What do you do if short-term financial gains clash with long-term environmental sustainability?

If we prioritize systems that value short term gains we will continue to encounter this problem. It is important to remember that companies both big and small are put in this position constantly. Sustainability is often a trade off, e.g., if short-term gains support paying employees (no layoffs), then can we fault that? Of course, the planet cares not about employee well-being! So, ensuring a company understands its material focus areas and has goals and targets in those areas is very important (e.g., goal = climate action & target = reduce GHG by 30% by 2030). This will ensure that even though a short-term decision is made that clashes with long-term sustainability, the company remains focused on achieving its long-term commitments.

This is real example from a customer interaction: A retail giant based in the Nordics was eying to reduce its scope 3 emissions aligning with their 2035 net-zero strategy. For the same, they had to transition to biofuels against a premium that their logistics provider was offering. Given the high (abatement) cost, they decided to ship just 14-16% of their goods for the first year. However, they displayed a clear intent to increase the volumes on eco-fuels once the prices are lower in the subsequent years.

It's essential to recognize that sustainable practices often contribute to long-term financial stability by reducing operational costs, enhancing brand reputation and fostering innovation. Therefore, aligning financial objectives with a broader sustainability vision is imperative for creating a resilient and responsible business model that thrives both economically and environmentally. Assess which financial KPIs are core to the business function and which can be altered to fit your sustainability vision.

Clarifying your purpose is foundational for aligning environmental goals with core values. Define your mission, vision, and measures of success to identify your values. By prioritizing environmental sustainability as a core value, businesses can integrate it into their strategies and operations, leveraging it as a competitive advantage. This alignment fosters a sense of purpose and drives meaningful impact toward environmental goals.

Assessing current and potential environmental impacts is essential for understanding strengths, weaknesses, risks, and opportunities. Evaluate how products, services, processes, and operations affect natural resources, ecosystems, and communities. Identify areas for improvement to reduce negative impacts and enhance positive ones. By setting realistic and measurable goals, businesses can effectively prioritize actions to minimize environmental harm and maximize sustainability benefits, fostering long-term success.

Apply strategic thinking. Follow your heart and do what is right = what js good for nature. Back that up with facts and let your customers and suppliers know. You will see good things happening, because your customers and suppliers are humans who will, at least mostly, support you for doing the right thing.

Impacts can be big or small. I'd recommend organizations to complete a double materiality assessment to understand the level of priority they should attach to those impacts. This will form the basis of their strategy related to those impacts.

While this is important, it is also vital to reiterate that impact assessment alone without meaningful accountability mechanisms in place will give minimal results. In this case, without such mechanism and possibly other incentives that would facilitate demand for sustainable products and practices, it would be difficult to use the impact assessment information to drive incorporation of sustainable practices into company operations. There is also the dimension of trade-offs between the short-term gains and long-term sustainability practices, as in most cases, difficult decisions would have to made. This may include re-evaluation business models and possibly investing in sustainable technologies that offer long-term profitability.

The sustainability professional will not make progress without being pragmatic and actively listening to the business concerns and priorities. Helping the Board understand both short and longer term risks to the decisions they are making about climate is imperative. It’s about understanding the business and talking specifically about the stakeholder implications of the Board decisions. I avoid talking theory and more abstract concepts like purpose at this time. While I believe in these, when the Board attention is on cash, your arguments must resonate and cut through.

Exploring options to achieve environmental goals involves understanding trade-offs and synergies between short-term and long-term objectives. Assess costs and benefits of different scenarios to optimize resource efficiency, innovation, and value creation. By identifying the best fit for their business model and context, organizations can integrate environmental sustainability into their operations without compromising financial performance. Balancing environmental goals with economic viability is key to long-term success in sustainability.

Engaging stakeholders in decision-making and implementation involves identifying those with interest or influence in business and environmental performance. Communicate purpose, impacts, and options effectively, soliciting feedback, input, and support. Collaborate with stakeholders to create shared value and solutions, building trust, credibility, and partnerships for sustainability. By involving stakeholders, businesses can leverage diverse perspectives and resources to achieve environmental goals while fostering positive relationships and enhancing reputation.

The perspective of stakeholders to the dilemma of short-term financial gains and long-term sustainability is crucial to making the right and optimal trade-off decision. Firstly, stakeholder involvement facilitates transparency and accountability, helping the business interests to align with societal goals. These point of interaction provide vital that help in the development of sustainable solutions that minimize the trade-off. These solutions are mostly innovative, which tend to create shared value. It is also important to note that the role of stakeholders is well stated in the Triple Bottom Line approach to sustainability. Hence, the place of engaging stakeholders is super important!

When engaging your stakeholders - think about whether there is a supplemental gain or benefit that you can tie to your sustainability message. For example, is it cost-saving, is it innovation-building, would it lead to increased investment or a more diverse talent pool. This might help you overcome the short-term losses by framing sustainabiltiy as a much wider impact that aligns to multiple leadership goals.

Monitoring progress and evaluating results involves tracking and measuring environmental and financial performance using relevant indicators and metrics. Collect and analyze data to report outcomes and impacts transparently. Learn from successes and failures to refine strategies and actions. By regularly assessing achievements and challenges, businesses can adapt and optimize efforts toward achieving environmental goals while maintaining financial performance. Consistent monitoring ensures accountability and facilitates continuous improvement in sustainability practices.

Celebrating achievements involves recognizing efforts and accomplishments in environmental and financial performance. Reward yourself and your team for successes and share stories and best practices with stakeholders and peers to inspire and motivate others. By celebrating achievements, businesses reinforce purpose, values, and goals, fostering a culture of sustainability and driving continued progress toward environmental and financial goals. Recognition and sharing successes inspire others to join the sustainability journey, creating a positive impact for all stakeholders.

Balancing short-term profitability and long-term sustainability is crucial for the success of any business. When a company focuses solely on short-term profitability, it may sacrifice its long-term growth potential. However, when company prioritizes only long-term sustainability, it may struggle to meet immediate financial needs. By taking a holistic approach companies can create a strong foundation that allows them to generate consistent returns over the years while also maintaining focus on environmental responsibility. Finding balance short-term profitability & long-term sustainability requires careful consideration but ultimately pays off with higher profits through responsible behavior from all angles of business mngt strategies.