What is Sustainability?
Sustainability means using resources to meet current needs without compromising the capacity of future generations to meet their needs.
Sustainability involves making the world a better place by preserving resources over the long-term. A sustainable business is eco-friendly, socially conscious, and financially viable. Adopting sustainable business practices can bring benefits like lower costs and a competitive advantage but may require a high initial investment. A company can become more sustainable by reducing energy use and carbon emissions, among other things. Sustainable investing is an investment strategy that considers environmental, social, and governance factors. In 2015, the United Nations set 17 sustainable development goals to address global challenges and improve quality of life by 2030.
Apple has made major strides in sustainability. Since 2018, all of the tech giant’s data centers, stores, and offices have run on 100% renewable energy. Apple reduced its carbon footprint by 35% between 2015 and 2018. All the paper in its packaging comes from recycled or renewable resources, and the company is creating or protecting responsible managed forests to offset its paper consumption. Apple also encourages volunteering and charitable giving among employees. For each hour or dollar an employee donates to a charity, Apple gives the same amount. In 2018, Apple and its employees donated more than $125 million and volunteered more than a quarter of a million hours.
Sustainability is like always having eggs to eat…
If you own chickens with the goal of having fresh eggs to eat, you must not eat all the chickens. If you do, there will be no more chickens to produce eggs, so you’ll eventually be unable to eat either eggs or chickens. If you make sure you always have enough chickens to give you eggs, that’s sustainable. The same holds true for our planet: If we consume every resource, we’ll run out of resources one day. Sustainability helps ensure we always have enough.
Sustainability aims to preserve resources to ensure the survival of future generations without sacrificing social and economic development. The idea is that if we act responsibly, our planet will be able to support the people that come after us.
Sustainability is a new way to look at the relationship between environmental damage and societal progress. It addresses how human societies and economies can grow without destroying or overexploiting the environment.
We use the planet’s resources every day to produce cars, computers, and pretty much everything we need. However, the earth has limited resources, and our common future depends on managing them successfully. The global supply of natural resources is declining dramatically, while the demand for them is rising. From pollution to resource depletion to climate change, the human footprint on the natural environment is growing — That’s not sustainable.
Every choice we make can have an impact on the environment and worsen resource scarcity (limited availability). If you wonder if something is sustainable, you can ask yourself: “Can I do this over and over again forever?” If the answer is no, it’s not sustainable.
Reusing or recycling products can contribute to sustainability. For example, throwing away plastic bags contributes to pollution, since plastic takes several years to decompose. Bringing reusable bags to the grocery store means fewer will need to be made and thrown away.
While sustainability is a long-term goal, sustainable development refers to the processes needed to get there. This may involve things like building energy-efficient offices and recycling garbage.
The concept of sustainability has three pillars, and an activity or company is sustainable when it incorporates them all: Environmental (or planet) Economic (or profit) Social (or people)
Environmental sustainability: Conserving resources, using sustainable agricultural practices, reducing greenhouse gas, replacing fossil fuels with renewable energy, protecting natural spaces, and preserving wildlife fall under this pillar.
Economic sustainability: This involves balancing profits and wealth with acting responsibly. A company looking to become sustainable should manage with a long-term view and not seek profit at the expense of the planet or people. Sustainability can actually bring economic benefits. For instance, reducing waste can reduce costs, and reusing products costs less than using new ones.
Social sustainability: This pillar aims for the well-being of all. Promoting community and human rights, eradicating poverty, promoting social equity, and protecting public health are part of this pillar.
In 2015, the 193 member states of the United Nations adopted the 2030 Agenda for Sustainable Development. This included 17 Sustainable Development Goals (SDGs) and 169 targets to achieve by 2030. Each of these encouraged action in areas of critical importance for the planet and human life. They aim to end poverty, reduce inequality, tackle climate change, and promote peace. Here are the 17 SDGs:
A sustainable business strategy tries to reduce harm to the environment and society. The goal is to ensure future generations will have adequate resources to meet their needs. Sustainable companies sometimes have a competitive edge, since many investors, customers, and job seekers pay attention to corporate social responsibility.
