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Business strategy

How a wider take on sustainability can get your business future fit for 2023 and beyond

Our FutureFit survey shows most companies understand broad sustainability measures are the way to future proof their organisations, but not everyone has acted on this just yet.

The term sustainability may have become interchangeable with environmental protection in the popular mind, but most business leaders know the term means much more.

In our recent FutureFit survey of 500 senior UK business decision-makers (see more on our research below), we set out to share insights on what actions companies are taking towards incorporating sustainable thinking into their broader long-term business plans and operations.

Redefining sustainable business: leaders know it’s important but short-term challenges are limiting action

More than half (57%) of senior decision-makers agree that a truly sustainable business is one that is future-proof, purpose-led and diverse in its supply chains and customer base. Achieving this kind of sustainability is as much about the way you run your business as it is managing its impact on the planet, they agree. 

No doubt fuelled by recent events, 65% of respondents identify the ability to manage financial risks such as inflation as a crucial capability of sustainable businesses as the top answer. This is followed by the need for a diverse customer base – see full results in the chart below.
 

Which of the following do you view as the main features of the ‘sustainable’ business?
(% of respondents ranking 1 to 3)

Beyond the sustainability ideal: Holding back or being held back?

While business leaders understand the importance of sustainability in building longevity and resilience, not all companies are able to act on this insight in the current economic climate.

Four out of ten (41%) respondents say their business has yet to make the leap and accept sustainability as more than an environmental issue. And just over half (52%) agree that while their business would like to be more sustainable, it is held back by a lack of budget. 

For business leaders to convert this holistic understanding of sustainability into action, building support for funding investment in sustainability is vital. Some 54% of respondents agree that sustainability often means taking a long-term investment view and not going for the cheapest option available today. 

“In recent years, many sustainability initiatives have been driven by demands from regulators and investors for companies to prove their environmental, social and governance credentials,” says our National Sector Head Jonathan Barrow.

“But against a challenging macroeconomic backdrop and rising inflation, we believe continued investment in broad-based sustainability will build long-term resilience.”

The short vs long-term horizon for sustainability action 

A gap between understanding and commitment to action is clear in many of the survey findings. For example, nine out of ten senior decision-makers agree that they are at risk of losing customers if they cannot demonstrate their sustainability credentials. But this is not quite the rallying cry to take action that it may at first appear.

Nine out of ten senior decision-makers agree that they are at risk of losing customers if they cannot demonstrate their sustainability credentials.

Drilling a little deeper into attitudes, only three in ten (32%) believe this risk is significant. As you can see in the chart below, the majority feel there is little risk of losing customers within the next year and most see this as a risk they’ll face more in the medium to longer term.
 

Over what time would you expect to lose customers if you fail to demonstrate sustainability credentials?

(% of respondents who identified a risk of losing customers)

How businesses are preparing for a future world

As you’ve read above, our FutureFit survey shows that business decision-makers mostly understand the link between broader sustainability measures and building resilience in the face of current and future challenges. But to make this insight a reality, they must act on many fronts – here we explore their action plans and challenges across four key operational areas.

Businesses are taking long-term action on rising energy costs

Decision-makers expect rising inflation, including energy price rises, to be either their top or second most pressing challenge – not just for the short term as you’d expect but also for the medium and long term.

This has motivated investment in renewable energy sources: 64% of our respondents have invested in cleaner energy solutions, they say, with the overwhelming majority (60%) having done so to protect against rising energy costs.

60% of businesses say they’ve invested in clean energy solutions to protect against rising energy costs.

But even cost-cutting initiatives such as cleaner energy require investment and therefore commitment. Among the handful of companies that have not invested yet and have no plans to, ‘a lack of business buy-in’ is the most common reason. 

Key action to get future fit: Embrace the benefits of cleaner energy

Competing supply chain objectives are still impacting most businesses

Competing supply chain objectives are still impacting most businesses

Rising inflation will also add further complexity to businesses’ supply chains, as will geopolitical risks, including sanctions – another pressing challenge that respondents expect to encounter in the medium to long term. 

In preparation, six out of ten respondents are taking action to diversify their supply chains. But they are caught between wanting to choose the cheapest suppliers and also prioritise trustworthiness and reliability. 

Key action to get future fit: Make tough decisions on supply chains.

Companies believe in the power of purpose but are still yet to unlock its full value 

Many business leaders understand the value of defining their organisation’s purpose, with 44% of respondents agreeing that giving staff purpose at work reduces the risk that they will be tempted away by a pay rise. 

However, fewer than half of the businesses we surveyed have published a statement outlining their purpose and just over half of our respondents agree that purpose needs to be proven through everyday actions within their business, perhaps suggesting that a statement alone is not enough to create a purpose-led organisation. 

Failure to take the first step could show that business leaders are neglecting their long-term interests to fight short-term battles. 

Key action to get future fit: Prove purpose to win talent.

Businesses are investing in digital innovation and it’s not just about operational efficiency 

By far the majority of business decision-makers surveyed (93%) have already invested in digitisation and within two years, all will have. More than two thirds have already invested in AI and within two years, only 7% will not have AI tools in operation.

The reasons are focused not so much on employee numbers but rather getting a better view of operations and improving customer service. In fact, improving employee satisfaction outranks wage reductions as a reason to invest in IT. 

Key action to get future fit: Invest in untapped digital innovation opportunities to save now and in the future.

Background on our FutureFit survey

In September 2022 we set out to gather insights on how businesses are in the current turbulent times balancing action on short-term challenges with long-term aims and sustainable business strategies to future proof their businesses. 

We interviewed over 500 senior business decision-makers across a broad range of sectors across the UK, see below. Get a breakdown of who took part in the FutureFit survey here

Get future fit

Tomorrow’s truly sustainable businesses will be built on the actions we take today. 

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This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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