Why Enterprises Care about Sustainability

Note: This post was written for the module Enterprise IT (113601a) in the summer semester 2025

Introduction

Sustainability is a topic that is gaining more and more attention – not just in politics and society, but also in the business world. Companies are under growing pressure to reduce their environmental impact, act ethically, and contribute to social well-being. But why do businesses actually care about sustainability? Is it just about their public image, or are there deeper reasons behind it?

This blog post explores what sustainability really means and looks at the different factors that drive companies to act more sustainably. By breaking down the main motivations – from laws and public expectations to internal culture and financial incentives – we get a clearer picture of why sustainability has become a key issue for modern enterprises.

Aspects of sustainability

Before we can dive into the reasons why enterprises care for sustainability, we first have to define what sustainability is. When we think about sustainability, we usually think about environmental problems and how to avoid them. But sustainability is much wider.

In 1987, the World Commission on Environment and Development (WCED) – an international commission of environmental experts, politicians, and civil servants – was convened by the UN and tasked to find solutions for sustainable development [1]. Their results were published in the Brundtland Report. They defined sustainability as ”meeting the needs of the present without compromising the needs of future generations, so that they can meet their own needs as well” [2]. This definition has been commonly used since then. Furthermore, the Brundtland Report states that there are three key aspects of sustainability: economic, environmental and social. The goal is to obtain a balance between economic growth, environmental sustainability and social well-being [2].

Nowadays, the focus is often on the environmental aspects of sustainability because these problems are the most visible and significant ones, and they are difficult to solve [3]. Nonetheless, it is important to also keep the economic and social aspects in mind.

Why enterprises care

There are many reasons why enterprises care about sustainability. To structure the various influences and motives, they have been categorized in various studies. Burke and Graham [4] divide the motives into internal and external factors where internal factors include the corporate governance, the organizational structure and the influence of the stakeholders – such as owners, shareholders, consumers and regulators [3] –, and external factors include the country’s legal system as well as cultural and social factors. Law [5] added the management’s attitude as a third group.

Uecker-Mercado and Walker [6] take a different approach by categorizing the motives into internal pressures, organizational culture, financial, competitive, and ethical factors.

For a structured and detailed understanding, this blog post combines the different approaches and divides enterprise motives into external, internal, managerial, financial, competitive and ethical factors. In the following, we will take a closer look into each category.

External factors

External factors play a crucial role in shaping enterprise behavior regarding sustainability. One major driver is regulation: national and international agreements such as the Glasgow Climate Pact from 2021 have set frameworks for environmental compliance [3]. Regulatory bodies monitor adherence, and failing to comply can lead to penalties. However, recent trends show a shift from strict command-and-control regulations to more incentive-based approaches, such as tax reliefs, grants, and rebates [3, 7].

Public pressure also influences companies. Especially in industrialized countries, consumers demand responsible behavior, pushing firms toward sustainable practices [3]. At the same time, sustainability has become a factor in employer attractiveness. A company perceived as environmentally and socially responsible is more likely to attract and retain talent [7].

Brand image and customer loyalty are additional external motivators. Companies that demonstrate commitment to sustainability often enjoy stronger reputations and customer trust, which can translate into long-term market success [8].

A survey by PwC (Figure 1), conducted in 2021 among 2,510 employees and 5,005 consumers, confirms how much both groups value sustainable commitments. Over three quarters of respondents said that they are more likely to buy from or work for a company that actively supports environmental, social, or governance (ESG) values [9].

Internal factors

Internal factors refer to the structures and dynamics within organizations that drive sustainable behavior. Corporate governance and organizational culture are essential in embedding sustainability into business strategy [3]. Stakeholders such as owners and shareholders often expect profitability, but increasingly demand sustainable value creation as well.

Similarly, employees are placing greater importance on sustainability, not only as a value but also as a workplace expectation [3]. Companies that treat employees as stakeholders and engage them in sustainability efforts benefit from increased retention, motivation, and productivity [7].

Managerial factors

Beyond organizational structures, managerial attitudes significantly influence sustainability initiatives. Management’s personal beliefs, ethical thinking, and value systems play a decisive role [3]. Some managers act out of a genuine desire to contribute to society and secure the future for upcoming generations [6].

