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Sustainability and Profitability

The intense public debate on both the desire as well as the feasibility of sustainability has made the choice of a topic for this year fairly easy. Sustainability is increasingly becoming one of the key aspects in a firms’ image and strategy. For many firms it has also been a fruitful transition to become more sustainable. On the other hand, many firms are wary of a change towards sustainability because they fear it might damage their financial performance; and indeed, this has been the case for some firms. This uncertainty about the impact of sustainability on the performance of businesses has resulted in the formulation of the following research question for the ISRP: 

“Is sustainable business (more) profitable in comparison to non-sustainable business, and what are the determining factors in this regard?”
 
The increasing societal attention for sustainability has created profitable business opportunities for firms. The way in which sustainability can enhance the performance of firms can be divided into two parts: A cost decreasing aspect through efficiency gains of resources and a revenue enhancing part through the reaching of more customers because of the sustainable product (image) of the company. Differentiating your product by making it more sustainable, for instance, can attract new customers but whether enough customers are willing to pay (a premium) for these products is difficult to determine upfront. It can therefore be a risky business. But perceived risk can be something else then actual risk. Many firms think substantial investments in sustainability are risky and/or not worthwhile but in many occasions this turns out not to be the case.
 

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