Sustainability has become a buzz word across various domains but more so in business. Why has this transition happened? It is because people are becoming more and more aware of the environment. Customers prefer purchasing products from companies that conduct frequent tree plantation drives and use paper bags as an alternative to plastic ones.
This article will delve deep into what sustainability means in business and how companies can make a sustainable business plan in the long term.
What is a sustainable business plan?
A sustainable business plan does not cause a drain on the resources and provides constant returns over time. It generates value for shareholders and stakeholders alike. It also considers the environment, government regulations, adheres to transparent reporting standards, and carefully analyzes the present economic conditions. Business fundamentals and not trends form the basis of a sustainable business plan due to which it remains profitable for a reasonably long time
What makes a sustainable business plan work?
The following are the four reasons that make a sustainable business plan work.
1. It’s commercially viable
The initial condition for a sustainable business plan is that it should be commercially viable. Unless you don’t have a free-flowing stream of customers, you cannot expect to survive for long. You will drain your resources and come up with nothing. For commercial viability, you need to focus on the following things:
- What customer segment do you want to serve?
- What is the product niche you should focus on?
- What is your value proposition?
- How are you different from other players in your industry?
2. It’s sustainable for a longer time
This point thoroughly examines the definition of sustainability. What is sustainability, after all? It means that you are making profits for a reasonably long time. The highs and lows of the market don’t affect you. Your business fundamentals are strong and you can quickly rebound if market forces trap you. But these won’t happen if your business plan depends on temporary factors like pricing and resource availability. If your business plan doesn’t stand on strong fundamentals, you may fly for some time, but you will nosedive and crash.
3. It makes use of resources wisely and judiciously
Sustainable business plans ensure that companies make judicious use of resources. It’s important because resources are available in limited quantities and take months or years to replenish. Also, some resources are inexpensive but harmful to the environment, for example, palm oil. A business will always like to take control of cheap resources to keep its expenses low. But this strategy can backfire in the long term. Customers today take environmental concerns seriously. For example, if you still use plastic bags, the chances are high that you will lose a fair share of your customers.
4. It gives back to society and the environment
The majority of businesses operate on the “Take, Make, Waste” model. In this model, businesses take resources from the environment, use them to make a salable product, and dump the waste in the environment (forests, rivers, etc.). This is a linear model and it harms the environment. Customers wouldn’t like to deal with you if you follow this model. On the other hand, the “Borrow, Use, Return” model is a cyclical model that emphasizes borrowing resources from nature, using them for the benefit of the business and consumers, and then returning to nature by conserving it. If your company invests in nature-based solutions, consumers will build a strong and long-lasting relationship with you.
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What is a sustainable strategy?
A sustainable strategy determines what and how much of it goes inside as input, and what and how much of it comes out as output. It is a well laid out document that takes into consideration the following attributes:
- What is the existential purpose of the company?
- What are the MVV (Mission, Vision, and Values) of the company?
- What are the strengths of the company that distinguishes it from other industry players?
- What does the company idealize to become in the coming years?
- What are the few ideal values that the company will never forsake for more profit?
- How does the company plan to return to the environment?
Once the company has answers to the above questions, it can streamline all business stakeholders’ collective actions, right from employees and the management to the vendors, distributors, suppliers, and the end-customer. It will also help the company decide the goal sheet, measure each individual’s KPIs, and give a clear vision of the company’s future trajectory. Once a sustainable strategy is ready, the company’s management should communicate it to all the relevant stakeholders, both internal and external and try not to drift away from core principles that are a lighthouse to its existence.
Why do we need a sustainable business plan?
Sustainable business plans unite various stakeholders to work as a cohesive unit. It also creates an excellent image in front of customers that helps sell more products. A recent survey revealed that by telling online shoppers that other people were buying eco-friendly products led to a 65% increase in making at least one sustainable purchase.
Since consumer awareness has risen sharply, a higher percentage of your customers will ask about your sustainability initiatives and judge you based on the steps you are taking to conserve the environment. You should invest in building a support team that deals with the doubts your customers have. The more vocal and supportive you are, the better are the chances that they will share the news with their peers.
You should also ask yourself, “what is your end goal? Is it making huge profits or creating a positive impact on the world?” The bigger the company grows, the more considerable impact it can create. Keeping these things in mind, you must give credence to sustainability while drafting your business plan.
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Steps to implement a sustainable business plan
1. Prepare a comprehensive plan for your resource usage
Ask yourself the following questions:
- Prepare a list of raw materials you need to conduct your business.
- Search from where you can get them.
- Learn about their market price and find which supplier/distributor will let you bargain.
- Check where and how are the finished products being transported?
- Analyze transportation time and find ways to minimize the transportation cost.
- Examine which resources are the riskiest and how you can lessen your dependence upon them.
Once you have completed preparing the list of the raw materials, consider answering the following questions regarding the manufacturing process.
- Check which manufacturing processes produce a lot of wasteful by-products.
- Examine whether these by-products can be used in some other manufacturing activity?
- See how you can reduce your dependence on raw materials that produce a lot of wasteful by-products. Are their substitutes available?
- Check the negative impact these by-products are causing to the environment while disposing of them.
- Investigate whether you can reduce the number of raw materials for creating the same finished product while maintaining its quality.
- See whether the laborers are being paid at par for the services they are offering.
- Also, check whether the manufacturing process is negatively impacting their bodies.
2. Focus on wage parity
In the top-down business model that most businesses follow, there is a wide pay gap between the senior management and the laborers who carry out the manufacturing process. While drafting a sustainable business plan, put a strong focus on bringing wage parity between various business stakeholders. Those on the top of the ladder should not be overpaid, while those at the bottom shouldn’t be underpaid.
3. Make your customers a part of your sustainable business plan
When you bring sustainability to your business, the cost of your products may rise. As a responsible company, you must let your customers know why they are paying more. According to a survey, 66% of global consumers are willing to pay more for sustainable goods. And with consumers becoming more environmentally conscious, this figure will only rise.
To engage your customers, you can do the following:
- Pledge a part of your revenue to a charitable organization.
- Conduct eco-friendly rallies.
- Use biodegradable packaging material.
- Create online groups and forums where customers can meet and discuss sustainability issues.
It would help if you kept in mind that including sustainability in your business model can be a costly affair in the short-term. But in the long term, you will build substantial brand value and a significant following in the market. If your customers feel that you are doing your best to operate sustainably and taking steps to conserve the environment, they will spread good word-of-mouth that will attract other like-minded people. Thus, giving the much-required impetus to your business.
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Disclaimer: All the information, views and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd.