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In recent years, the development of sustainable industries has become an important topic and a general trend.


Finage has done a profound amount of research on the issue and found out the main sustainability challenges that the S&P 500 (stock market index composed of 500 top companies) are facing today. Let’s see the biggest sustainability challenges that organizations have reported recently.

 

Contents:

Climate Change

Environmental Regulations

Operating Costs

Consumers Influence

Supply Issues

Inaccuracy in What Forms Environmental Commitments

Own Business Influence on Environment & Ways of Managing the Issues

Catastrophes & Damage to Operations

Fuel Spendings

Public Awareness Influence

 

Climate Change

Climate change and environmental priorities in the sustainability challenges were not accidentally chosen. S&P 500 organizations pay special attention to issues existing in the environmental sphere and their relationship with sustainable socio-economic development.

 

Companies and departments received a number of specific instructions aimed at solving climate change and environmental problems, making a transition to a model of environmentally sustainable development, which in the long term will ensure the effective use of the natural capital and at the same time eliminate the impact of environmental threats.

 

Environmental Regulations 

Development and goals of sustainable industries include the environmental regulations. There is an S&P 500 ESG index of sustainable development that includes companies that adhere to the principles of sustainable development. The companies list includes the most capitalized and most successful companies that adhere to environmental regulations.

 

It should be noted that companies that have a high ESG index get the easiest access to capital, since compliance with the principles of sustainable development means that such companies work for long-term goals, increase the efficiency of processes, which allows them to invest in their securities as in the least risky. For example, in the 2020 10-K, it was identified that the usage and disposal of certain substances in the production processes have to be regulated by these policies.

 

Operating Costs

It is a smart move for companies to become more sustainable for long-term cost savings. However, achieving sustainability is not that easy. Many organizations identified a high financial spendings. Lots of companies are trying to be more sustainable but often they do not know how to do that or cover high expenses. A good way is to invest in effective altruism options to be as cost-effective as possible and to become more sustainable. Companies can also just start following the sustainability trends. For example, Coca-Cola implemented packaging recycling campaigns to advertise recycling worldwide and it was a major, but necessary spendings.

 

Consumers Influence

Prioritizing sustainability strategies by businesses is a means of creating a better reputation for companies and getting more profit. First of all, by 2023, the majority of consumers are going to purchase only from sustainable companies as estimated by statistics. So organizations have to be evolved in a sustainable way of production to meet users' needs and beliefs. This happens now and will occur across all areas represented in the S&P 500.

Supply Issues

Some of the large organizations that enter the S&P 500 get their supply from regions affected by conflicts or the ones that are located in high risk areas. One of the examples is the Target and Microchip company that has faced a few problems when purchasing minerals used in their products due to the control of these resources by local country forces. Actually, many companies have supply chain weaknesses that put owners into huge financial risks, including their reputation. Simply because customers cannot receive the products when they need them  when they want them, this influences the allegiance​. This also influences sales, setting purpose-driven companies apart from their competitors.

 

Inaccuracy in What Forms Environmental Commitments

The environmental commitments and regulations differentiate across industries and countries. Somewhere, you can find clear policy or standards, however, this is one of the main issues that has been represented by S&P 500 companies in the current report, claiming that owners could not find clear definition or legal regulation of what constitutes green and sustainable environmental liability. Therefore, ambiguity and inaccuracy of environmental commitments create difficulties and companies face risks concerning industries operations.

 

Own Business Influence on Environment & Ways of Managing the Issues

Management of own business environmental impacts is another aspect which companies pay attention to.  What business owners and teams do? First of all, they have to meet local or federal policies, proving that all supply chains meet regulations and pass certain criteria. It also requires more investments. 

 

At the same time, more and more investors, when making decisions on investments in a particular company, take into account its impact on the environment. The explosive growth of responsible investing is forcing corporations to follow global trends. Responsible investing involves reviewing the company principles and providing corresponding management procedures.

 

Catastrophes & Damage to Operations 

It is important to mention that many S&P 500 companies that are engaged in energy and agricultural services and production are worried about natural catastrophes as a main sustainability challenge. First of all, the issues of climate change and fires, including changes in the weather conditions and high temperature or floods are considered as the main factors that damage companies operations.

 

Responsible companies are actively investing to cope with the damages and protect the environment from natural disasters. They are interested not only in terms of making a profit, but also in saving the planet from the negative effects.

 

Fuel Spendings

The S&P 500 organizations indicate the fuel costs rise which highly influence the supply chain distribution. It is considered to be one of the main sustainability challenges.

 

When organizations are trying to move away and stop using fuels, indeed the prices and overall spendings rise on the fuel increase. Moreover, you need more resources and spendings to be devoted and directed towards sustainability. 

Public Awareness Influence

Public awareness and support for sustainability has never been higher and will only continue to increase as the reality and effects of the crisis hit our planet. The question is how quick can public mandates and companies responsibilities be translated into real and radical changes?



Summing up, sustainable development is a model of interaction between society, environment and companies that are commercial structures that follow the provisions of long-term and sustainable development. Companies and enterprises are managed as commercial structures, which provide equipment efficiency improvement and cost management in order to have a positive economic effect on the entire ecosystem. This implies the understanding that the company operates in a certain region, contributes to the economy of that region, country and environmental sustainability.

 

The company itself must understand its attitude to nature and society, the need to form a corporate culture, train employees, and develop their own environmental liability. It is also required to develop sustainable supply management, respect and adopt the concept of lean manufacturing. It is also important to be engaged in sustainable development initiatives that will reduce costs at each stage of the life cycle in the long-term.