Sustainability is driving profitability and competitiveness in Australia, though access to data is stifling progress

SAP launched new research revealing that businesses in Australia are increasingly seeing financial benefits from sustainability, but an inability to accurately measure their impact on the environment could hinder progress. The global Environmental Sustainability Study* of 6500+ business leaders, including 204 from Australia, is the second edition of SAP’s annual report which explores the motivations and barriers organisations face as they look to boost sustainability in their companies.

Customer demand (39%) and revenue and growth opportunities (36%) and are the top two motivating factors for Australian businesses to take environmental action, followed by governmental regulation (36%) as another leading factor. Yet Australian organisations risk losing out if they are unable to place data at the heart of their sustainability strategy.

Making sustainability profitable and profitability sustainable

Taking action to improve the environment and reduce an organisation’s footprint is not only a moral issue but has quickly become a key driver of revenue. More than eight in ten (86%) Australian leaders now see a positive connection between taking environmental action and profitability. Just 14 per cent see either a negative or no relationship between the two.

It’s no wonder that over half (56%) of Australian businesses now believe addressing environmental issues will be material to business results within the next five years. Moreover, SAP found 52 per cent of businesses said that their stakeholders would be moderately or highly tolerant of reduced profitability in pursuit of their organisation’s sustainability goals – indicating leeway to invest in positive sustainability outcomes.

Building a data-led sustainability strategy

Nurturing a connection between profit and purpose requires a dedicated sustainability strategy and an ability to prove return on investment. However, these factors have been revealed as leading barriers to environmental action. Almost four in ten (38%) of Australian businesses say difficulty proving a return on investment is holding them back, while 34 per cent point towards a lack of environmental strategy.

The ability of businesses to gather and analyse quality data has emerged at the heart of the issue. SAP reveals that 83 per cent of Australian businesses are not completely satisfied with their ability to accurately measure their impact on the environment.

Such data challenges will hold back progress and delay innovation, and yet some businesses are exacerbating these issues by how they collect and utilise their environmental data. Three in ten (30%) Australian businesses rely solely upon assumptions and estimates to screen the environmental impact of their supply chain. Similarly, a majority (76%) of businesses say they don’t have complete visibility over the sustainability metrics of their external supply chain.

Commenting on the research, Damien Bueno, President and Managing Director, SAP Australia and New Zealand, said: “If Australia is going to move towards a more sustainable future, organisations across the country need to embrace sustainability as part of what they do every day, and embed these strategies into their operating models.

“To do this properly, organisations need to consider their entire value chain. Only by coming together, and being more open, trusting and collaborative with their value chain partners, will organisations be able to truly progress sustainability outcomes.”

About Prof Janek Ratnatunga 1129 Articles
Professor Janek Ratnatunga is CEO of the Institute of Certified Management Accountants. He has held appointments at the University of Melbourne, Monash University and the Australian National University in Australia; and the Universities of Washington, Richmond and Rhode Island in the USA. Prior to his academic career he worked with KPMG.
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