For middle market companies, business success and responsible growth aren’t mutually exclusive. In fact, prioritizing responsible growth is becoming increasingly important as successful companies are making sustainability central to their growth strategies.
Beyond good corporate citizenship, companies are recognizing the intrinsic link between the strength of their business and that of the communities and economies in which they operate. Leading your growth with those goals in mind builds resilience and better solutions for the future. Consider the following:
Responsible growth companies perform better. Companies that consider the impact of risks and opportunities on the environment, local communities and society may produce better financial results than those that don’t. Additionally, 90 percent of companies believe a sustainability plan is important for remaining competitive.
Responsible growth companies attract investment. A 2016 study by MIT Sloan Management Review and Boston Consulting Group surveyed 3,000 executives and managers from more than 100 countries. Findings revealed that 75 percent of senior executives in investment firms agree that a company’s sustainability performance is materially important to their investment decisions, and nearly half would not invest in a company with a poor sustainability record. Ninety percent of executives see sustainability as important, but only 60 percent of companies have a sustainability strategy in place.
Responsible growth companies resonate with millennials. The next generation of employees, millennials, are more purposeful than other generations. If they feel a company is prioritizing profit over community, they’ll be quick to exit, according to a recent report by Deloitte.
Here are some ways companies can invest in sustainability and help improve business:
Set concrete goals – When setting goals for sustainability, it’s important to outline firm, measurable goals. Fortune recommends a goal such as “eliminate X million pounds of packaging” rather than “reduce the footprint of our packaging,” as the former allows for better tracking of improvement and general accountability.
Invest in talent – Recruiting bright, innovative employees will ensure your company will think outside-the-box when facing any challenge. Review your value proposition and leverage branding and social media to attract and retain talent. Be mindful of company culture as this is important for millennials when choosing a place to work. Lastly, know your industry segment but consider hiring those with expertise outside your silo; some of the best ideas and products come from unconventional corners.
Evaluate your supply chain – It’s important to understand the impact of each corporate function on the cash conversion cycle. Evaluate whether processes could be more streamlined and where new methods are needed. For example, a company’s salesforce may not be concerned with how payments are made, but electronic payments may be a priority for the accounts receivable department to speed collections and reduce processing fees. This can free up surplus cash flow to support growth and liquidity.
Be transparent – It’s important to be transparent regarding business practices, both internally and externally. For the public, transparency will aid in maintaining reputation and trust in credibility. Internally, transparency will increase job satisfaction and communication. For example, when company SumAll started detailing every employee salary in a Google Doc, turnover reduced because when employees were unhappy with their salaries, they felt free to speak up about their dissatisfaction and enter a negotiation versus opting to find another job.
Use incentives – A McKinsey study found the top reason respondents gave for their companies’ failure to capture the full value of sustainability was the lack of incentives to do so. Installing compensation incentives for executives can help keep it in focus. For other partners, consider making sustainability an important factor in procuring vendors or manufacturers. For example, Nike uses a sustainability index to evaluate factory performance.
Share the good news – Let your stakeholders and community know about your efforts to grow sustainably. You’ll attract more customers, investors and talent.
To achieve your company’s full potential in this era, responsible growth strategies must be integrated into company goals. When prioritized, becoming a more sustainable company can become a unifying factor for your entire workforce while also benefiting your larger community and your bottom line.
Jim Morehead is a Market Executive in Global Commercial Banking at Bank of America Merrill Lynch in Seattle.