Environmental responsibility allows business success

Environmental responsibility is linked to business success – true or false? True, say we! And for many reasons. Environmental responsibility is increasingly a requirement of consumers, employees, financiers, partners and tenders. Research shows that responsibility also has a positive effect on the evolution of the organization’s share price.

Environmental responsibility is often seen as nothing but necessary evil and a requirement that gives nothing back. In fact, investing in environmental responsibility has several tangible benefits, which we list here in this article. It is naturally good to keep in mind that responsibly operating businesses take into account ESG values (environmental, social and governance). Without considering these values, succeeding in business becomes more and more challenging, even impossible.

Even according to research, corporate responsibility has its benefits. For example, according to a 2015 report by the University of Oxford and the investment service company Arabesque, 88 per cent of the material out of +200 studies showed that sustainable practices positively affect the evolution of business share price. Responsibility, therefore, has a genuine competitive edge, and its effectiveness is based on how well the company responds to the wishes and demands of its stakeholders.

Environmental responsibility required by consumers and employees

For many consumers, the responsibility of a product or service is one of the factors influencing a purchase decision. According to a 2019 survey by the Association for Finnish Work (Suomalaisen Työn Liitto), 80 per cent of respondents aged 25-79 and 81 perc ent of respondents aged 15-24 either fully or somewhat agreed it is important for a provider to demonstrate operational responsibility. It is thus fair to say that should a business wish to remain in the favour of consumers, it is worth investing in responsibility. 

The same applies to employees. The employer’s social responsibility has weighed on the decisions of many employees for a long time. Nowadays more and more employees are interested in their employer’s environmental responsibility as well. It is challenging to engage and hire new employees if the values and actions of the employer do not match those of the employee.

Ympäristövastuu
Ympäristövastuu

Environmental responsibility required by financiers and investors

It is no use to even dream about financing if the responsibility issues in your business are not in order. Large financiers specifically on the public side can use their criteria to steer business life in a more sustainable direction. For example, the European Union, Business Finland and Finnvera take certain responsibility criteria into account when granting funding. Financiers have to map the risks of the business seeking financing, including environmental and social risks in addition to financial risks. For example, Finnvera aims to assess the environmental and social risks of all its applicants for the Export Receivables Guarantee.

According to a 2021 report by RBC Global Asset Management, 96 per cent of European investment industry players base their investment decisions on ESG values. Many private investors – guided by their values ​​and in the hope for good profits – favour companies whose responsibility issues are in order. According to the results of the Hanken School of Economics 2021 survey, 60 per cent of private investors who responded to the survey confirmed that they consider ESG information when making investment decisions.

Environmental responsibility required by partners and tenders

Environmental responsibility is becoming of particular importance also in tenders. The Finnish law on public procurement mentions that the law aims to take environmental and social aspects into account in public tenders. This phenomenon is not only seen in public tenders but also private companies are focusing more and more on responsibility criteria when choosing partners because a business that strives to operate as responsibly as possible must take ESG values ​​into account in its entire supply chain.

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