Sustainable development can be described as supporting economic and business development while minimizing negative environmental and social impacts, bringing true value to customers and to business stakeholders, and the natural environment. As we have reached an economic tipping point, current environmental challenges require a decisive action.

Sustainability management matters because the world has changed fundamentally; extreme weather, driven by climate change, is shattering records all over the planet – these big challenges demand an urgent change by business for our own survival. We’ve reached an economic tipping point, and now we are testing the limits of all the natural systems that support our economy and society, and we need to change the way how companies operate. Because man-made climate change represents a serious threat to our collective prosperity, and non-action is where the real risk lies.

All businesses today need smart sustainability strategies that make both economic and environmental sense. Those who make this change will thrive in a rapidly changing world. Private-sector leadership has the capacity to lead the way to a more sustainable future by keeping environmental thinking center in corporate strategies. Most business leaders have realized that “business-as-usual” is no longer an option to tackle sustainability challenges. Considering the added value that corporate sustainability can bring to their businesses, companies increasingly shift how they operate, and put more emphasis on creating new strategies to produce environmentally friendly products and services.  

Corporate sustainability management will evolve over the next decades in the context of global decarbonization goals. Strict environmental regulations, the impacts of manmade global warming, climate change mitigation targets and environmental concerns require business environment to integrate their policies with sustainability considerations, particularly in terms of environmental, economic and social aspects. Also, with the aim of achieving a carbon-constrained world, governments around the world are increasingly striving to establish policies to address environmental challenges. They encourage real action for improving environmental performance.

Paris Climate Agreement – a global response to climate change

The Paris Agreement is a global deal on climate change and aims to limit global warming to less than 2 degrees Celsius. Paris Agreement aims to strengthen the global response to the threat of climate change by motivating people to take action, producing incentives to reduce carbon emissions.

All participant nations have agreed to decrease the use of fossil fuels that generate greenhouse gas emissions like methane and carbon dioxide as soon as possible. Government officials are urged to review the plan every four years to ensure they are meeting their goals.

According to environmentalists, 2 degrees Celsius is a critical threshold above which the planet could experience irreparable impacts such as  greater sea level rises and widespread plant or animal extinction.

The agreement also stipulates that by 2050, man-made emissions should be reduced to levels that can be absorbed by our forests and oceans.

Reducing energy waste is one of the largest weapons we can utilize to this end.  It’s also crucial to deploy market-supported measures.

The Paris Agreement is a great achievement but the scope of the effort put by all stakeholders would determine whether the targets are enforceable or not, since this is a  cross-cutting issue that one sector has impacts on another.

Evolution of Sustainable Management Practices

In order to remain competitive in the market, the practices of a business should be sustainable, because unsustainable business practices won’t be able to survive in a competitive economic environment, given the necessity of understanding the implications of new trends and business developments. Any failure to incorporate sustainable practices would have huge impacts on the survival and capability of any business.

Sustainable management aims at striking the right balance between the environment, the needs of generations to come, and the financial returns of an enterprise.

Sustainable management is an integral part of maintaining the quality of life on the planet, and it involves integrating environmental, economic, and social factors into decision making process of a business with a view to avoiding future costs associated with unsustainable business practices. In particular, natural resources need to be managed through sustainable practices by making decisions that will help sustain our environment and meet the changes in consumer expectations. Thus, companies are increasingly integrate sustainability into their organizations. 

Recent surveys indicate that sustainable management practices offer more profitable outcomes as they are able to adapt changing market conditions, and accordingly they provide a competitive advantage over other businesses. And, the key factors driving sustainability integration in the core business of companies include the necessity for organizational change, new regulations on environmental impact, shifting expectations of consumers along with the rise of social media, the importance of socially responsible investing practices.

Implications of COVID-19 for Sustainable Investing

It is quite obvious that Corona pandemic has intensified the challenges of sustainability along with the challenges of rising unemployment and shrinking economic activities in an increasingly interconnected business environment.

Though overall stay-home measures compulsorily enabled a sort of reduction in greenhouse gas emissions, economic recovery measures are indispensable with a view to bouncing back and going back to usual economic activities. These recovery measures, including the economic stimulus package of the European Commission which aims to integrate green transition principles, would unquestionably curb the momentum on climate change initiatives.

