Globally, business leaders are under increasing pressure to deliver sustainable returns and value to their stakeholders. This pressure is in addition to navigating a complex operating environment with increased uncertainty.
However, it is interesting that business leaders are turning to sustainability in defining their purpose and strategy execution.
There is a recognition that having purpose and sustainability at the heart of the organisation’s ambition is vital to successfully navigating these challenges in the operating environment.
From changes due to innovations like artificial intelligence, volatile macroeconomic indicators, climate change, dynamic regulatory environment, attracting and retaining talent and geopolitical tensions, leaders across different industries leverage sustainability to provide short, medium and long-term value creation for their organisations.
It has enabled leaders to make better decisions by understanding the trade-offs and broader connections associated with every decision.
Organisations are now embracing a shared and collaborative approach with other stakeholders to solve many of our societal challenges.
The positive results from this approach are unambiguous.
One significant benefit has been mitigating the adverse effect of climate risk (physical and transition) on organisations. Organisations can perform comprehensive risk management that incorporates the impact of climate change on their cash flows, financial performance and position.
It has also led to lower operating costs by increasing energy efficiency, developing climate-friendly products and using more sustainable materials.
This comprehensive risk management approach allows organisations to focus on the demands of the present without compromising on future investments and changes that need to be made.
Another benefit is increased customer satisfaction and loyalty, which results from outcomes and impact-based reporting. It enables organisations to understand the non-financial issues affecting customer behaviours while using these insights to address customer pain points and better tailor their services. This way, organisations guarantee long-term revenue cash flows by building customer loyalty.
Also, building efficiency and resilience across the supply chain greatly benefits organisations. The disruptions to businesses from supply chain disruptions can be very costly, and organisations have to think through their entire value chain to identify weaknesses and constraints that need to be addressed.
A sustainable supply chain ultimately reduces costs for organisations and builds resilience for navigating disruptions. Other benefits include improved operating margins and employee morale.
Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics.
