As the reality of economic uncertainty in the United States begins to set in, there are concerns that a potential recession will slow corporate environmental progress. While it’s true that most businesses’ classic first move in response to economic uncertainty is to protect their balance sheet and cut auxiliary activities, savvy business leaders will take a second thought before compulsively shutting down environmental initiatives.
Every company and every sector is different, but the most obvious value of sustainability initiatives in a moment of economic uncertainty is efficiency. Sustainability initiatives drive efficiency, which in turn cuts both costs and emissions. Reducing energy usage cuts power costs and operational emissions. Recycling product parts at the end of the product life saves money on input materials and reduces ecological impacts. Using less packaging cuts down on plastic waste, as well as the costs associated with packaging and transporting goods. While some businesses see sustainability as an extra cost center, the truth is that sustainability is often aligned with business goals and promotes efficiency.
When done right, sustainability initiatives both bolster the bottom line in the short term and provide economic advantages in the long term. Study after study has shown that strategic investment during a recession positions companies to outperform when economic conditions normalize. For forward-thinking firms, climate and sustainability is an area ripe for strategic investment. Sustainability breeds innovation and efficiency, which are the key ingredients for competitive advantage. While other firms may turn away from climate investments to focus on their bottom line, savvy business leaders will seek out climate investments that transform their bottom line. For example, a Boston startup created a technique that uses renewable energy to produce steel and other metals with zero carbon footprint. This process is only one step compared to traditional multistep smelting, making it more efficient. It can also turn low-grade ore and mining waste into high-value metals, reducing waste and increasing the value capacity of metal production.
Investing in sustainability doesn’t just create opportunity, it also mitigates risk. The cost of climate change doesn’t slow with a recession. With more organizations facing natural disasters, power outages, and supply chain disruptions, it is wise to build up sustainable investments that can soften the blow of climate-related risks. Multinational organizations will also have to consider the legal landscape as ESG regulations abroad continue to proceed despite some slowdown in that area of U.S. policy. Climate change and its impacts on business won’t wait for the end of a recession, so organizations should continue to meet regulatory and risk-related needs through the economic downturn.
Sustainability initiatives provide a strategic stronghold that bolsters the bottom line, inspires innovation, and mitigates risks despite economic uncertainty. Organizations looking to not only survive the recession but also come out the other side ahead of competitors should view sustainability initiatives as an investment for a richer future for both the company and the planet.