In our live-for-the-moment society, sustainability and entrepreneurship are two goals that are rarely pursued together. This is unsurprising because the prevalence of maximum-profit orientation places significant emphasis on ideals other than sustainability – the long-term guarantee of enterprise success and even earth’s sustenance.
Entrepreneurship is an important facilitator of human progress as it encapsulates the “creation and extraction of economic value” for human consumption. Considering the limited availability of natural resources, integrating sustainability frameworks into entrepreneurship models should be a top priority.
Sadly, the reality is different. By way of example, the European Commission and national consumer authorities in early 2021 reported that 42% of online businesses investigated were found to be greenwashing (a situation where a company falsely claims to produce eco-friendly products or services). Similarly, a recent Harris poll for Google Cloud published in April 2022 revealed that 58% of CEOs surveyed around the world admitted to marketing themselves as sustainably led whilst not executing sustainable practices. The greenwashing trend is troubling because while sustainability is regarded by many businesses as a roadblock, it is a proven catalyst for entrepreneurship.
One of the foremost reasons why sustainability is critical for entrepreneurship is that eco-friendly practices enhance business financial performance. In a recently published study involving 150 senior executives globally, IT services management firm Genpact found that businesses of senior executives who strongly agreed that their organizations were driven by environmentally sustainable practices (58%) outperformed the businesses of the other respondents (40%). Ernst & Young (EY) in 2021 also found that sustainable companies outperformed industry peers on gross profit, EBITDA, EBIT, and net profit metrics by up to 6.3 percentage points for 73% and 61% of the industries studied.This finding does not come as a surprise because several other studies have long established sustainability as a key factor for entrepreneurship success. For instance, McKinsey & Company 2014 spotlighted a Deutsche Bank study that found companies with high ratings for environmental, social, and governance (ESG) factors to face a lower cost of debt and equity and outperform the market in the medium (three to five years) and long (five to ten years) term. On the other hand, unsustainable practices have been noted to impair the long-term competitiveness and financial performance of businesses, and industries that engage in them. The “open secret” for businesses focused on sustainability is that they tend to be more innovative, regulation-complaint, understand customer needs better, and align business practices closely with shareholders’ values.
Beyond the benefits to the bottom line, promoting sustainable entrepreneurship practices is the surest path to creating inclusive work opportunities and ensuring economic prosperity for all. The International Labour Organization (ILO) estimates that 24 million new jobs can be created globally by 2030 if the focus on sustainability is strengthened. Similarly, the UN’s Business and Sustainable Development Commission projects that businesses could make $12 trillion and create 380 million new jobs in the next 15 years by integrating the goals of sustainable development into their strategies. Given that sustainability frameworks ensure that economic opportunities are inclusive and accessible to the broadest pool of talents, economic growth and overall quality of life tend to significantly improve when the frameworks are implemented.
Another key point to note is that a sustainability focus can enhance brand perception and sustain business value in the long run. The adoption of eco-friendly ways of doing business can be a core driver of a business’ strategic positioning and competitive advantage within an industry. The World Economic Forum in March 2022 reported that 75% of Generation Z (the emerging workforce population) prefer to buy sustainably rather than to go for brand names. What is more intriguing is that Generation Z inspires “other age groups to act more sustainably”. Entrepreneurs concerned about keeping pace with building long-lasting products can be rest assured that eco-sustainable practices pay.
Although there are a lot more reasons for making entrepreneurship sustainable, it is not enough to only highlight the benefits. One major hurdle to achieving sustainable
entrepreneurship is the poor implementation of strategies and frameworks that would enable environmentally responsible production activities. Experts at the International Institute for Management Development (IMD) identify this as the “knowing-doing gap” – the awareness of sustainability issues and failure to incorporate sustainability in business strategy and model. In my experience, some of the factors behind the phenomenon are the significant upfront investment needed in rewiring business processes to be more environmentally friendly, the lack of corporate willpower, poor education on execution techniques, and concerns that the inability to fully implement green strategies might result in negative risks to the business.
My recommendation is that there should be a comprehensive approach to addressing sustainability in entrepreneurship that would accommodate not only the big corporates but Micro, small and medium-sized enterprises (MSMEs), which account for 50% of global GDP and employ up to 70% of labour. In practice, this would include the creation of incubators, accelerators, and funding programs that would train and enhance the capacity of smaller businesses to participate actively in sustainable entrepreneurship.
Also, frameworks for evaluating sustainability practices should be modified to allow companies to take steady progressive steps rather than huge leaps to remodel their businesses. At the same time, governments must work to provide the right incentives for entrepreneurs to go green.
The conversation around entrepreneurship and sustainability is one about the long and lasting repercussions of our economic activities today. The recent events of record-high heat waves in the UK, flooding in some parts of Nigeria, and other weather mishaps around the world serve as a scorecard to remind us of the need to rethink how we engage in production and consumption activities. Climate action is a matter of urgency, and we must act now to build a sustainable future.
Chukwuemeka Idam is social. Follow on Instagram @Mekkha, LinkedIn on @Chukwuemeka Kelvin Idam, and Twitter @Mekkhanik
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