Why is Corporate Sustainability Important to S.C. Business?

Richard Waycaster, CPA
Elliott Davis 

Corporate sustainability is a business strategy that considers environmental, social and economic issues in order to ensure the long-term viability and success of an organization.  While certain countries and even some areas of the U.S. have focused on sustainable practices for years, S.C. businesses appear slower to embrace it on a large scale.

On December 7, the South Carolina Association of Certified Public Accountants (SCACPA) will hold a Corporate Sustainability conference in Columbia, S.C. focused on the financial impact that sustainable practices can have on businesses of all sizes.

Below are 10 reasons why sustainability is important to South Carolina, its economy, and its citizens:

10. Global Implications. S.C. currently has one of the largest foreign investments per capita of any state in the U.S. If we are going to continue to attract and retain desired foreign business investment and trading partners, it is important to stay abreast of trends in other parts of the world, including sustainable business practices.

9. Decreasing Resources / Increasing Population. Current estimates for world population growth project that the Earth’s population will grow to nine billion people (from the current six billion) by 2050. Concurrent with that population explosion is an alarming depletion of many non-renewable resources. Increased demand on diminishing resources will have far reaching economic, social, and political implications as well as a major impact on business operations on a global as well as local basis.

8. Expanded Stakeholder Expectations. Years ago, many businesses were concerned only with their stockholders and keeping them happy. Recently, though, businesses are becoming increasingly influenced by and attuned to the opinions of a much broader group of stakeholders, including employees, customers, suppliers, creditors, governmental and regulatory agencies, NGOs, communities, and others. This expanded sphere of influencers and an increasing call for transparency and corporate social responsibility is causing companies to rethink their governance, strategies and priorities.

7. Regulatory Environment. A huge increase in laws and regulations surrounding sustainable practices has occurred in the last few years. This heightened regulatory environment is occurring at the federal, state, and local level. Greenhouse gas emissions, clean air and water Acts, as well as energy and water conservation are but a few examples – and new regulations are being passed daily.

6. Supply Chain Pressure. Now that Wal-Mart and many other “Fortune 500” companies are embracing sustainability, they are beginning to demand that their suppliers do the same. S.C. is full of second and third-tier suppliers for these large companies.  Product Life Cycle Management and Life Cycle Assessment tools are enabling companies to consider the entire life cycle of their product and bring up-stream and down-stream considerations into their business model. 

5. Tourism. Tourism has long been an important industry and economic engine in S.C. The potential exists, however, for this industry to suffer significant losses by unsustainable practices or a major environmental disaster. When one considers the economic damage caused by the BP Deepwater Horizon Oil spill to the Gulf Coast’s tourism industry, it is easy to appreciate the importance and relevance to our state.

4. Risk Management. Business risk comes in many forms:  financial risk, reputation risk, supply chain risk and contingent environmental liability are among some of the areas of risk with direct ties to sustainability. Considering the global interconnectivity issues mentioned in #10 above, management and mitigation of these risks is becoming increasingly difficult and complex. Sound risk management practices require a thorough understanding of sustainability and the many aspects of modern business that could be negatively impacted by failure to consider these issues. 

3. Investment / Capital Flow. Considering the billions of dollars currently being invested by large multi-national companies in their sustainability initiatives, research and development, product design, marketing, and reporting, it would appear that this is clearly not a passing fad, but rather a core business strategy that has some staying power. Additionally, many Private Equity Funds, institutional and individual investors are beginning to show a preference for investing in companies that demonstrate social and environmental responsibility. 

2. Shifting Business Paradigm. Corporate sustainability now represents much more than a “feel good” initiative. Market forces have caused companies to re-think the way they do business and many have shifted from the “Industrial Revolution” model to a new paradigm based upon Natural Capitalism. With a push for more transparency and a combining of non-financial information along with the traditional financial data in company Annual Reports, sustainability and its various subcomponents are likely to become more and more the language of business. 

1. Strategic / Competitive Advantage. Making sustainability a core business philosophy and key business strategy have proven to provide a competitive advantage to companies in the following key ways:

  • Decreased Costs by improving efficiencies throughout the life cycle, along with reduced waste
  • Increased Revenues by  identifying new customers and markets interested in doing business with socially responsible companies; creating new products through innovation and design; increasing productivity from associates working in improved conditions
  • Improved Brand through the adoption of this strategy, which also contributes to talent attraction and talent retention
  • Established Goodwill and Long-term Value through the combination of decreasing costs, increasing revenue, and improved brand identity, which helps to build long-term value for the company and its stockholders while simultaneously addressing concerns of other stakeholders.

Sustainability is highly important to S.C. businesses now and in the future.  If your organization is slow to adopt such practices, you may want to consider expediting your implementation timeline to best position your business for long-term success in this changing world.

 

Richard Waycaster, CPA chairs the SCACPA’s Task Force on Corporate Sustainability. He is a shareholder and the CFO of Elliott Davis, LLC. He may be reached at rwaycaster@elliottdavis.com.