Businesses urgently need to address their exposure to resource challenges in order to future proof their companies in a resource-constrained world, a new report from the Carbon Trust has urged. Investors should also consider how sustainable their investment are as it can improve returns.
As the effects of climate change take hold, businesses will face challenges such as the increasing scarcity of land, energy, water and materials. The organisation estimates there will be a 40% gap between available water supplies and needs by 2030. It also notes that whilst there is sufficient land to feed earth’s growing population large efficiency gains are needed.
However, these issues remain largely unaddressed meaning that businesses and investors are unnecessarily exposed to risks. The report adds that the majority of companies have yet to understand what sustainability really means beyond carbon emissions or why considering resources is important. “Even fewer businesses seem to recognise that proactive engagement with sustainability has the potential to drive value”, it states.
Carbon Trust measured the returns on investment in over 2,000 companies. The analysis found that for energy efficiency measures the average internal rate of return is over 40%. This compares with 10-15% returns from ‘typical’ business investments.
Tom Delay, chief executive at the Carbon Trust, said, “Our report clearly shows that businesses which proactively put sustainability inside their operations have the potential to drive business value by reducing exposure to the resource crunch.
“To protect our economy, our environment, and the resources available to future generations, we need today’s businesses to recognise the severity of these threats and adapt their business models for future growth.”
The key drivers found to be motivating businesses to become more sustainable and resource efficient included competitive differentiation, industry leadership and new growth opportunities.
Multinational hotel, coffee shop and restaurant company Whitbread was highlighted as a leading company that demonstrated that the long-term advantages of sustainability outweigh the immediate costs. The business is now investing £4m per annum in energy and resource efficiency.
Chris George, head of energy and environment at Whitbread, commented, “As consumers become more discerning it’s not enough to do the bare minimum when it comes to sustainability. We see our sustainability strategy as an opportunity, not a compliance exercise, both in terms of future revenue and protecting existing value.”