After a new report published which says that most business leaders plan to increase investment in sustainability initiatives to protect against disruption, we look at what this means.
A recent Gartner report highlighted how 86 per cent of business leaders plan to increase their organisation’s investment in sustainability initiatives to protect against disruption and 87 per cent are already engaged in sustainability initiatives and expect to expand them in 2023 and 2024.
What Kind Of Disruption?
The kinds of disruption to businesses, supply chains, and the wider economy that businesses need to protect themselves against include:
– Economic uncertainty. In the UK, for example, the effects of recession, inflation, rising interest rates, sluggish productivity, problems in the labour market and an IT skills gap plus a relatively weak post-pandemic recovery are all creating less certainty and a tough economic environment. For example, Office for Budget Responsibility (figures) show that the UK may not return to its pre-pandemic growth level until the end of 2024, while ONS figures show that by September, the economic output in the UK was still 0.4 per cent lower than pre-pandemic.
– Geopolitical conflict. For example, the war in Ukraine and its multiple effects, notably including high energy costs, higher commodity prices, and disrupted supply chains are causing cost pressures on a number of industries, high food prices, a squeeze on consumer (end-user) spending. This has led to uncertainty over future supply chains (especially if businesses deal in Europe), difficulty for central banks to forecast and plan, and overall uncertainty.
– Escalating materials and energy costs. Again, mainly due to the war in Ukraine, this is having a major effect on business costs and consumer spending. The soaring cost of energy could also increase data centre costs by 40 per cent which may soon mean price rises for business customers who are now very reliant on the cloud.
As highlighted in the Gartner report, the ways that business leaders plan to tackle disruption centre around re-examining all forms of business expenditure and seeking new, longer term, sustainability initiatives and new revenue streams that leave them less at risk of the uncertainty that’s part of current models, i.e. less reliance on fossil fuels such as oil and gas (and less reliance upon big oil companies).
As identified by a report in October (Gartner), most investors see sustainability as the key strategic technology trend for 2023 and most CEOs see environmental and social changes as a top three priority for investors, behind profit and revenue.
In addition to getting away from expensive, volatile, and environmentally damaging fossil fuel reliance and the disruption it is currently linked to, other main drivers for business investing in sustainability initiatives include:
– Customer demand. The Gartner report shows that most business leaders (80 per cent) identified consumer pressure behind sustainability as the key reason for investing in sustainability initiatives.
– Environmental, social, and governance (ESF) expectations.
– More environmentally focused government regulations.
– Growing availability of sustainable technology.
– Opportunities to find new revenue streams, accelerate innovation, and develop new forms of customer engagement.
What Kind Of Sustainability Investment and Initiatives?
Some examples of how businesses could use/are using sustainability investment and initiatives include:
– Investments in sustainability as regards energy consumption, and reallocating energy sources to areas with renewable energy sources.
– Software sustainability. Developing and using software that causes less environmental impact and producing new software standards that prolong devices’ lifecycles, thereby helping to reduce the amount of e-waste.
– Sustainability investments related to business travel, customer transactions, and productivity.
– Investing in more efficient hardware.
The recent Gartner report says that 83 per cent of business leader respondents said that their sustainability investments have created both short term and long-term value, and supply chain savings, and that costs for their initiatives have been outweighed by immediate efficiency improvements. There is also the key benefit of the promise of a more stable future for their companies/organisations. That said, it’s still relatively early days for many businesses that have invested in sustainability and, as such, the returns on investments are still unclear.
What Does This Mean For Your Business?
The Gartner report appears to reveal a growing consensus among business leaders that consumer demand is a major driver for businesses investing much more in sustainability. The current economic uncertainty, geopolitical conflict, escalating materials and energy costs, increase environmentally focused government regulations, and the growing availability of sustainable technology, all alongside the climate crisis are also now major reasons why businesses are looking seriously at how sustainability investment could help. Turning to sustainability-focused solutions could help businesses not just to reduce business expenditure, but to possibly create new revenue streams and tackle the threat of disruption more effectively over time.