A sustainable business makes itself known through its investment strategy. The choices seep into every company facet, from workforce performance to third-party partners to technological adoption. Sustainability has a double meaning here. You must focus on becoming greener while making operations financially resilient, stable, and transparent. Values like these guide corporations of any size to build a sustainable business through strategic investments that are intelligent and eco-friendly.
What Is a Sustainable Business Investment Strategy?
A sustainable business strategy is an operating framework that guides decision-making through strong corporate values. The most prominent pillars are sustainability, governance, economic viability and corporate social responsibility. You must integrate these principles equally.
Companies aren’t as successful anymore if they don’t promote social justice and environmental advocacy. B2C and B2B customers question your commitment’s trustworthiness and validity if you have an unbalanced strategy. Investments are how customers validate whether an entity is putting their money where their mouth is. Do actions match sustainability promises?
Investments encompass more than shares. Most perceive them as purely financial when brand owners make numerous non-monetary investments daily. They can include:
- Employee wages
- Packaging and product materials
- Time dedicated to nonprofit organizations
- Marketing eco-friendly causes
- Process discovery and optimization
- B2B partnerships with similar values
Sustainable business owners use value-based practices to frame every goal and metric. These techniques entice management because they yield more than financial gains. Customers are more likely to become brand advocates, and you reduce profit performance volatility.
How Do You Build a Sustainable Investment Portfolio?
If you’re already familiar with how to build a traditional investment portfolio, you’re off to a solid start. You may have to readjust priorities and expand your mindset on what you can invest in, but these actions encompass the basic steps to a strong strategy.
Act Alongside Values
The first step to building a strategic investment portfolio is ensuring your business actions align with a sustainable company’s values. Environmental, social and governance metrics must hold you accountable as you engage in more ethical activities.
Learn Where to Invest
Next, perform market research. You’ll want to know what’s out there to engage in impact and ethical investing. Impact investing is using your profits to contribute to social good projects, such as green startups making carbon-free delivery drones or a nonprofit advocating for workers’ rights. Ethical investing is making rules for your portfolio and sticking to them. It may mean dissolving a years-long B2B relationship because the partner doesn’t support your values.
Set Goals and Limits
These actions are the most similar to traditional investments. Every dollar and minute invested has a risk tolerance. Managing risk and setting a trading plan is like playing cards to the gambler’s favor. Similar to investing in a Silicon Valley dream, there is no certainty that your sustainable investment will take off because it is more ethically aligned.
Mitigate losses by interviewing recipients of your assets and determine how they intend to respond to uncertainty or external influences. Outline how far you’re willing to go and how flexible your time horizon is before committing to anything.
Alter Return Expectations
Viable, sustainable investments may be tangible or intangible. There isn’t always an end product or financial gain on the investment’s horizon. Sometimes, there is only a moral or environmental victory, which is normal. The time horizon may be longer than anticipated. Rewiring your financial headspace to accommodate this will make sustainable investing more rewarding.
Diversify Assets
Diversification is another classic tip from long-time investors. Countless projects are helping the planet and its people become greener and more fair. Putting all your hopes into one company is never wise. Expanding your worldview to many ESG initiatives encourages responsible cash flow management and more security in sustainable investments.
Monitor for Accountability
The effort to diversify only matters if you have informed monitoring. Review investments at a responsible frequency without obsessing, and do regular check-ins to ensure projects stay on an ethical trajectory. Analyze the carbon footprints and social impact of the investment.
Do they measure relevant evidence-based metrics that are inspiring and realistic for their timelines? Are they being transparent about progress, or do they have increased third-party backing to validate your support?
Strategic Investment Areas for a Sustainable Business
You understand investments take various forms. What are practical ways this manifests for companies on a successful path?
Energy Efficiency Investments
Spend time and resources discovering how to reduce energy consumption. You may unlock the potential of Internet of Things devices to measure voltage and find what machines pull the most power. You could contact an energy professional to perform an audit, recommending upgrades and improvement areas. Are leaks costing your company money and inflating your carbon footprint? You only know through investigating.
Energy efficiency is a long-term investment in the health and well-being of your buildings and carbon awareness. Executing preventive maintenance, upgrading legacy machinery, and altering habits to reduce energy use are investments that save money and assets. Who knows — this interest may result in the ultimate renewable transformation.
