21 Apr The Business Value of Sustainability

In quick succession in October 2018, the Nobel Prize in economics was co-awarded to a Yale professor who pegged the cost of poor environmental practices to economic health, and a United Nations (UN) panel of scientists revealed that the world has less than a decade to take action against devastating climate change.

Sustainability is once again front-page news.

And while governments struggle toward collaborative solutions, businesses are driving corporate sustainability efforts backed by big data analytics and location intelligence.

The UN’s Sustainable Development Goals

On September 25, 2015, heads of state gathered at the United Nations headquarters in New York City. At that summit, 193 countries signed on to a new set of global sustainability targets. The UN’s Sustainable Development Goals (SDGs) use simple language to lay out an international regulatory framework for radical changes to be made in the world by the year 2030.

The SDGs are known as a government initiative, but companies worldwide consulted on their development, and they will have a potentially enormous impact on the business world. In part, that’s because their successful implementation will require investment and support from the private sector. A report by the UN’s Sustainable Development Solutions Network estimates the cost of SDGs at US$1.4 trillion per year until 2030. The same report notes that approximately half of the investments can be privately financed.

The sustainability effort is of particular interest to companies that convert natural resources into products—among them energy providers, car manufacturers, and food purveyors. For those businesses, investment in the SDGs can be critical to conserving the raw materials of production for decades to come—and locking in long-term competitive advantage.

Across the business world, executives can see the implication: sustainability could soon become a major business opportunity.

The Role of the Private Sector

Just one day after the September 2015 summit, then-UN secretary-general Ban Ki-moon held the United Nations Private Sector Forum to discuss the role of businesses in achieving the Sustainable Development Goals. More than 200 executives from organizations around the world joined him in New York, including leaders from Dell, Deloitte, Facebook, Fidelity, PepsiCo, and Siemens AG.

The secretary-general told business leaders, “I am counting on the private sector to drive success. Now is the time to mobilize the global business community as never before. . .  Trillions of dollars in public and private funds are to be redirected towards the SDGs, creating huge opportunities for responsible companies to deliver solutions.”

Corporate organizations seem to agree. In a 2017 McKinsey survey, nearly 60 percent of organizations said they are more engaged with sustainability than they were two years prior, with engagement levels rising to 80 percent in certain industries like packaged goods and infrastructure.

Indeed, as climate change continues, companies that rely on natural resources are taking a hard look at the long-term viability of their products. In some regions of the world, for example, water supplies might soon run out. Reliable cropland could turn fallow as temperatures and weather systems shift. And yet, just 21 percent of business executives told McKinsey that business growth was a top driver of their sustainability initiatives. One way to read that finding: a select few industry leaders have figured out that smart, sustainable practices sow the seeds of long-term growth and competitive advantage.

Innovative companies are adopting tools such as artificial intelligence, IoT, and analytics to address these challenges in ways that also benefit the business—doing well by doing good. In fact, according to the McKinsey report, nearly half of the organizations using technology to advance sustainability are employing big data and advanced analytics, which typically includes location intelligence.

Where Sustainability Meets Opportunity

One such company is Nespresso. An autonomously managed subsidiary of Nestlé Group, Nespresso is known globally for its premium single-serving coffees. Key to Nespresso’s success and customer loyalty is the company’s emphasis on—and investment in—the consistency of its coffee’s flavor.

However, coffee is a delicate crop, frequently grown in developing countries and highly dependent on healthy ecosystems. This leaves coffee—and Nespresso—susceptible to the increasingly volatile effects of sociocultural events and climate change. For Nespresso, acting today to avoid the perils of tomorrow is not just good citizenship; it’s sustainable business.

“Sustainability is really at the core of our business. It is an imperative to our long-term business success,” explains Yann De Pietro, operations and sustainability technology manager for coffee at Nespresso. “There have been studies saying that by 2050, Arabica coffee may not be available anymore in some countries if we don’t do anything now.”

The company is working to combat that decline so that the seeds of Nespresso’s competitive advantage remain fertile long into the future.