ESG-whizz! The case for sustainable business has well and truly been made.

Master of Commerce student Lachlan Finch is a winner of the 2022 Natoli Student Ethics Competition for a postgraduate student.

“ESG-whizz!” – it’s a fair response to the overwhelming evidence stacked in favour of running businesses sustainably – not just for greater profit, but for security of funding, management of risk, consumer confidence… the list goes on.

But how do we frame “sustainability” in the practice of business, you ask? Great question. The almost universal answer you’ll receive is the UN’s Sustainable Development Goals or “SDGs” - a list of 17 pursuits geared towards make our global society more… well, sustainable! ESG goal posts, United Nations style.

Not only is it possible for businesses to kick between these goal posts, it is downright better for them to do so: and the proof is in the pudding (a sustainably sourced pudding of course). Investment in sustainability is growing at an unrivalled pace, public companies making strides with ESG are avoiding massive investor headaches experienced by their peers, and even during market downturns ESG equity funds writ large are proving more resilient than the rest. Talk about sweet!

Want a home-grown example? Say no more. Introducing ASX-listed market darling Vulcan Energy Resources (ASX:VUL). Vulcan is becoming the world’s first lithium producer with net zero greenhouse gas emissions, decarbonising EV supply chains in the process: that’s profit + purpose from the get go. But it gets better: Vulcan is certified as carbon neutral under Australia’s climate active standard, it’s Zero Carbon Lithium™ Project has been deemed not just carbon neutral but carbon negative (!), and the firm’s entire sustainability framework is specifically underpinned by 10 of the 17 UN SDGs. The results are astounding: a project NPV of €2.256B, enormous success raising cash from investors, and a share price appreciation of over 1,600% in less than 2 years.

Case closed.

Tempestuous world: the urgency to addressing climate change and SDGs for business entities

by Yuhan Wang

People face ethical dilemmas from time to time, and most of them seem unsolvable. Regardless of how much effort you make, the problem continues. One dominant example is the climate change issue: not only are humans running out of time to curb the upcoming global upheaval, but any actions to change current business also confronts severe ethical challenges. We increasingly hear the voices of changing the status quo but often have no clue what future firms should look like.   

Our society must understand that only businesses that are sustainable and align with high ethical standards deserve a place in the future where sustainable development goals guide humankind weathering through an increasingly boiling planet. The notion of mass consumption, the object of corporate profit maximization, and the definition of successful business shall warrant a complete overhaul.  Australia has already become the global frontline of the climate crisis, and entities operating on this red island need to devise more sustainable ways to echo the United Nation's SDGs initiative. Perhaps more importantly, they need to realize the limited and carbon-dense fossil fuels are not the way to go. AGL Energy Ltd, one of Australia's largest greenhouse gas emitters, has published a pathway to carbon neutral by 2050 and gradually phasing out its coal-fired power stations. This should serve as a clear road sign for other entities that the ethics of future generations are indispensable.

When facing an imminent tempestuous world, the longer we wait, the more appalling outcomes will happen. The best time for businesses to take action toward sustainability and to operate more ethically is now. Demand has already been here: research has shown Australians want ethical and sustainable products with a landslide. Sydneysiders are very likely to pay more for a net-zero flight to London than current Qantas stopovers.  

The Worth of Women

by Diana Shen

Purpose and profit are often viewed as dichotomous, yet a marriage between the two should be strived for, as profit is the result of purpose.

The SDGs represents the world coming together to enhance the livelihood of our society. The rising significance of sustainability has prompted businesses to consider how to address existing and future societal issues.

Economic sustainability is making financial resources accessible to meet the needs of everyone. The 5^th SDG is gender equality, and inequality for women in the workforce has never not been an issue.

Female talent are one of the most underutilised businesse resources. In finance, women at an executive level is merely 15%. Alongside women being underrepresented in finance, women are not expected to reach pay equality for the next 43 years. Gender wage gap and the difference in representation in higher management positions are what stirs inferences that women are less capable. These issues exacerbate existing stigmas and spirals the underrepresentation of females in the workforce.

Westpac is just one of 4 ASX20 companies near 50% women in managerial positions. This target was emplaced in 2017 and has been upheld ever since. Furthermore, many of Westpac’s other policies break down outdated societal stigmas such as its paid parental leave being gender neutral and its gender transition leave to provide support for people coming back with a gender identity at work. This accepting work culture this will prevent existing and future gender discrimination. Westpac has identified that the large gender wage gap is caused by occupational segmentation as men dominate higher paid positions such as IT whereas women take up mostly lower paid positions in branches. Shifting this occupational skew will require time, but through this SDG education institutions may incorporate more STEM into curriculums to provide women as much opportunity as possible.

Sustainable Business - An Oxymoron?

by Soham Pathak

As the earth heats up, freshwater becomes a scarce commodity, access to food remains uncertain, and other fields of concern emerge or aggravate further, it becomes evident that humanity must take prompt, stern measures to get its act together. Since most enterprises had hitherto neglected the adverse impacts of their operations, the corporate world is often deemed the primary cause of the natural and socio-economic imbalances that society faces today. Thus, a significant portion of the responsibility of hauling the planet out of its predicament rests on business houses. To assist them in their endeavors and provide benchmarks for evaluation, the Agenda for Sustainable Development was adopted by the United Nations.

