Australian businesses link sustainability to better performance

Recent research by SAP has revealed a strong belief among Australian businesses that sustainability is closely tied to their overall performance, with 68% of respondents acknowledging a positive correlation between sustainability, competitiveness, and profitability. This trend is expected to have significant implications for corporate strategies across the nation.

Gina McNamara, Regional Chief Financial Officer for SAP Asia Pacific & Japan, commented on the findings, stating that sustainability and financial performance are inextricably linked. She emphasised the growing recognition that more sustainable organisations tend to be more successful.

The report highlights several key points, including that 69% of Australian businesses observed moderate to strong increases in the efficiency of business processes as a result of sustainability activities. Nearly half (49%) of Australian businesses plan to ramp up their sustainability investments over the next three years, a rise from 38% last year.

The study, which surveyed 250 business leaders in Australia, also revealed that two-thirds (67%) of respondents noticed sustainability strategies contributing to revenue or profit growth to a moderate or strong degree. Additionally, six in ten (60%) Australian businesses expect to see a positive financial return on their sustainability investments within the next five years, closely mirroring global expectations.

McNamara stressed that sustainability should not be considered separately from financial performance. She pointed out that over one in ten (11%) Australian businesses already view sustainability as material to their business results, while another 36% expect it to become important within five years. Combining financial and environmental decision-making processes is essential, she added.

However, the report also identified several challenges. The primary barrier to environmental action is the difficulty in proving return on investment, an issue cited by 40% of Australian businesses compared to the global average of 33%. Other significant hurdles include a lack of funding (33%), an absent environmental impact strategy (32%), and insufficient expertise (32%).

The quality of sustainability data remains a concern, with only 15% of Australian businesses expressing complete satisfaction with the data they gather, down from 17% last year and below the global average of 23%. In terms of direct measurement, Australian businesses lag behind their global counterparts in areas such as energy consumption and emissions (72% vs. 83%), resource availability (73% vs. 79%), and materials use (70% vs. 76%).

Despite these challenges, sustainability data is being used to inform strategic and operational decisions by a significant majority of Australian businesses. Three-quarters (75%) reported using sustainability data for decision-making to a moderate or strong extent, with just 4% not using it at all. Encouraging progress is being made, with 73% of businesses tracking Scope 1 emissions, 64% tracking Scope 2 emissions, and 52% tracking Scope 3 emissions to a moderate or strong degree.

Companies are increasingly demanding sustainability data from their suppliers and partners. Almost two-thirds (64%) require such data from suppliers, and 63% from partners in sectors like logistics and fulfilment.

McNamara concluded that integrating sustainability data into the core business is beneficial but acknowledged that more work remains. Partnering with technology providers like SAP can help businesses measure accurate sustainability data, act on it strategically, and enhance their competitiveness, profit, and revenue.