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Competitive sustainability

Why now is the time to become sustainable?

 

Sustainability, sustainable development, corporate responsibility

Sustainability, sustainable development, corporate responsibility. These words have become increasingly common amongst businesses to display actions for commitment on becoming more sustainable. However, are the words simply buzzwords reflecting the trends or do the words actually pose some truth in them?

Looking back at history, the idea of becoming sustainable was to sustain resources for future production and long-term profitability of a business. As time passed and resources became more available through the advancements of technology, countries’ GDP and welfare grew significantly in a relatively short time. However, the resulting advancements have led to new challenges: climate-change, changing social values and information security to name a few. External and internal stakeholders push businesses to adapt to these changes, and stakeholders have become apparent influencers on supply and demand for products and services.

Finnish bank Nordea committed last February to reduce its investment and credit portfolio’s carbon footprint by 40-50% by 2030, which means that the bank’s credit customers will face tighter requirements for carbon emissions reporting. Banks and financial institutions have realized how unattended environmental and legislative risks can have significant setbacks in terms of legal and reputational scrutiny, resulting in lower income cashflows and increased costs.

LinkedIn reported in January that of the 15 highest demanded roles, experts on workplace diversity were the fifth most requested. Civil protest on racial and social issues in the United States have sparked a global demand for companies to take actions on social concerns. Left unattended, the social justice movement can have significant effects on recruitment, income and business reputation. In addition, the disparity between words and actions has become more apparent: more words than actions leads to scrutiny, and scrutiny decreases reputation and competitive edge.

In addition, discussions on information security and customer data usage have presented new risk aspects. Major customer privacy violations can lead to significant fines as we saw with Facebook’s 5 billion USD fine in 2019. However, the negative effects on customer privacy and product/service quality management do not solely remain in legal disputes and fines. Messaging apps have faced troubles over misuse of customer’s data, which has resulted in users changing from one platform to another. On small a scale, the financial effects can be minimal but when over 10% of users move away from your platform, the effects can be devastative.

The current trends of external and internal stakeholders have pushed a surge for sustainable actions inside companies resulting in new demand for legislation, non-financial reporting, communication, and consideration of workforce and customer privacy. Unattended, these aspects can results in lower credit ratings, increase in legal disputes, loss of customers, decrease in income cashflows, increase in costs and, what has become more apparent in the last couple of years, a decrease in long-lasting business partner relationships.

Now is a good time to look at different risks to the business and consider; what do I have to do to make sure my business lasts for a long time?

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