The current pandemic has also increased the urgency of dealing with sustainability challenges as the repercussions are felt profoundly. The pandemic induced a global recession and market volatility. United Nations figures shows that the world has already used up more resources than can be renewed in the following year. These effects would serve as a stimulus in particular for the policy makers or regulators to focus on potential risks and make an urgent shift toward sustainable investing. Accordingly, this shift would require investing more in green transition. Researches shows that investors expresses an increased interest in addressing sustainability risks through investing as economies begin to emerge from the volatility of the pandemic. Still, public and private sectors have to cooperate to help mitigate the sustainability problems as post-pandemic measures.

Corporate sustainability strategies represent a major shift in awareness for the private sector; as sustainability management creates more resilient businesses and enhances competitive advantage. Companies seeking to keep up with the rate of change should modify the way they currently operate.

Climate change is a growing problem and poses one of the greatest long-term threats to human health, and it’s usually the poor who are most vulnerable. The world’s poorest citizens are at greatest risk from heatwaves, a huge climate change health threat already claiming lives. Therefore, each individual bears a responsibility to confront the threat of climate change.

Given that the entire economic system is in transition, the sustainable development plans must keep pace with this transformation in a timely manner. As a company, if you delay your sustainability practices, you will lose your competitive advantages to your competitors who continue to invest in eco-friendly products through innovation and adaptability.

Additionally, market researches show that consumers consider health and sustainability as major criteria when making purchase decisions, and they increasingly take environmental benefits into consideration. Thus, to survive in the market, companies have to respond consumer concerns and adopt sustainable development strategies without delay. Rising global population also urges companies to implement sustainable development plans. 

Hence, business leaders speaking out for climate action and corporate sustainability. Investors are watching the trends to see where the opportunities are. 

Today, business leaders not only make decisions to save money, they also make decisions to gain market share and generate revenue from that market share. In this regard, they acknowledge how sustainability drives profitability. A number of companies globally generate a billion dollars or more in revenue annually from sustainable products or services. They’ve shifted sustainability from the bottom to the top line — and that move has had profound implications for sustainability in the context of business. 

Green Investing 

Green investments refers to investing in business activities which can be considered good for the environment in a direct or indirect manner.

As what constitutes a “green investment” might differ based on individual views, some investors are interested in doing research into renewables and energy-efficient technologies, while others focus on good business practices on waste management.

Socially responsible investments are an area of the financial world that is promptly expanding. Millennial investors approach their financial decisions and investment practices in a different way than former generations, as they have a tendency to consider environmental impact.

Sustainable Investing directs investment capital to organizations that endeavour to tackle climate change and ecological devastation while promoting financial returns.

Areas of Investment

When we break down greenhouse gas emissions into categories, we see that electricity generation accounts for 25 percent of all greenhouse gas emissions each year. Agriculture sector is responsible for 23 percent of greenhouse gas emissions. This includes livestock which are massive source of methane, deforestation and clearing land for crops which results in removing trees that absorb carbon dioxide out of the air.

Manufacturing industry accounts for 20 percent of greenhouse gas emissions, as producing steel, cement, etc. requires lots of energy from fossil fuels, and this production process releases carbon as a by-product. Transportation causes around 15 percent of greenhouse gas emissions, and this includes emissions from vehicles, airplanes, and ships. The remaining part is caused by various factors such as air conditioners, heaters, lights, and other electronic appliances that takes a lot of energy to function. As the world’s middle class grows steadily, they tend to consume more due to their increasing purchasing power, and this leads to expansion in carbon footprint as well.

It seems that energy affects almost every part of our life and to address climate change, we need to change the way we generate electricity, grow food, produce things, and carry people and goods, along with how we power our cars and houses. Initially, we should de-carbonize the way we generate electricity through solar panels and wind turbines. Fortunately, renewables are getting cheaper and governments are increasingly relying more on renewable energy for their electricity needs. But this is not enough, we need more investments with government engagement on these areas to reduce greenhouse gas emissions. Over the next years, the private sector will be leading these efforts, however, socially and environmentally responsible investors are to receive the support they deserve from governments.