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Wednesday, June 19, 2024

Sustainability is a value creation opportunity

Vast majority of companies view sustainability as a value creation opportunity, with more than three quarters anticipating potential benefits ranging from higher revenues and profitability to lower cost of capital, according to a new survey released by Morgan Stanley.

Many however apprehend increased sustainability-related costs and a need for significant investment, as per survey.  The survey indicated that nearly all companies now recognize the impact of sustainability on their long-term corporate strategies, with 85 percent of respondents reporting that they see sustainability as a value creation opportunity. In fact, value creation opportunities topped the list of “very significant” reasons reported by companies for pursuing sustainability strategies, followed closely by compliance with government regulation.

Experts however point out that managing investments needed for sustainable procedures by big companies and multinational giants could pose lesser problems but for small and medium companies operating in the textile sector is problematic for the industries. Thousands of small industries are the main suppliers of the trillion dollar annual trade of this industry. They supply their textile products to big brands in developed economies who outsource their orders to these small producers spread in different countries. They determine the prices at which they buy these products. They pay extremely low prices to their suppliers as they have the choice to choose from hundreds of suppliers for each product spread in different countries.

These small and medium suppliers operate on low margins and are not in a position to make the huge investments needed for sustainability. The brands that buy products from suppliers sell the same at 7-10 times higher than purchase price. The textile suppliers have appealed to the big brands to increase their purchase price by only one dollar per piece that would add millions of dollars in the kitty of suppliers enabling them to invest in sustainability.

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