Author: Sarah Walkley
Word count: 1,900
Time to read: 8 minutes
When you’re focused on how to grow your business, where the next opportunity is coming from or whether your team has the skills it needs to take the business to the next level, worrying about your impact on your community or the planet may feel like a step too far. However, I would argue that sustainability is increasingly part of building a sale-ready business.
Incorporating sustainability into the heart of your strategy can enhance your competitive advantage, help you attract the best talent, increase resilience and improve access to capital – all of which translate to higher deal valuations.
I have been on both sides of the sale process over the past 25 years in the media and information industry and witnessed sustainability grow from a niche topic for a few specialists to one that is central to investment conversations. In fact, the majority of my contemporaries on Cambridge University’s Master’s in Business Sustainability Leadership are from the finance community – such is sustainability’s importance to investors. Our tutors encourage each of us to think about our leadership role in advancing sustainable development – through study, action at work and volunteering. The latter has led me to get involved in start-ups tackling plastic pollution, charities working on environmental education and even develop the sustainability strategy for a heritage railway. Yes, steam trains and sustainability can mix!
What do we mean by ‘sustainability’? Most of us have developed what Jan Konietzko terms ‘carbon tunnel vision’. The high profile coverage afforded to climate change has resulted in ‘sustainability’ becoming a shorthand for reducing carbon emissions and achieving net zero. There’s no doubt that we do need to take urgent action on that front as is clear from the latest IPCC report published at the end of February. But it is not the only challenge. We face a nature crisis and are losing species and habitats at an alarming rate. Meanwhile, Covid-19 has shone a spotlight on the massive inequalities that exist within and between nations. Building a better and more sustainable future for all means addressing all of these issues holistically.
In 1987, the UN’s Brundtland Commission set down the definition of sustainability as ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’. It’s an elegant definition that, despite multiple attempts, has not been bettered in the intervening 35 years. It is also one that can be helpful to entrepreneurs. Ask yourself, am I doing the things today that are needed to build a business that will grow, endure and be of value to investors tomorrow?
Delivering value for entrepreneurs
There is a growing body of evidence – both academic research and commercial studies from the likes of BNP Paribas, Deloitte and McKinsey – that sustainable businesses are more profitable. A study published by HSBC in November 2021 suggested that companies expected to grow revenue by as much as 18% from increasing their sustainability focus. Many also had lower borrowing costs.
A like-for-like comparison of listed companies by investment expert Amundi has revealed that the more sustainable entities have higher valuations. While the research has been conducted on publicly listed companies, it is likely to translate to private companies. Collingwood Advisory knows that nothing makes a potential investor’s heart more likely to sing than to acquire a small business with a good suite of KPIs and strong financial reporting; it’s one less thing for them to have to worry about in the integration phase. Publicly listed media businesses are required and many financial institutions are expected to report on the social and environmental impact of their portfolio, so to find a small business that is also aware of its areas of impact is a true bonus. There’s no need for rafts of reporting and externally accredited decarbonisation targets.
Much of the reason that sustainability translates to positive valuations is that companies with good practices when it comes to sustainability embrace good governance generally. You don’t worry about your environmental impact, but fail to have regular board meetings. Collingwood Advisory has long known that strong governance translates to higher valuation multiples; on the risk side, we are seeing ESG compliance being a serious issue for major investors and buyers. That’s why helping entrepreneurs to embed strong governance is at the heart of all of our activities.
Companies with a focus on sustainability are alert to the potential impact of the changing climate on their business. For example, they may have conducted a systematic review of where they hold events to ensure that they are not in areas that have a high flood or storm risk. Similarly, remote working reduces the potential impact of extreme weather events and increases resilience, though hybrid models may generate greater emissions as you potentially need to power both home and office locations.
Well-run companies attract the best talent. Surveys regularly show that 65-70% of employees want to work for a company that cares about social and environmental issues, noting that a company that cares about wider issues is more likely to care about the wellbeing of their staff. Small businesses can use this to their advantage, according to Henry Coutinho-Mason, Content Chief of PlasticFree.com, a new materials intelligence service for product designers. Unable to compete on salaries, company values and social and environmental impact are the differentiators that will attract people to come and work for you.
That’s all very well, I hear you say. A small business doesn’t have the time or the resources available to invest in sustainability. However, it is about using size to your advantage. It is easier to embed new processes in a small business and scale them as you grow – you only have to get 10 or 20 people to change the way they do things and new employees adopt the process when they join as ‘the way we do things around here’. Larger organisations have to invest heavily in culture change programmes.
Established companies were once attractive for their heritage, but now heritage and unacceptable historic business practices may work against them. Start-ups are ‘born clean’, Coutinho-Mason notes, and can build operations sustainably from the ground up, rather than bolting on a separate sustainability strategy. Indeed, sustainability should be part of everyone’s role, which is why I have relished volunteering for the Carbon Literacy Project, a charity which gives individual employees the knowledge they need to make changes in their day-to-day working lives.
