COP27 – businesses see the financial benefits of going green
SAP study shows shift in business attitudes to sustainability
One of the frustrations with trying to go green is how much easier and often cheaper it is to just harm the planet. Whether it’s the extortionate cost of train tickets compared to driving, or the convenience of buying plastic-wrapped pasta rather than finding a refill store, often it can seem just too expensive or inconvenient to protect the planet.
However, attitudes are starting to shift. According to The Global Sustainability Study from Simon-Kucher & Partners, 85 percent of people have shifted their purchasing behaviour towards being more sustainable in the past five years. Thirty-four percent are now willing to pay more for sustainable products or services, and would accept a 25 percent premium on average.
This is even more prevalent among younger generations. Around four in 10 Generation Z and Millennials are willing to pay extra for sustainability, compared to just 26 percent of Baby Boomers.
People are also seeking out environmentally friendly suppliers. Research from Ensono Digital reveals that seven out of 10 consumers would be encouraged to buy from a retailer with environmental and sustainability initiatives in place, and would show that brand more loyalty. Buying from sustainable and environmentally responsible brands is the second most important factor in choosing where to make purchases, after customer service.
Going green also has benefits for marketing and recruitment. Almost a quarter of millennials would be happy to part with personal data to offset waste potentially incurred alongside their purchases, regardless of what this could entail.
Meanwhile, 71% of employees and job seekers rate environmentally sustainable companies as more attractive employers, according to an IBM Institute for Business Value study. Over two-thirds are more likely to apply for and take jobs at environmentally and socially responsible organizations, while almost half would accept a lower salary to work there.
As the willingness among individuals to take a personal hit for the planet increases, so awareness is rising among organizations of the benefits. Ahead of the COP27 climate conference in Egypt, SAP released its second annual Sustainability Report. The report reveals that 88 percent of UK businesses now see a positive link between environmental sustainability with their ability to be competitive in the future, a jump of 19 percent compared to last year. Meanwhile, two-thirds say addressing environmental issues will be material to business results within the next five years.
Greenwashing also seems to be decreasing. Only 15 percent of respondents cited media coverage as a reason to take positive steps for the planet. Instead, almost half of business leaders cited customer demand as a driver. Thirty-eight percent said their sustainability measures were driven by the potential for revenue generation, while for just over a quarter, it was down to the potential risks to financial results of inaction.
Businesses are less likely now to believe that being kind to the planet will cost their bottom line. Compared to last year, 57 percent fewer leaders think environmental action will adversely impact their financial results.
Better data needed
One area where businesses are hampered in their sustainability efforts is data. Only eight percent are completely satisfied with the quality of their data, a significant drop on 15 percent last year. A third rely on assumptions and estimates, rather than facts, when working to address climate change, while 23 percent doubt their ability to accurately measure their impact on the environment.
Stephen Jamieson, Global Head of Circular Economy Solutions at SAP, attributes the drop in satisfaction around data quality to a broadening of the horizon. They said:
It's having to understand just how much intelligence you need across your Scope 3 emissions, for example. Organizations that felt they had that under control over the last couple of decades are now realizing that with a new wave of standards and directives, that approach is no longer good enough. The magnitude of the gap is becoming clearer.
The pace of new regulatory interventions is picking up, and they're multifaceted, making it harder for organizations to cope. These include the EU Corporate Sustainability Reporting Directive (CSRD), which requires businesses to start managing disclosures in a more sophisticated way from 1 January 2024; the International Sustainability Standards Board (ISSB) directive that came out of COP26, a set of global guidelines on corporate sustainability disclosures; and new plastic taxes in the UK and Spain. Jamieson said:
There's a lot more clarity in terms of what's needed and a lot more appreciation of the size of the challenge. Where for much of the last 30 years it's been okay to work based upon the average factors for different sustainability metrics, it’s clear that’s no longer good enough. There's a broad awakening that much more needs to be done and as a result, a realization of just how big the gap is.
The new plastics tax in Spain means businesses are now having to rely on their data about packaging materials to ensure they have declared the right amount of tax. Jamieson added:
That's not something an organization could get wrong. We have hundreds of customers in Spain who are very actively working with us to tackle that problem for them. It's a complex challenge to deal with the calculation of the tax, how to ensure you've got the right quality of data on recycled content packaging materials, how you can integrate that back into your core processes to ensure the right information is going into pricing and invoicing, as well as making sure you’re compliant with customers processes.
And that’s just one scheme in one country. He said:
We're tracking 450 at the last count, so it's a really significant shift. We also have the UN plastics treaty coming in 2024, and that will galvanize increased focus.
Regarding COP27, which ran from 6-18 November in Egypt, Jamieson was positive about the outcomes from the climate conference. He said:
There's been this real drive to abolish greenwashing and to drive greater transparency on organizations that are making net zero pledges. That's a really useful intervention because we're very much about how we support businesses’ drive for transparency and providing clarity on how businesses are governed and how they're able to report on key sustainability criteria.
He also welcomed the announcement from the White House, requiring all suppliers to disclose their environmental data via CDP. Jamieson added:
That's a really encouraging initiative for such a world-leading buyer of services, to make such a market-changing commitment in such a key region can only help accelerate change that's needed.
Ahead of COP27, SAP CEO Christian Klein was one of the 102 signatories to a letter calling for governments to work with business leaders to speed up the transition to net zero. The Alliance of CEO Climate Leaders counts CEOs from Dell, Hewlett Packard Enterprise, Microsoft and Salesforce, as well as SAP, among its members.
SAP is taking a multi-pronged approach to fighting climate change within its own organization. Earlier this year, the company announced it is accelerating its net-zero commitment to 2030 instead of 2050. Its next milestone is 2023, when SAP aims to be carbon neutral in its own operations.
SAP has been using 100 percent renewable energy for its own data centers and buildings since 2014, while its cloud solutions also run with 100 percent renewable electricity. The firm has also pledged to plant 21 million trees by the end of 2025.