First the coronavirus, now sustainability. A new challenge in the globalised economy that can make or break future industry leaders. Will sustainable products be enough, or will companies have to re-build their business models?
Oxford’s Dictionary offers two definitions for the word sustainability. The first definition states that sustainability refers to: “the use of natural products and energy in a way that does not harm the environment”. The second definition defines sustainability as: “the ability to continue or be continued for a long time”. For the future consumer, both are important and closely intertwined. We are slowly approaching the holiday season when consumers usually start spending money like water. However, this year and in the years to come, the traditional holiday spending spirit is expected to slowly fade. Even though consumption in this year’s holiday season will most likely contract due to the poor global economic performance, some of the deficit will be connected to the shift in consumer behaviour. A shift towards sustainability.
According to an article published by Intrum, nearly 50% of Europeans said they were encouraged to limit their spending due to their growing interest in sustainability. The trend is especially significant with women and younger generations. This shift is a result of a growing number of debates over how much people consume and how such habits negatively impact the environment. More and more consumers are beginning to see the bigger picture as the number of activists is growing, even among politicians, celebrities, and world leaders.
A shift in consumer behaviour will have to be recognized by retailers and also producers. Not only will retailers be expected to provide consumers with sustainable products but will also have to re-design their entire supply chain. Meaning, they will have to seek new suppliers, and very closely monitor their production. The challenge will of course not end here, companies must also think about building their entire business models around sustainability in order to meet the demands of future consumers. Additionally, companies will not only be challenged by their customers, but also by investors where sustainability is becoming the focal point of many sovereign funds, private equity funds and portfolio managers.
Lastly, regulators are joining the initiative of sustainability. EU law requires large companies to disclose information on the way companies operate and manage social and environmental challenges. Such information must be disclosed in the non-financial part of large companies’ annual reports from 2018 onwards. The goal of the directive is to helps investors, consumers, policymakers and other stakeholders to evaluate the non-financial performance of large companies and encourages these companies to develop a responsible approach to business.
Sustainability shift is inevitable and has quite some time been in the making. For business, it poses challenges. The fittest will thrive, but for some, this shift will eventually end in tears.
This article was written by the team at ALPHA CREDO
Intrum, (2020, November 24). Black Friday: 1 in 2 Europeans say sustainability motivates them to limit their spending. Retrieved November 26, 2020, from https://www.intrum.com/press/news-stories/black-friday-1-in-2-europeans-say-sustainability-motivates-them-to-limit-their-spending/