It also helps to identify the individuals that are most keen to champion sustainability and drive initiatives, providing them with an ideal personal development and leadership opportunity.
So where do you start? The key is to start with a few highly targeted actions that are meaningful to your business and scale from there. Consider the issues that are going to be most important to your business in future, whether that is waste from events, changing consumer expectations related to data privacy or talent development and create measurable initiatives in those areas. Measurable does not necessarily need to be onerous. For example, progress on diversity and inclusion could be tracked by adding a simple question on belonging in staff surveys.
Most media and information businesses have a relatively low carbon footprint from their day-to-day operations, with travel, data storage and office energy use being the key contributors. Consider switching to a green tariff for electricity. Moving any residual on-site data storage to the cloud can reduce emissions by at least 75%.
When it comes to travel, a clear simple policy setting out the hierarchy of options is the best approach. This gives employees clarity about what to do in each instance, e.g. an online meeting by default, walk or cycle to a meeting if they can, take the train or drive and fly as a last resort. If travel booking or expenses processes are amended so that the start and endpoint of every journey, the class of ticket and the number of nights away from home is recorded alongside the mode of transport and the cost, then you will have the core of what is needed to track carbon impacts.
Which brings me on to events. Large-scale conferences and tradeshow have have two difficult years. Take time to review the event and what works well face to face and what can be delivered through other formats. That said, people want to get together, network and share ideas. However, they are also more likely to be alert to the environmental impact of travel. Incorporating an optional environmental donation at the point of booking to compensate for travel goes someway to alleviate that guilt (I hesitate to call it an offset, as that comes with its own thorny issues).
Work with the venue to understand what it is already doing to improve energy efficiency, reduce food waste, support local suppliers and promote good working practices. Just by even asking the questions, you will demonstrate it is important to you and your attendees and will challenge the venue to go further.
Don’t forget, AEO, UFI and other trade associations have an increasingly strong focus on sustainability and can support events businesses with best practice and advice.
In terms of social sustainability, the key is to think about how your business can support local communities, increase diversity, champion fair work practices and human rights and address growing inequality. As increasingly virtual organisations, it may be about deliberately widening your recruitment reach to individuals in parts of the country where there are fewer opportunities, or offering careers guidance and work experience to disadvantaged young people. According to the Youth Employment Group, work experience opportunities evaporated during the pandemic. Alternatively, charities like Mer-IT refurbish IT equipment to provide to disadvantaged communities – a double whammy as it also means that the life of that equipment is extended before entering recycling.
While media businesses should be progressively incorporating these changes into their business, they should also not forget what Carnstone describes as media’s “superpower”. Relative to other sectors, media businesses may have a small carbon footprint, but they have a large “brainprint”. They have the potential to be a megaphone for the issues we face and to be a platform for the industries they serve to discuss, share and agree solutions. If you aren’t already weaving sustainability into your content, take some time to think about how you might, as it can have a big influence on your audience.
Information businesses can also provide a nudge by how they run their events, e.g. how they present the food served. Recent research suggests that more people choose plant-based options when there is a positive message about the difference their choice will make to the planet, rather than labelling it simply vegan or vegetarian. It is becoming increasingly common. Edie only offers a plant-based menu at its events, while TrendWatching went entirely plant-based in 2018.
There are many small ways that we can each begin to address sustainability and put the 3Ps – People, Planet and Profit – at the heart of our businesses. Consumers and investors are increasingly expecting it and the pressure to make changes will only grow. As in our personal lives, it is about starting with the easy switches that align with company values and are likely to endure. It is also about taking a step back and thinking more long term, just as we at Collingwood Advisory try to help entrepreneurs step away from the day to day and think about their future exit.
Sarah is a strategy and product development specialist with a strong track record of using research to provides individuals at all levels of the organisation with the knowledge they need to act. She has over 25 years’ experience in business information.
Throughout her career, Sarah has worked in fast-paced and constantly-evolving information businesses, using research and market intelligence to support content and product development, strategy, digital transformation and turnaround. She spent 15 years at Informa in various editorial, commercial and strategic development roles, working across product formats from newsletters and books to clinical research databases. As Chief Research Officer for Autovista, she was instrumental in overhauling the company’s product portfolio in line with customers’ information needs.
Her experience spans numerous complex and technical industries including automotive, shipping, agricultural and soft commodities, pharmaceuticals, cultural policy and sustainability.
She has been heavily involved in M&A on both the buy and the sell-side of transactions.
Sarah has a deep appreciation for how to incorporate sustainability into business strategy and is studying for the MSt. in Sustainability Leadership at the University of Cambridge. She holds a PhD in Cultural Policy Studies from the University of Warwick.