Why Have Responsible Businesses Become Role Models?

Over the last decade, the concept of responsibility – and more specifically Corporate Social Responsibility – has permeated the landscape of private-sector companies. Whether it is seen, from a pessimistic perspective, as a utopian vision of the role of businesses or a tall tale to sweet-talk a generation ever more in demand of actions that benefit the common good, it is a deep-rooted trend that wise managers should not brush off at the risk of facing major set backs on the long-term. For a responsible business, beyond being a norm to follow and implement, is now a role model. Here are a few explanatory factors of this tidal wave that can turn into a tsunami when overlooked, as illustrated by Volkswagen’s example.

Business Sustainability: an employee and ecosystem expectation

A study by consulting firm PwC revealed a number of compelling data to a sustainable business model’s advantage. First of all, 90% of employees consider that companies must bear their share of responsibility for sustainable development and 40% of them consider that CSR determines the performance of the company they work for. These commitments can take many forms and some managers might interpret this transition as an additional cost. The example of SEB, which has committed to producing household appliances that can be repaired over a period of ten years, could give the shudders to a few financial directors as they anticipate a significant drop in their EBITDA. Still, these concerns might seem unjustified when put into perspective with other indicators. From a commercial standpoint, French people are willing to pay a range of 5 to 30% more for a sustainable product, based on the value of an equivalent – or “homogeneous” – non-sustainably made product. In other words, the cost of shifting to a sustainable business model could be smoothed out due to consumer support and willingness to pay more for greater sustainability.

This civil society expectation is conveyed through both consumer and stakeholder desire. As testifies, the slingshot of Volkswagen shareholders who manifested their disapproval of the disastrous choices of the company – namely, the choices which led to the rigged engines scandal in 2016. The result of this fall out was clear: Volkswagen shares dropped, and shareholders reacted to the considerable financial loss with ire, some even demanding an 8.2 billion euros compensation from the carmaker.

An evermore favourable legal and financial context

As Volkswagen’s example highlights, the shift to a sustainable business model – whether it stems from a genuine ambition or more questionable motives akin to green washing – is deeply tied to a company’s financial stability.

In this matter, specific initiatives can provide significant tax benefits. Tax exemptions are plentiful, especially regarding infrastructure work related to energy savings. Moreover, companies with strong environmental, social and governance policies compliant with ESG criteria are now considered safe havens in times of crisis, to the same extent as gold or the OATs (fungible Treasury bonds) of the most developed countries. This interest from investment funds can be explained by these companies’ resilience, itself due to the above detailed factors. In other words, espousing a sustainable business model makes financing easier.

An alignment of business signals that tends to confirm the relevance of this strategy

Finally, shifting towards a sustainable model leads to short, middle and long-term resilience. Not only due to the above detailed elements but also because climate change is underway and society as a whole will strive to mitigate it. Companies that take part in this effort will be all the more rewarded as those lagging behind will be fiscally and financially sanctioned, and their image might be tarnished and their workforce disengaged.

Becoming a sustainable business with EveryAct

EveryAct’s goal is to support managers in transforming their company towards a sustainable business model. Indeed, EveryAct is the new environmental engagement platform for employees. Bring your teams along this collective journey in a uniquely simple way: raise awareness, share new knowledge, become a more responsible citizen at work and in your private life, create enthusiasm to reach a common aspiration, join together to achieve quantifiable and measurable targets… such are the ambitions of our platform. Becoming a sustainable business requires asserting strong convictions, developing an ambitious roadmap, that is good for the planet and its inhabitants – a roadmap with measurable targets aligned with the United Nation’s Sustainable Development Goals. What EveryAct offers is to practically develop these aspirations and help you achieve them.

05 January 2021 – 8 min read