However, with every novel concept comes its share of cynics, with every epiphany, its unwavering opposition. Whether the business world can reform itself and wash its soot- covered hands of its previous sins leads to doubts and dilemmas, given that most companies still consider ‘sustainability’ a luxury investment.

I think Interstellar’s Cooper puts it best:

Case - “It’s not possible.”

Cooper - “No. It’s necessary.”

Take Woolworths. The company releases an annual sustainability report, highlightingactions taken to orient itself towards the environment and improving working conditions, among other things. The enterprise’s objective of eliminating food waste to landfills by 2025, leading it to establish the Countdown Food Rescue Summit, addresses the second, twelfth and seventeenth SDGs. With many such endeavors, Woolworths is treading towards becoming a sustainable company by 2025.

 

Shifting towards sustainability isn’t easy, but then again, organizations like Woolworths aren't achieving the impossible; they’re merely proving that an amalgamation of economy, ecology and society is indeed possible with slight tweaks in managerial attitudes and organizational goals.

Hence, the question posed to business houses isn’t an ‘If.’

It’s a ‘How’.

Are being sustainable and profit-driven mutually exclusive?

by Katharine Pang

It is common to forgo sustainability for profit, but it is changing with the shift of shareholders’ interest towards corporate social responsibility (CSR) and growing shareholder value due to implementing CSR. Therefore, it is possible and in companies’ interest to be sustainable.

Coles Group Limited is a typical case where achieving SDGs can lower long-term cost as evident in its rising profit to more than $1,000 billion. Economically, it creates a circular economy to attain the SDG of responsible consumption and production. For example, its partnership with REDcycle encourages customers to return plastic packaging and convert them into hand sanitation stations. Coles continues to sell plastic-packaged products, but recycling waste reduces greenhouse gas emissions and possibly cut cost. Socially, being recognised as the excellence award finalist in the best health and wellbeing program in Australian Human Resources Award, its engineering controls in waste management equipment and mental health programs investment promotes safety and well-being. A 15.7% improvement in Total Recordable Injury Frequency Rate further proves the worth of social investments in reaching the SDG of health and wellbeing, increase productivity and minimise medical claims. Environmentally, its purchase of renewable energy and distribution of grants to support suppliers and small organisations using solar energy significantly reduced their greenhouse gas emissions by 2.2% to achieve the SDG of Climate action and combat climate change. Buying renewable energy is expensive but cost-effective by saving electricity bills. 

As evident in Coles Group Limited, being sustainable and profitable are not mutually exclusive. It also mitigates existing and future risks such as expectations to be responsible citizens and tightening environmental laws. Aligning purpose, that is SDGs and profit brings lasting benefits for corporations and society.

Sustainability: A Reflection of the SDGs in Our Current Business Context

by Amber McCully

Society is moving towards an economic future where investors are looking for sustainable practices within organisational culture that meet the requirements of the triple bottom line. Thus, companies are increasingly looking for inspiration from sources such as the SDGs towards aligning their purpose and profit to meet these needs. Therefore, sustainability is achievable for businesses, however the difficult aspect is prioritising societal goals whilst still attempting to maximise profits.

Consequently, it can be argued that in some circumstances, integrating the social, economic and profit goals of a business is more effective than having separate goals in achieving sustainability. Examining the Australian company, Social Enterprise Finance Australia (Sefa), demonstrates the alignment of purpose and profit. Sefa offers a range of lending services to “purpose driven organisations,” showing they embody the “promotion of decent work and economic growth”. They even state “We walk beside you on your path to becoming a sustainable organisation,” in their company values. Their current “partnerships for the goals” mirror the SDGs, proving their directional influence on this business. Sefa contributes to community employment and training services, healthy food access, environmental support, Indigenous development, disability support and affordable housing. They have achieved this through working with organisations such as WWF Australia, LMCF (for building affordable housing), the Aboriginal Land Council NSW and the NSW Council of Social Service.

Therefore, the SDGs are clearly reflected in Sefa, as they have wholly integrated the concept of sustainability into their company ethos. A consideration for Sefa may be to extend some of their partnerships to contribute to global sustainability as well as local Australian sustainability. This is because international investors may find it more relevant to their personal situation which would increase economic profits and may result in other financing companies to integrate the SDG values as thoroughly as they have.

Profit and Purpose - a balancing act that corporations need to get right.

by William McCredie

Environmental impact, social change, and consideration of the Sustainable Development Goals. These factors now more than ever are taking a prominent role in consumer decision making, presenting a growing challenge for businesses - dollar voting. With the widespread use of the internet and social media, information can be liked, reposted, retweeted, upvoted, and shared around the world in seconds. This rapid exchange of information has helped mobilise activism at unprecedented levels, with campaigns such as Black Lives Matter, School Strike for Climate, and even movements such as ‘Cancel Culture’.

With more consumer alternatives available, corporations find themselves at a crossroads - adapt their business model and meet the rapidly changing demands of the modern consumer, or fall out of relevance and be overtaken by competitors.

Take HESTA for example, an Australian Superannuation fund for healthcare and community service workers. They have overhauled their investment priorities in order to create substantial and meaningful change for society, such as dropping all investment into tobacco back in 2013 and being the first major superfund to commit to net zero emissions by 2050. Since realigning their principles to have a more ESG-centric focus, they have attracted new consumers and scored the highest customer satisfaction rating among industry funds in 2021. It is companies like HESTA that have recognised that ESG considerations must not merely be a factor in making changes to a business model, but must now be one of the key foundational pillars that underpin a large part of their operations.