Written by: Angelica Sirotin, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
The business world is under pressure like never before to operate in a sustainable way. Consumers, employees, and shareholders are all demanding that businesses take action on climate change, social injustice, and other pressing environmental and social issues.
This pressure is transforming the way businesses innovate. Sustainability is no longer seen as a CSR initiative or a nice-to-have; it’s now central to how businesses create value.
Here are five ways sustainability is transforming innovation:
1. Increasing regulation and standards
As sustainability issues move up the political agenda, businesses are facing increasing regulation and standards. For example, the EU’s recently introduced Sustainable Finance Disclosure Regulation will require companies to disclose how their activities contribute to climate change.
This increased regulation is driving businesses to innovate in order to meet the new requirements. For example, banks are developing new financial products that help their clients transition to a low-carbon economy.
2. The rise of social purpose
There is a growing expectation that businesses should have a social purpose beyond making profits. Consumers, especially millennials, are increasingly likely to buy from brands that they believe are doing good in the world.
This shift is driving businesses to embed sustainability into their brand identity and purpose. For example, Patagonia’s mission is “to use business to inspire and implement solutions to the environmental crisis.”
3. The growth of sustainable investing
Sustainable investing is one of the fastest-growing areas of the financial industry. “Globally, the asset-management industry earned $1.8 billion in fees last year from their sustainable funds, up from almost $1.1 billion in 2020, Morningstar reported,” according to Bloomberg.
This growth is being driven by a desire to generate both financial returns and positive social and environmental impact. For example, impact investing funds invest in companies that are solving social and environmental problems.
4. The rise of ESG data
Environmental, social, and governance (ESG) data is becoming increasingly important to investors. This data can provide insights into a company’s sustainability performance and risks.
As a result, businesses are under pressure to improve their ESG disclosure and reporting. This is driving innovation in data collection and analysis, as well as new reporting standards and frameworks. Businesses that adopt best practice in ESG reporting will be better positioned to attract investment.
5. The growth of the circular economy
The traditional linear model of take-make-waste is no longer sustainable. The world’s population is growing and consumption is increasing, putting strain on the planet’s resources.
To address this, businesses are adopting the principles of the circular economy. This new model keeps products and materials in use for as long as possible and captures the value of waste.
The circular economy is driving innovation in product design, manufacturing, and business models. For example, companies are designing products that can be easily repaired or recycled. And new business models, such as product-as-a-service, are emerging.
Sustainability is transforming innovation in the business world. Increasing regulation, the rise of social purpose, and the growth of sustainable investing are just some of the trends that are driving change. Businesses that don’t embrace sustainability will find it increasingly difficult to compete.
Angelica Sirotin, Executive Contributor Brainz Magazine
Angelica Sirotin is the founder and CEO of Sirotin Ventures, a boutique firm offering strategic business, valuation and fundraising solutions for small-mid-size companies. She is a strategic advisor to investment and management consulting firms that have secured over a billion dollars worth of equity and debt financing for businesses globally. Angelica is a Member of the World Economic Forum, B20, AI For Good Foundation's Council For Good, and has been selected as Swiss Cognitive's Global AI Ambassador 2022. Angelica was the former founder and CEO of Torrent, an Esports company acquired for 5x profit.