Research shows that leadership engagement, motivation, and personal commitment are strong predictors of how seriously an enterprise pursues sustainability goals [10].

Financial factors

Sustainability often leads to financial benefits. Energy-efficient equipment and optimized resource usage help reduce utility costs for water, gas, and electricity [3]. Although the upfront costs of sustainable practices may seem high, they tend to result in long-term savings and profitability [6].

Reducing waste and emissions also cuts overhead costs and mitigates financial risks from potential regulatory non-compliance [7]. Furthermore, financial incentives from governments – such as tax credits or rebates – can significantly lower investment barriers [3].

Sustainability can also be a driver for growth. Enterprises with well-defined sustainability strategies are more likely to attract investors and access funding [7]. Figure 2 shows that the investment volume of sustainable investment funds and mandates grew massively from 2005 to 2023.

Competitive factors

Sustainability has become a source of competitive advantage. Companies that innovate with eco-friendly products or processes can differentiate themselves in the market [3]. A green image enhances customer perception, influencing purchasing decisions and boosting loyalty [7].

Acting early allows companies to stay ahead of regulatory changes and industry standards, gaining first-mover advantages over competitors [12]. This proactive approach strengthens reputation and ensures long-term resilience [8].

Ethical factors

Finally, many companies are motivated by ethical considerations. They view sustainable action as the right thing to do – an obligation to future generations and society at large [6]. These intrinsic motivations often drive deeper, more authentic commitments to sustainability beyond what regulations or market incentives require.

Conclusion

There is a huge variety of reasons and motives why companies care about sustainability: From purely number-based financial benefits over long-term benefits like customer loyalty, innovations and employee recruitment and retention to personal motivations and beliefs of managers.

And although environmental issues often get the most attention, it’s important to remember that sustainability also includes economic and social aspects. Companies that understand and address all of these factors are better prepared for future challenges.

References

• [1] Michelle E. Jarvie. Brundtland report publication by world commission on environment and development, 2014. available at https://www.britannica.com/topic/Brundtland-Report.
• [2] World Commission on Environment and Development. Report of the world commission on environment and development entitled ”our common future”. Aug 1987.
• [3] Stela Zhivkova. Sustainability and the reasons for its adoption in the companies. Proceedings of CBU in Economics and Business, 3:75–80, 12 2022.
• [4] Stephen Burke and William F Gaughran. Developing a framework for sustainability management in engineering smes. Robotics and Computer-Integrated Manufacturing, 23(6):696–703, 2007.
• [5] Kris M. Y. Law. Factors affecting sustainability development: high-tech manufacturing firms in taiwan. Asia Pacific Management Review, 15(4), 2010.
• [6] Haylee Uecker-Mercado and Matthew Walker. The value of environmental social responsibility to facility managers: Revealing the perceptions and motives for adopting esr. Journal of business ethics, 110:269–284, 2012.
• [7] Georgia Makridou. Why should business embrace sustainability? lessons from the world’s most sustainable energy companies’. Retrieved March, 20:2023, 2021.
• [8] Wangchuk Chungyalpa. Understanding business sustainability: The what, the why, and the how of sustainable business practices. Indian Journal of Sustainable Development, 5:24–37, 06 2021.
• [9] PwC. Consumer Intelligence Series survey on ESG, June 2021. available at https://www.pwc.com/us/en/services/consulting/library/consumer-intelligenceseries/consumer-and-employee-esg-expectations.html.
• [10] Sarah Williams and Anja Schaefer. Small and medium-sized enterprises and sustainability: Managers’ values and engagement with environmental and climate change issues. Business Strategy and the Environment, 22(3):173–186, 2013.
• [11] Forum Nachhaltige Geldanlagen. Marktbericht Nachhaltige Geldanlagen 2024, June 2024. available at https://www.forum-ng.org/.
• [12] Ram Nidumolu, Coimbatore K Prahalad, Madhavan R Rangaswami, et al. Why sustainability is now the key driver of innovation. Harvard business review, 87(9):56–64, 2009.