A sustainable business model requires leaders who look at more than the bottom line. They adopt managerial strategies and decision-making that integrate economic, environmental, and social concerns. This creates a triple bottom line.
True corporate sustainability isn’t just about reducing negative impacts — It’s also about creating positive effects. A sustainable company actively contributes to solving the world’s sustainability challenges.
Starbucks is one example of a business promoting sustainability. More than 99% of its coffee is ethically sourced. The coffee giant has offered a $10M grant to innovators who can create a coffee cup that’s easier to recycle and will end the use of plastic straws by 2020. Starbucks also has a goal of building and operating 10,000 greener stores (using wind and solar energy) around the world by 2025. The company has also committed to donating 100% of unsold meals to local food banks.
For a business, prioritizing sustainability has pros and cons:
Drives innovation: A sustainability strategy requires a new way of thinking and doing. For instance, companies might need to use new technologies to develop greener products.
Boosts the bottom line: Companies can lower facility and energy costs by using the life cycle approach — Reduce, reuse, recycle, and rebuy. Sustainable products can also generate extra revenue or create new businesses.
Reduces waste: By using resources more efficiently, companies can produce less waste, which cuts costs.
Attracts top talent and investors: Sustainable companies can build a strong brand with a positive reputation. This can attract employees and build their loyalty to the company. Some investors also focus on companies that act in the public interest.
Creates a competitive edge: Customers are becoming more aware of sustainability issues and may be willing to pay more for green products.
Long and complex process: Moving toward sustainability can take a long time and be challenging.
Modest earnings in the near-term: A company adopting sustainability initiatives should see long-term earnings improve. But earnings may be smaller in the short-term due to the initial investment.
Requires a radical change in mentality: Some people are resistant to change, even if it’s for their own good.
Can be expensive: Implementing sustainable processes can be costly at first. Not all companies might have the money to adopt more eco-friendly practices.
Can lead to lost jobs: Industries that are viewed as less sustainable (like the coal industry) may shut down, leading to layoffs of many workers.
Sustainable (or socially responsible) investing implies looking closely at a company’s environmental, social, and governance (ESG) practices before investing in it. Here’s a short description of each of these factors:
Environmental: A company making efforts to lower its environmental impact will score high on this factor.
Social: A company that maintains good relationships with employees, suppliers, and customers will do well here.
Governance: This factor is about how a company is managed. Governance looks at things such as the independence of the corporate board, the management of corporate risks, and the way executives are paid.
Sustainable investing allows you to put your money into companies whose values, behaviors, and beliefs match up with yours. For example, you could choose not to invest in tobacco companies and to buy shares in solar energy firms.
Many investment managers are already taking ESG factors into consideration. Some studies show that this investment strategy can reduce risk and potentially generate higher returns. An easy way to invest in sustainable companies is to buy a sustainability exchange-traded fund (ETF) (fund trading on a stock exchange) or a mutual fund (pooled money to buy a mix of securities). That way, you can hold a basket of sustainable companies and diversify your risk.
What is Scarcity?
What is Revenue?
What is a Mutual Fund?
What is an Exchange Traded Fund (ETF)?
What is Profit?
What is an Income Statement?
What is a Balance Sheet?
What is the Stock Market?
What is Forbearance?
Forbearance is an agreement between a borrower and a lender where the lender allows the borrower to postpone payments on debt temporarily.
What is the Earned Income Tax Credit (EITC)?
The earned income tax credit (EITC) is a tax credit available to working individuals with an income that falls under a specific threshold.
What is a Debt Ratio?
Debt ratio measures a company’s debt compared to its total assets — an indication of the level of financial risk of a company.
What is beta?
Beta is a number that helps rate how dramatically a stock is expected to move compared to the broader market.
What is Strangle?
A strangle is an options strategy involving both a call option above the current price and a put option below the current price, on the same security with the same expiration date.