Sustainability Is Not A Liability To Businesses
Introduction: Moving from Voluntary to Mandatory
The sustainability landscape in Kenya is rapidly evolving, with an upcoming shift of regulations and compliance from voluntary to mandatory. The banking sector, as a financer of businesses, has taken the lead in spearheading this transition, meaning the ball is rolling, and this change is inevitable. Following recent news from the Central Bank of Kenya (CBK), financial institutions will henceforth be required to disclose climate finance risks from January 2025, with mandatory compliance expected by 2027.
The Business Case for Sustainability
Sustainability is moving from being perceived as a liability to an opportunity for growth. It places business operations and practices under scrutiny, assessing their efficiency. For instance, when a manufacturing company integrates sustainable practices into its production line, the entire process undergoes a thorough review of resource consumption, machinery efficiency, and product design. This reveals points of loss or inefficiency, prompting corrective action. Research indicates that integrating sustainable practices can lead to notable efficiency improvements, potentially cutting production costs significantly, depending on the industry and specific measures implemented.
Sustainability creates a balance between people, the planet, and profits. Its cross-cutting nature encompasses not only environmental aspects but also social and governance factors, presented as ESG (Environmental, Social, and Governance). The integration of these three facets enables a business to operate harmoniously.
Eco-conscious businesses have minimal environmental footprints and make the Net-Zero target achievable. They adopt practices such as waste reduction, energy efficiency, and sustainable sourcing, which not only lessen their environmental impact but also contribute to global efforts to combat climate change.
Within the social sphere, sustainability fosters organizational culture, creating a conducive work environment that maximizes productivity. It goes beyond that, ensuring peaceful coexistence with the community. It pushes the narrative that businesses exist not merely for profit but for the good of society. This reputational impact makes a business more lucrative and assures its survival in the long run.
On the governance front, sustainability streamlines leadership, ensuring businesses are well-managed and free from corruption that could cripple them. Sustainability is only possible to a business when the top management embraces it and see the need to integrate the necessary frameworks to support its implementation. Other benefits include regulatory compliance and the avoidance of legal liabilities associated with sustainability.
The Competitive Advantage Sustainability Brings
The positive impact of sustainability on a business, compared to its peers, culminates in a competitive advantage. It attracts stakeholders along the value chain, including customers and investors, contributing to business growth. As the world becomes more sustainability-conscious, decision-making factors shift beyond just financial aspects. Sustainability is, therefore, a way to create a strong, impactful brand with lasting influence.
Resources for Implementation
The gap between strategies geared toward the green transition of businesses and their implementation often lies in the resources required. Though many businesses and organizations have displayed a positive reception to sustainability, without the necessary resources for implementation, it remains mere talk. Banks and financial institutions hold a critical role of contributing to driving businesses toward a sustainable future by unlocking funds through loans and investment schemes for green projects.
Businesses can navigate trading in carbon markets to generate a stream of income to realize their sustainability ambitions. Small and Medium Enterprises (SMEs) that have taken sustainability to consideration can take advantage of the various business grants and funding programs available for SMEs.
Conclusion
Sustainability is not merely a regulatory obligation or a financial burden for businesses; it represents an opportunity for innovation, efficiency, and growth. For businesses in Kenya to retain their relevance in the local and global spheres in the near future, they will have to embrace sustainability, otherwise, they will be phased out.