Entrepreneurs see opportunities that others do not and act accordingly in their business. As the world around us constantly changes and markets and consumer behavior evolve, entrepreneurs are uniquely positioned to adapt their business models. With social themes around CSR, ESG and sustainable business becoming increasingly central to stakeholder decision-making, transparent reporting and strong employment practices, entrepreneurs see this as an opportunity for additional value creation. Corporate sustainability is therefore a necessary strategy for future growth and relevance.
In the past, profit maximization and sustainability were sometimes seen as conflicting goals. However, corporate social responsibility now demonstrates its value, extending well beyond ethical considerations. Companies committed to social responsibility and environmental protection, for example, win the trust of consumers and investors. This trust translates into brand loyalty and financial stability. Sustainable business also means applying innovation.
It forces companies to work more efficiently, use sustainable materials and implement energy-efficient processes. These innovations can reduce costs and open up new markets, increasing company cash flows. It also encourages circular business models, in which products and materials are reused and recycled, which is not only good for the environment but also creates new business opportunities. Investing in sustainability helps companies mitigate risks, such as stricter environmental legislation and the physical effects of climate change. Companies that lead the way now will be less affected by future regulations and actively manage risk. Corporate sustainability also contributes to a positive corporate image and helps companies attract and retain (new) talent. Employees want to work for organizations with shared values and standards that have a positive impact on the world.
Entrepreneurs who embrace these developments and adapt their businesses accordingly will not only contribute to a better world, but will also benefit from a stronger, more resilient and profitable business model with better insight on risks. Not surprisingly, we are seeing these elements emerge more and more in our daily corporate finance practice.
For instance, sustainability considerations appear in financing applications and due diligence processes in M&A transactions, but also in preparation for the CSRD reporting obligations from 2025 onwards. An active and enforceable CSR policy builds trust in the company and contributes to long-term value creation. It enhances competitiveness , strengthens brand value and improves access to new customers and markets . Simultaneously, risks are reduced and costs can are optimized
Since understanding a company’s revenue potential, alongside its risks and business dependencies, remains central to valuations and acquisitions, entrepreneurs who focus on shareholder value creation continue to stand out. This approach makes a company attractive to both strategic or financial investors. Companies that adopt this path will differentiate themselves in the market and be better prepared for future challenges and opportunities. Sustainability truly is the key to additional value creation!
This article was originally published in ZAAN Business magazine of December 2023.