Why companies can’t afford to fall behind in the race to go green

With climate change dominating the headlines, it’s no wonder that consumers are leaning towards ever-more responsible choices. The title of the 2021 WWF report The Eco-Wakening says it all: people around the world are looking for more information about sustainability, and this is influencing their consumption patterns. According to the report, Google searches relating to sustainable goods have increased by 71% globally since 2016. Even more tellingly, 50% of respondents worldwide have switched products or services because a company violated their values, particularly around environmental protection.¹

Our own 2020 Global Navigator survey told us that businesses are aware of the commercial opportunities that come with these new demands, with 86% of businesses saying they expect their sales to grow in the next twelve months as a result of their sustainability performance.

Two sectors in particular are heavily influenced by consumer demands: in the survey, automotive and construction respondents cited consumers as the strongest driver to enhance sustainability. This doesn’t come as a surprise. The construction industry’s environmental impact is both well-known and significant: 30-40% of global greenhouse gas emissions and 30-40% of solid waste are estimated to come from this sector.² And since this is a very visible activity, communities around the world are asking for change.

Companies in this sector are embracing sustainability in different ways, by using renewable energy for manufacturing, choosing recycled metals or natural materials such as certified timber, clay or straw, or even upcycling waste into sustainable concrete. For instance, construction giant LafargeHolcim launched its ECOPact concrete last year, integrating upcycled construction and demolition materials and claiming to reduce carbon emissions by 30-100% compared with conventional concrete.³

Sustainable construction also has a lot to do with design, to reduce waste and improve the energy efficiency of buildings. Many companies are now offering eco-friendly design and construction solutions, which have benefits not only in terms of environmental footprint, but also for the health and productivity of the people inside these buildings. And while green building methods and materials are sometimes considered more expensive, emerging evidence indicates that green buildings are a higher-value, lower-risk asset than standard structures.⁴

Automotive manufacturers too have been under public scrutiny for longer than other sectors. As a result, carmakers were even ahead of the CO2 reduction targets set by regulators between 2000 and 2015 — until governments agreed on much more ambitious pledges under the Paris Agreement.

Today, the electric vehicle (EV) revolution is underway in much of the developed world, but availability of charging points is key to making EVs a viable option for consumers and businesses. ChargePoint, a California-based company that installs and operates EV charging stations has been helping legacy companies become more sustainable. It offers hardware and software solutions on a subscription basis to businesses that want to offer EV charging to their customers in their car parks and depots. Drivers have visibility of the network via an app, while companies can use ChargePoint’s technology to help meet their environmental, social and governance (ESG) goals.

With eco-savvy consumers firmly in the driver’s seat, expectations go beyond just emissions. Some of the areas where the sector is targeting more sustainable practices include sustainable product development, environmentally responsible sourcing of metals, sustainable power procurement and manufacturing, and recycling of waste.

As an example, Volkswagen now uses natural fibres such as flax, hemp, cellulose and cotton in component production and General Motor is sourcing 100% wind energy for its SUV assembly plant in Texas. Meanwhile, Tata Motors’ take-back programme recovers tens of thousands of used vehicles every year for refurbishment and resale.

Overall, it is estimated that USD 50 billion of investment will be required over the next five years to meet carmakers’ sustainability targets. Interestingly, automotive companies do not seem to expect high returns from this investment: this was the sector with the lowest expectations in terms of sustainability-linked growth in our survey. This reflects the fact that green vehicles are no longer seen as a premium product; they are now a basic customer expectation.

But companies of all sectors know that the benefits of adopting sustainable practices extend beyond profits: employee wellbeing and recruitment, ability to attract investment and corporate reputation were all cited as positive impacts in the survey.

Consumer pressure is forcing companies in the construction and automotive sectors to invest in sustainability now. Luckily, the current low interest rate environment, combined with the financial sector’s growing ESG focus, makes this an ideal time to raise funding for such projects.