How sustainability translates into a business’s core strategy

Sustainable Development Goal 12: Responsible Consumption and Production related to the theme discussed

The business world is constantly changing, but currently there are two very relevant changes. In addition to the emergence of industry 4.0, the newest industrial revolution in the field of technological and productivity evolution, a wave of sustainable business is emerging in which, in addition to valuing the financial sustainability of the business, it values ​​other factors equally important to finance such as: the relationship between the company and its impact on the environment and the relationship between the company and its impact on people. In this article, I will focus on sustainable businesses.

As stated earlier, sustainable businesses value financial results (or economic value), social responsibility and care for the environment. By thinking about this triad, the sustainable business manager is able to expand the company’s strategies to think about how to make the company sustainable in the long term, while opening the range to mitigate potential economic, social and environmental risks.

How does this translate into practice? Here is an example of an agricultural production business. There is currently a movement to change conventional agriculture to increase organic agriculture practices. Organic agriculture brings enormous benefits compared to conventional agriculture.

According to a study made by Professor Reganold, along with other researchers and published by the US Department of Agriculture, USDA, there is the following data and comparisons between the types of methods:

• The study was made comparing 55 crops, on 5 continents and was carried out considering data from 40 years.
• Organic Agriculture, considering it practices a premium price (due to the better quality of its products), was significantly more profitable (22 to 35% more profitable considering the net present values) than conventional agriculture.
• In addition, the cost/benefit ratio was 20 to 24% higher in organic than in conventional agriculture.
• If there is no price premium, profitability is significantly lower for organic farming, but the price premium needed to match conventional farming is only 5–7%, even considering that the yield from organic production is about 10 to 18% lower.
• In general, costs are not that different between one type of agriculture and another, but worker costs are 7 to 13% higher in organic agriculture (which benefits the worker and the social part of the business).

Obviously the study has some limitations and only a few variables were analyzed, however the study cites that if some external variables are considered, such as soil erosion or nitrate leaching into groundwater, organic agriculture would be even more profitable, since its environmental impact is less than that of conventional agriculture.

To determine whether your agriculture and your business in general are sustainable, they have to be:

• Economically viable: more productive, at better prices and at lower costs
• Obtain adequate high-quality yields: i.e. more productive and with better quality products.
• Environmentally safe: does not use chemicals, deteriorates the soil much less, among other practices.
• Socially responsible: healthier products for people and better conditions for workers.
• Reduce risks: that is, less dependence on inputs such as agrochemicals, soil condition, environmental and social health, etc.

Have you thought about all of this? Although many people do not want to use the concept of sustainability because they think it is a cliché or something brought by environmentalists, it is currently a concept of extreme importance for risk management and the longevity of your business, in addition to bringing benefits to the environment and people.

If you’re thinking about keeping your business healthy and long-lasting, consider turning it into a sustainable business if it isn’t already.

Source of the study:

Organic Profitability Around the World, by John Reganold, Regents Professor of Soil Science & Agroecology, Washington State University: https://www.usda.gov/sites/default/files/documents/Reganold.pdf