Source : Procurement Leaders
The vast majority of businesses say that sustainability is vital to their future growth, but almost half say that margins are currently lower on sustainable products and services, according to new research.
The Accenture survey of 250 senior executives in eight leading mature and emerging economies reveals that 44% think sustainability is critical to their business and 78% say it is vital to their future growth.
However, while the vast majority (83%) of responding senior decision makers see spending on sustainability as an investment rather than a cost, a majority (56%) say it is currently more expensive to be a sustainable business. Some 49% say that margins are currently lower on sustainable products and services. The figure rises to 54% of surveyed businesses in the United States and 58% in emerging markets.
Nearly two thirds (62%) of respondents claim their sustainable investments are motivated by customer expectations for sustainable products and services and 60% by the opportunity to drive growth. Only 41% of those surveyed are motivated by regulatory compliance and only 29% by the need to reduce energy and material costs.
When respondents were asked if their sustainable investments are primarily aimed at aiding growth or improving efficiencies and cost cutting, almost twice as many pointed to growth over efficiencies (41% to 22%). In emerging markets, the distinction was greater still, exactly half of surveyed executives opting for growth over cost savings (18%).
“The good news is that companies now systematically see sustainability as being vital to their future growth and core to their business,” said Bruno Berthon, managing director, Sustainability Services at Accenture.
“Sustainability has broken free from the realm of regulatory pressure and reputation management, and is now rising into a virtuous circle of commercial opportunity and investment growth. Businesses must now industrialize and scale production in order to drive higher levels of productivity, operational discipline and cost optimization into what can often be immature operating models in high growth sustainable markets. ”
He added that the concern over lower margins may be explained by the survey’s finding that businesses think consumers are reluctant to pay more for sustainable products and services. Almost half (47%) of respondents say that consumers are not willing to pay a premium for them (exactly a quarter of respondents believe that they are willing to do so).
Nevertheless, 60% admit to charging premiums for sustainable products and services and the largest proportion of those that do so (68%) claim they can charge between 5 and 20% premiums. 17% claim they can charge premiums of between 20% and 50%. Yet, despite charging higher prices, over one third (37%) of surveyed businesses say they cannot keep up with customer demand for sustainable products and services. This figure rises to 44% in emerging markets.