Study: Sustainability delivers higher revenue and greater profits

Asia Pacific and Japan (APJ) organisations say their overall business performance is intrinsically linked to treating sustainability as a strategic priority – and are boosting their investments as a result.

A recently released sustainability and business study by SAP found seventy one percent of Asia Pacific and Japan (APJ) businesses see a moderate to strong relationship between sustainability and their organisation’s competitiveness and its profitability.

That impact on business outcomes is driving investment. In APJ, over half of businesses (51%) intend to increase their investments in sustainability over the next three years, up 12 points since last year (39%).

The study, which surveyed 1300 people in five APJ markets, found almost three quarters (74%) of APJ businesses saw sustainability strategies contributing to outcomes like revenue or profit growth to a moderate or strong degree. Similarly, 77% of APJ respondents saw a moderate or strong increase in the efficiency of business processes from sustainability activities.

Half (50%) of APJ businesses expect to demonstrate a positive financial return on their sustainability investments within the next five years, compared to 61% of global respondents.

“Sustainability can no longer be considered separately to the wider financial performance of the business because it is increasingly clear that more sustainable organisations are more successful organisations,” said Gina McNamara, Regional Chief Financial Officer, SAP Asia Pacific & Japan.

“Already, almost one in ten (9%) APJ businesses say sustainability is material to their business results, and another 32% say it will be within five years. Now is the time to combine financial and environmental decision-making in every business process, so we treat carbon data the same way we treat financial data.”

However, difficulty proving return on investment is one of the top barriers to taking environmental action with 36% of APJ businesses finding it a challenge, above the global average of 33%. Other notable issues include lack of an environmental impact strategy (36%), COVID-19 uncertainty (34%), and lack of expertise (33%).

Results speak for themselves

For the 70% of APJ organisations that see a strong relationship between sustainability and competitiveness (Sustainability Leaders), the results speak for themselves.

Over half (58%) of the APJ Sustainability Leaders saw revenue growth of more than 6% compared to just 37% of other businesses. Similarly, while 62% of APJ Sustainability Leaders experienced profit of over 6% in the past year, just 35% of companies who don’t link sustainability and competitiveness could say the same.

There are three key ways APJ Sustainability Leaders behave differently to other organisations that help them unlock sustainability as tangible profit drivers.

1. APJ Sustainability Leaders measure in actuals not averages

APJ Sustainability Leaders are significantly more likely to use real sustainability data rather than averages and estimates.

Nine in ten (89%) APJ Sustainability Leaders collect energy and emissions data by direct measurement compared to 72% of other businesses. By using actual data instead of averages, businesses can utilise accurate numbers when it comes to making core decisions for the business.

This is an area when more businesses in APJ businesses can improve. Based on our survey, the Asia Pacific and Japan region trails the rest of the world when it comes to directly measuring energy consumption and emissions (79% in APJ vs. 83% globally), resource availability (76% vs. 79%), and materials use (71% vs. 76%).

1. APJ Sustainability Leaders integrate sustainability into decision-making

Almost six in ten (59%) APJ Sustainability Leaders use sustainability data to inform strategic and operational decision-making to a strong degree, compared to just 25% of other businesses. Just one per cent do not use sustainability data in decision-making at all.

This requires conscious effort to make sustainability fundamental to organisational processes. Integrating sustainability into accounting and ERP systems into the business at every level of operations creates a ‘green ledger’.

This allows businesses to understand and view exactly where emissions are occurring in order to set achievable targets and to identify areas which would benefit most from decarbonisation.

3. APJ Sustainability Leaders record broadly and share sustainability data across their ecosystem

APJ Sustainability Leaders are experienced collecting sustainability data, with 65% of APJ Sustainability Leaders collecting data for more than five years.

But they also cast their nets wide, measuring data for energy consumption and emissions (79%), air pollution (66%), and resource availability (60%). Almost half (49%) of APJ Sustainability Leaders expressed complete satisfaction with the data quality they collect, compared to just 8% of other businesses.

But, more than that, they know sustainability isn’t an issue for their organisation alone. Scope 3 emissions are accrued across your entire supply chain, and require proactive, transparent action to monitor and manage.

APJ Sustainability Leaders expect to exchange sustainability data across their ecosystem. Almost half (48%) of APJ Sustainability Leaders require sustainability data from suppliers, compared to just 22% of other businesses.

Sustainability in person

Sustainability and green ledger will be explored at the Mastering SAP Collaborate Event in Melbourne on 22-23 May, 2024. See the program and speakers here.