Environmental and social considerations are often presented as risks to businesses. However, if they’re properly integrated into strategies and decision-making they can very much become opportunities. For example, research from KPMG suggests implementing measures to improve job quality can increase profit margins by as much as 0.4 per cent in industries where profit margins typically range between one and two per cent.
Such opportunities may also come in the form of more efficient use of resources like electricity and water or improving access to markets, and can generate greater returns and help businesses become more sustainable. Across sectors, taking measures to improve environmental and social standards is beneficial for individual employees, as well as businesses and it makes a valuable contribution towards sustainable development.
At CDC, the UK’s development finance institution, we recently published our first ever Annual Sustainability Review. It looks at a select number of businesses in Africa and South Asia, which (in different ways) show that improving sustainability is not only the right thing to do, it can also provide a competitive advantage.
One of the companies we look at in our review is Narayana Health, a healthcare provider based in India, which is pioneering cost-cutting methods so it can deliver quality, affordable healthcare to lower-income patients. To support its efforts, we conducted water and energy consumption audits at a selection of its hospitals. Implementing the recommended measures from our water audit led to a saving of around 39 to 43 per cent per month. With water scarcity being such an important issue in India, such a saving is not only good for the business but it has a wider importance too.
The review also looks at the work of financial institutions in South Asia and East Africa supporting financial inclusion. In Pakistan, for example, more than 20 million people don’t have a bank account and, while the country has around three million micro, small or medium-sized businesses, only 132,000 of them have access to banking services. Habib Bank, a company we’re invested in, is addressing this issue by providing life-changing financial services like micro-credit so people can start their own businesses.
It’s a similar story in other developing countries. For example in India, where 65 per cent of the country’s 1.2 billion people don’t have access to formal financial services, we’re working with RBL Bank to open 1.3 million accounts for financially excluded people by 2020. And in Tanzania, CRDB Bank is expanding into rural areas to provide formal financial services to people who previously would have had no access.
It isn’t just in financial services and healthcare that sustainability presents opportunities to businesses. In manufacturing, for example, we’ve worked with the first company in India to join the Ethical Trading Initiative (ETI), an alliance of companies and trade unions which all promote good working conditions, fair pay and decent hours. We’re also supporting Daraz, an e-commerce business operating in Pakistan, Bangladesh and Myanmar to join the ETI, and the company is introducing its own Code of Conduct for suppliers.
Companies like these recognise the opportunities to the business that this focus on improving job quality brings, which is borne out by the KPMG research. And doing so isn’t just good for the bottom line, it means businesses can last – creating the jobs and building a thriving private sector, which are both such a crucial part of sustainable development.
Ritu Kumar and Mark Eckstein, Co-Directors, Environmental and Social Responsibility, CDC, the UK’s development finance institution. You can download a copy of CDC’s Annual Sustainability Review 2015-2016 here.