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Mar 16, 2022

Euro vs. karma: Are sustainable companies more successful?

Whether a product or service is sustainable is becoming increasingly important for consumers when making a purchase. The same applies to employees: Professionals choose sustainable companies who convince with their values and actions. For many companies, however, sustainability is still purely a subject of marketing (1). Does sustainability really only help companies enhancing their image? Are sustainable and ethical actions incompatible with economic goals? In our article, we will show you why it is also economically viable for your company to invest in true sustainability.

Sustainability in companies

Sustainability is not limited to ecological environmental impacts. It also includes economic and social aspects. All three aspects are important when you develop products and services. The economic perspective, for example, aims to develop efficient and future-proof products, business models or services. The social perspective considers issues such as data privacy, inclusion, or the ethical use of technology.

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Winning skilled workers

In addition to salary and work-life balance, climate protection and sustainability are among the top three criteria for candidates when it comes to choosing a new employer (2). Sustainable companies who treat people, the environment and resources with respect both internally and externally position themselves as attractive employers and gain the trust of potential skilled workers. For younger employees in particular, salary is not the decisive factor if the potential employer can convince them with ethical corporate governance and the company's values correspond to their own (3).

Strengthening brands and customer loyalty

The market has long since recognized the customer need for sustainable products. According to a study by LBBW Research, around 50 percent of consumers say that they pay attention to the supplier's social and ecological responsibility when making a purchase (4). Sustainable companies who represent social and environmental values are more visible and can therefore sell their products more easily – even to new customers. Consumers trust brands with clear values. This increases customer loyalty and helps to tap new customer groups.

Successful business

But there is more to it: Consumers are also willing to pay more for sustainable products (5). This is also reflected in the key economic figures: Companies can pass on their sustainable commitment to customers through prices and also achieve good margins for sustainable products. However, consumers should carefully check whether they are paying for true sustainability or are merely being tricked into greenwashing. The amount of marketing and sustainability expenditures (for example, for innovations, corporate social responsibility) in the annual report of the respective company can provide information about this.

Minimizing costs & increasing efficiency

Those who operate in an energy- and resource-efficient manner not only reduce the ecological impact of their business activities, but also reduce costs. Sustainable companies are more efficient and save development, training and support costs in the long term. In product development, efforts can be reduced, for example, by using living style guides. We have developed a living style guide in HTML for the mobile product world of one of our mechanical engineering customers. It ensures cross-app intuitive operation and ease of learning of applications. At the same time, it lays the foundation for efficient, economical software development: The style guide is centrally available, and all UI components are documented, including code snippet and linked via storybook. This way, other developers can access it at any time. If developers need to implement new features, they take the relevant UI components from the living style guide. This not only makes their work more efficient; it also increases quality and consistency.

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Opportunity for realignment

Switching to sustainable technologies opens up new market potential: According to a study by the German Engineering Federation (VDMA), the mechanical and plant engineering sector could generate around ten trillion euros in additional sales worldwide establishing climate-friendly technologies by 2050 (6). Sustainable companies who adapt to changing conditions at an early stage – for example, rising energy costs, reduced availability of raw materials or stricter regulatory requirements – gain a competitive advantage. For example, the BMW Group states that more than 5,600 suppliers were surveyed on sustainability criteria. Those who could not meet the specified requirements of the BMW Group had to submit a corrective action plan. Less sustainable suppliers might therefore be less likely to win contracts in the future. The consequence would be a possible loss in sales (7).

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Developing sustainable business models

Companies who want to make their products sustainable are more strongly called upon to question existing business models. Those who develop innovative product strategies today that are checked for profitability while at the same time meeting sustainability goals and the needs of the market and target groups is investing in sustainable business models.

Avoiding negative headlines

It almost goes without saying: Beware of greenwashing. When there is a green label on a product, it should definitely be green. When the truth comes out, i.e., that a company has only greenwasher products by marketing strategy, it damages the trust in a brand considerably. In addition to the damage to the company's image, there is also enormous economic damage if customers no longer buy the product. Often, the trust of customers has to be regained through elaborate and costly marketing campaigns – if this is successful at all. The best known and biggest scandal in this context is the VW diesel scandal: Vehicles advertised as being a 'clean diesel' were equipped with manipulated exhaust software. So far, this scandal has cost the Group 32 billion euros (8).

Conclusion

Sustainability doesn't only serve karma. Well thought-out sustainability strategies have a positive long-term impact on the economic success of a company and help to pass companies on to the next generation in a responsible manner.

The Authors

Dr. Peter Klein

Peter holds a degree in computer science and a doctorate in information science, specializing in information design and visualization. As Head of Research & Innovation at UID, he is in charge of taking up disruptive technologies in a targeted manner and handles their creative transfer into user-centered product and process design.

Silja Donadel

Whether content or offer creation – Silja networks marketing and sales at UID. The literature and linguistics expert is always on the lookout for exciting topics from the UX world that will inspire our customers.

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Sources

(1) https://www.manager-magazin.de/unternehmen/nachhaltigkeit-laut-umfrage-von-russell-reynolds-fuer-manager-vor-allem-eine-image-frage-a-075c5587-6eb1-4f20-9ca8-e9610d416606

(2) https://www.haufe.de/personal/hr-management/arbeitgeberattraktivitaet%20umweltbewusstsein-ist-wichtig_80_520800.html

(3) https://www2.deloitte.com/cn/en/pages/human-capital/articles/global-human-capital-trends-2020.html

(4) https://www.lbbw.de/artikelseite/maerkte-verstehen/warum-nachhaltige-unternehmen-erfolgreicher-sind_7az2nfam2_d.html

(5) https://www.wiwo.de/adv/gruener-wirtschaften-green-it-darf-mehr-kosten/v_adv/14824662-2.html and https://home.kpmg/de/de/home/t...

(6) https://www.vdma.org/documents/34570/0/BCG-VDMA_Gruene-Technologien-gruenes-Geschaeft_2020-07-14.pdf/ec3bdb32-65d4-cd59-cb6c-7661840361bc

(7) https://www.lbbw.de/konzern/research/2018/blickpunkte/lb_studie_nachhaltigkeit_wandel_7ax8ein8q_m.pdf

(8) https://www.g-ne.de/blog/wie-greenwashing-kundenvertrauen-und-kaufintentionen-beeinflusst/ and https://www.tagesschau.de/investigativ/ndr-wdr/vw-winterkorn-117.html#:~:text=Bis%20heute%20hat%20der%20Diesel,gegen%C3%BCber%20Winterkorn%20nicht%20ausgleichen%20k%C3%B6nnen.&text=%C3%9Cber%20dieses%20Thema%20berichtete%20B5,2021%20um%2017%3A09%20Uhr