Since the first Climate Change Summit in 1979, we’ve been approaching this very precipice at an alarming speed. There’s been ample warning, whether from scientists, such as James Hansen, or activists, including the much-adored David Attenborough and the inspirational Greta Thunberg. All too often these warnings have been refuted and ignored. Now, though, we’re in the throes of battle against climate change, with world leaders coining it an ‘environmental Armageddon’.
For businesses, this urgency is now being communicated most prominently by worried customers. With increasing regularity, customers are refusing to purchase from businesses that are not sustainable or ethical in their practices. This trend has been accelerated by COVID-19, with 37% of UK and Irish shoppers now more conscious of their impact on the environment since the pandemic.
As customer priorities change, businesses have to adapt. The risk-reward dynamic is clear for business leaders: either they improve and expand their sustainability initiatives, securing a new segment of customers, or they stand still, losing both their competitive edge and existing customers in the process.
Why are investors so important?
Tipping the scales further in the direction of ‘reward’ is the increasing prevalence of sustainable financing. This initiative entails investors taking environmental, social and governance (ESG) considerations into account when providing businesses with investment. We know now that businesses that operate sustainably will be rewarded by investors – Chanel is a great example. The designer fashion label recently raised its first sustainability-linked bond with BNP Paribas. In line with sustainable financing, Chanel will only have to pay a premium on the bonds if they fail to meet their sustainability goals, which include ambitious Science-Based Targets like shifting to 100 per cent renewable electricity in its operations by 2025.
Businesses that don’t adapt face the ultimate risk of losing the support and financial backing of their shareholders. This is because the statistics show that public sentiment is rapidly shifting towards sustainability, which is being reflected in their shopping habits. 73% of customers are now expecting online businesses to minimise packaging and use recyclable packaging where possible. Pure and simple, businesses that fail to align their practices to these expectations will lose customers. This will only get worse as time goes on and customer attitudes continue to shift. Surprisingly enough, this isn’t a sustainable business model that shareholders want to back. Instead, they will take their investment elsewhere.
