.
1. The rise of the green giants
Many people have long challenged the idea of businesses profiting while being sustainable, thinking that there is no compelling business case for sustainability. But that thinking seems to be passé now.
In 2016, at least nine global companies including Tesla, Unilever, Brazilian beauty brand Natura, among others generated billion dollars or more in annual revenue selling products or services—from sports cars, beauty creams to sports shoes—that have sustainability or the social and environmental good at their core. They’ve proven what sceptics have long thought impossible: Sustainability is profitable.
The number of businesses embracing sustainability not just as a corporate social responsibility initiative but as a real business driver is only going to increase. As global consultancy PwC found through a recent global survey of almost 1,000 businesses, more than 71 per cent of companies polled said they are planning to align their business operations to the Sustainable Development Goals (SDGs).
The three SDGs which businesses felt most prepared to tackle were decent work and economic growth, climate action, and boosting industry, innovation and infrastructure.
In Asia-Pacific, the Asian Development Bank sparked excitement on green business investing this year, with its widely attended inaugural Green Business forum for Asia and the Pacific. ADB president Takehiko Nakao said of the enormous potential for green businesses in the region, particularly in the area of agriculture, eco-tourism and services, “The market is ready for environmentally sustainable food and products. Consumers are ready to pay a little bit more.”
2. Millennials drive demand for sustainable brands
For sustainable businesses to be profitable, there is a need for governments to lay the enabling policy and regulatory framework to support investments into sustainable business, and a market demand for sustainable products. And millennials have risen to the task of driving demand for sustainable brands even more this year.
This lot, born between the early 1980s and 2000, are influencing older generations to support sustainable business. Almost 50 per cent of millennials are said to be more willing to make a purchase from a company if their purchase supports a cause.
Millennials are also driving corporates to ascribe to a higher purpose other than profit-making by choosing jobs based on purpose, rather than merely on paycheck and titles. If companies want to cash in on top talents and on their growing purchasing power, then they must step up on their environmental and social responsibility. As a recent study by consulting firm Deloitte found, about 56 per cent of 7,700 millennials from 29 countries polled ruled out ever working for a particular organisation because they did not agree with its values.
3. New sustainability standards unveiled
This year, non-profit Global Reporting Initiative launched a new global Sustainability Reporting Standards to help companies assess their non-financial impacts and replace the current GRI G4 Guidelines, the most commonly used framework for sustainability reporting. The Standards retain the key concepts and disclosures found in the G4 guidelines, making transitioning “straightforward” for experienced reporters while using simplified language to facilitate reporting for new reporters.
The launch of the GRI Standards is timely especially for Singapore. The country’s local bourse, the Singapore Exchange (SGX) announced in June this year that it will mandate all listed companies to report on a ‘comply or explain’ basis from financial year 2017. Ahead of this, the SGX also launched its inaugural sustainability indices.
4. Investor interest in ESG performance rises
This year also exposed banks that have been financing companies responsible for deforestation in Southeast Asia.
California-based Rainforest Action Network (RAN), Indonesia-based community group Tuk Indonesia and Dutch consultancy Profundo revealed that at least $38 billion worth of commercial loans and underwriting facilities were provided to 50 companies in industries such as palm oil, pulp and paper, rubber and timber in the region for large-scale expansion.
The rise of responsible finance is expected to quell this practice and to enforce stricter financial control. This year, representatives from Singapore-listed companies said they saw a sharp rise in stakeholder and investor interest in the environment, social and governance impacts of their investments.
“Ten years ago, no one would pay any attention to our sustainability numbers or strategy at an AGM. But there has been growing interest for the past three or four years,” said Esther An, chief sustainability officer at City Developments Limited, a property developer in Singapore.
This year, the world’s largest sovereign wealth fund, Norway’s Pension Fund Global (GPFG) which manages $828 billion worth of funds, reported that it had dropped 11 companies over their connections to forest destruction.
5. Sealing the gap on gender equality
The move to close the gender gap leapfrogged this year, with government and civil society stepping up to promote women’s participation and recognition at work and in business opportunities.
This year, the United Nations Development Programme (UNDP) launched its gender equality certification programme for businesses in Asia-Pacific. UNDP Goodwill Ambassador Michelle Yeoh led the campaign, calling on the region’s governments to waste no time in adopting the initiative, and her home country Malaysia became the first to sign up to implement the programme.
WOCAN or Women Organising for Change in Agriculture and Natural Resource Management for its part developed a mechanism that puts a dollar price tag to the “invisible” work women do in rural areas, such their roles in caring for children and elders, housework, as well as farming and contributing to the preservation of natural resources.
UN launched a tool to get more women online as this increases their chances to get better work and education opportunities.
These initiatives are a good start to an uphill challenge to eradicate gender inequality in society. Gender pay gaps between men and women could take 170 years to close, said a new report released this year by the World Economic Forum.
This story is part of our Year in Review series, which looks at the top stories that shaped the business and sustainability scene in each of our 12 categories.