You can also invest in energy efficiency by supporting green innovations, funding local microgrids or contributing to an energy-to-grid system.
Supply Chain Investments
Take operations emissions and multiply that by 11.4 — this is the carbon footprint of supply chains. Diversifying suppliers and working with ethical brands are ways to curb external emissions and forge long-lasting business relationships.
Do your suppliers support fair trade and have just working environments? Do the workers receive adequate compensation and benefits? Does the supply chain maintain transparency with material sourcing and data disclosures? Are they transitioning to circular economic practices, and if not, is the supplier receptive to feedback? You must answer each question confidently with your values-based approach.
Investing in sustainable supply chain partnerships normalizes the practice of researching suppliers and holding them accountable to an environmental standard. Companies want all emissions scopes to be as low as possible. Though their footprints feel outside your managerial control, you are responsible for the contracts you sign and the values you agree to when investing in supply chains.
Green Product Development and Innovation
Who says your business can’t be the eco-aware thought leader in your niche? Put monetary, creative and time investments into making your items climate-conscious. Execute research, perform studies and experiment with new product compositions. You can start this with something as simple as a brainstorming session, consultation with a sustainability expert, or a life cycle assessment of your company’s products and services.
It is a smart investment choice because customers associate innovation with authoritativeness. Studies explore the connection between creative ideation and sustainability. Leaders in sustainability are 400% more likely to be perceived as innovators than companies without green goals.
Employee Engagement and Well-Being
Investing in your workforce is emotionally and financially driven. Teams must make a living wage with reasonable benefits to compensate for their efforts. The staff should be intersectional and accessible to all backgrounds and demographics. Do they have wellness programs? Can they take time off when necessary without being judged?
Their company engagement increases with education. Providing sustainability information and relaying goals to employees will make them more committed to the brand. Around 68% of people desire to work for sustainable employers and are more willing to apply and take jobs if that is a top priority. Include them in your investment journey to improve the world. They will appreciate it.
How Do Strategic Investments Garner Long-Term Benefits?
Strategic, sustainable investments focus on reversing climate change and making people happier in their positions. Everyone wants to contribute to global good somehow, and sustainable investments make that reality possible. The devotion to social and eco-justice produces even more benefits.
The financial gains are a bonus. Maintaining continued growth is more challenging than relying on typically trustworthy, tenured corporations, but it is possible and enriching. Monetary gains happen in other unexpected places. First, you have a higher chance of gaining a competitive advantage by committing to sustainability. Part of strategic investing is connecting with clients and customers. The positive brand reputation is priceless, primarily as customers want more eco-friendly products.
The increased revenue compounds in value with other savings from sustainable investments. For example, investing in energy efficiency means using less electricity and water. You’ll see reduced utility costs over time. You may also pay less for waste management as you recycle, compost and use more malleable materials.
Long-term strategic, sustainable investing raises your awareness of other green financing options. Instead of defaulting to antiquated banks, green bonds and sustainable loans are out there for conscious companies. A Canadian restaurant, Tacofino, reached out for green financing to open another location with $350,000. The money assisted in efficient and ethical renovations for reduced carbon emissions compared to standard avenues.
More climate-aware buildings have a better chance against future government regulations and compliance frameworks. Plus, they may receive third-party certifications, like LEED, which improves their industry standing.
There’s an increase in legislation detailing standards for how companies should operate sustainably, such as the Competition Law and Sustainability Agreements in the U.K. and the SEC Climate Disclosure Rule in the U.S. Get ahead of the game with sustainable investing and you’re more likely to adhere to the frameworks before they hit the market.
Green Businesses Strategize These Investments
Finance-concerned customers want their purchasing decisions to align with their values. Shopping at sustainable outfits is one way they can vote with their dollar. Business owners must facilitate these desires by investing in eco-conscious and ethical labor, products and services. Doing so bolsters their bottom line while healing the planet.
Corporate social responsibility is among the most impactful vehicles for decarbonizing every industry. Investments carry so much weight, connoting business success and longevity. How will you implement your strategy to solidify positive impacts?
Featured Image Credit: Photo by Tima Miroshnichenko; Pexels
