Why should an organisation change to more sustainable practices? This question needs an answer that convinces the essential decision-makers in the organisation.

A. Normative reasons

Normative reasons include explicit or implicit moral judgements. Something is done because it is believed to be the right thing.

Common normative reasons for sustainable products are:

1. Humans caused climate change. Therefore, humans have to solve the problem

2. Humans cause climate change, and it will affect us all. Therefore, we need to prevent it

3. Humans caused climate change, it will primarily affect low-income people and low-income countries without means to protect, which is an unjust situation we need to mitigate

More sustainability narratives focus on moral judgements. The risk of normative reasoning is that:

• People disagree because of different moral standards

• People feel offended or morally inferior because they are told that their behaviour is morally wrong

The opportunity of normative reasoning is the energy it creates for people with a specific normative view. This purpose motivates me to act and drive change. While normative reasoning is an essential and helpful strategy, Green PO provides more insights about commercial reasoning - the more dominant type of reasoning in organisations.

B. Commercial Reasons

1. Business Fundaments

50% of global GDP depend on natural resources. A collapse or radical changes of natural ecoystems will disrupt the global economy.

Rerecences points:

• Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy https://www.weforum.org/publications/nature-risk-rising-why-the-crisis-engulfing-nature-matters-for-business-and-the-economy/

2. Customer expectations

More and more customers expect products to be more sustainable. While customers are hardly willing to pay an extra price, companies following late risk being not competitive anymore.

Moreover, public authorities have started integrating sustainability criteria in their selection criteria for public tenders.

3. Regulation

Regulation is shaping the markets to internalise more environmental and social costs. Stock exchanges in 27 major markets have mandatory requirements for ESG reporting. The European Union, the United States of America, and China have implemented increasing amounts of climate-related legislation.

Additionally, corporate front-runners anticipate higher environmental damage prices and have started pricing carbon emissions internally.

Reference points:

• Understanding the Global Reporting Frameworks, International Finance Corporation https://www.ifcbeyondthebalancesheet.org/understanding-global-reporting-frameworks

  

• Reuters, Insight: No global carbon price? Some companies set their own https://www.reuters.com/sustainability/no-global-carbon-price-some-companies-set-their-own-2023-12-10/

4. Supply Chain

Access to raw materials will be harder and more expensive in the future. That might be because of:

1. Regulation increases the price to mine or process these materials (e.g. due to decrease of available carbon emission licenses)

2. Geological scarcity of materials on earth

3. Geopolotical restrictions based on national policies

5. Risk Mitigation

Climate change, biodiversity loss, water shortages, and similar events distort companies' facilities, supply chains, employees, customers, and stakeholders. Weather extremes and unforeseeable changes in environmental conditions disrupt regional economies and global supply chains.

Reference points:

• Global Risk Report 2024 shows environmental risks dominating the 10-year horizon (1,400 CEOs surveyed)

  

  https://www.marshmclennan.com/content/dam/mmc-web/insights/publications/2024/global-risks-report-2024/World_Economic_Forum_Global_Risks_Report_2024_Executive_Summary.pdf

6. Competition

Competition for more sustainable products and services is intensifying. Led by market pioneers and regulation, new material, product, process, and business model innovation is happening (e.g., packaging, plastics, and plant-based proteins). While some won’t change the markets, others already have an impact.

7. Talent Attraction & Employee Retention

More people are looking to join sustainable organisations. In times of ageing populations in many countries, the war for talent is tough. This is even more true for young and highly skilled employees. Candidates and employees also base their decisions on the company's strategic orientation.

Reference points:

• KPMG Climate quitting - younger workers voting with their feet on employer’s ESG commitments https://kpmg.com/uk/en/home/media/press-releases/2023/01/climate-quitting-younger-workers-voting-esg.html

8. Efficiency gains

Reducing resources and energy is mostly also reducing costs. Innovations in that area are the frontrunners as they don't require tougher regulations or strong sustainability preferences on the buyer's side. If a sustainable solution is faster, cheaper, or better, it will win over the alternatives only based on functional benefits.

A software architecture that requires less data storage and traffic is cheaper than an overloaded system. It also saves emissions. A process that reduces food waste likely reduces the costs of sourced ingredients.

9. New Business Opportunity

Economic change opens up new opportunities for solving problems and generating revenue. Organisations want or need to be more sustainable and will eventually review all their suppliers based on sustainability. This opens up new business opportunities in nearly every market segment, from measurement and reporting software to regeneration services.