TL;DR: There is often a misconception that sustainability comes at the cost of profit and growth. However, research shows the opposite. Sustainable companies grow faster and have lower operational costs compared to competitors that do not invest in sustainability. With the introduction of ETS 2 in 2027, this trend is expected to accelerate even further.
Intro to Green growth & sustainable profit: When can we consider a business sustainable
Sustainable business revolves around one core principle: actively and consciously contributing to a positive societal impact as a company, by responsibly managing the effects of your operations on people and the environment. A sustainable company combines profitability with social and ecological responsibility. This includes:
• Striving for climate neutrality by reducing scope 1, 2, and 3 emissions,
• Aiming for a circular business model,
• Transparency across the supply chain so both you and the consumer know the origins of the product.
Green Growth: Can sustainable business coexist with profitability? Research on sustainable companies says it can
One common critique of sustainability is that it might come at the expense of (additional) profits or competitiveness. This notion, however, is too simplistic. While adjustments to business operations require upfront investments, many agree that these investments are worthwhile when they contribute to societal progress.
Moreover, in many cases, this assumption proves to be unfounded. Sustainable business often creates opportunities and competitive advantages.
McKinsey conducted research on the relationship between profit margin, revenue growth, and ESG performance. The findings? Sustainable companies are growing faster than average globally. Companies that perform well in both profit margins and sustainability show stronger growth than those focusing solely on profit margins.
Our Vision on CSR and the future of sustainable companies
At Regreener, we expect this trend, particularly in Europe, to continue growing. Sustainability will remain a core focus for the European Commission in its push for a competitive and clean economy.
Sustainability: Ecologically necessary and economically beneficial
Sustainability is not only critical for the environment but also offers significant economic advantages. Reduced energy consumption translates directly to lower energy costs, boosting the competitiveness of businesses and the purchasing power of households.
Following the loss of access to cheap Russian natural gas, energy prices in Europe are structurally higher than in other regions. According to the well-known Draghi report, electricity is currently 2 to 3 times more expensive in Europe than in the US, and natural gas costs 4 to 5 times more. To maintain and strengthen Europe’s economic position, it is essential to use energy more efficiently and increase the supply of green energy.
This is already happening. The energy we do use is becoming increasingly sustainable. Green energy, such as solar and wind power, is now often cheaper than fossil alternatives, making the switch to renewable energy attractive from a financial perspective. Reduced reliance on fossil fuels and materials from outside the EU means more stable energy costs and greater future security.
The EU Emission Trading System (ETS): Driving Europe towards green growth & a climate-neutral economy by 2050
With the European CO₂ pricing system, the EU Emission Trading System (ETS), Europe continues to move toward a climate-neutral economy. The system positions Europe as a leader in clean production and innovative technologies. At the same time, the Carbon Border Adjustment Mechanism (CBAM), effective from 2026, ensures a level playing field for European companies and competitors outside the EU.
The motor of green growth: How does the EU emission trading system (EU ETS) work?
ETS 1: The EU Emission Trading System (ETS) is Europe’s cap-and-trade system for CO₂ emissions in the industrial sector. Under this system, industrial companies must surrender one emission allowance for every ton (1,000 kilograms) of CO₂ they emit. These allowances can be purchased and traded, ensuring that industries pay for their emissions. The ETS is designed to gradually push European industries to reduce emissions, with the ultimate goal of achieving net-zero emissions by 2057.
ETS 2 (From 2027): Starting in 2027, the ETS system will expand to cover CO₂ emissions from all fuels supplied to buildings, road transport, and industrial sectors not covered by ETS 1.
CBAM (From 2026): Beginning in 2026, importers of six product groups will need to pay a price for the CO₂ emissions associated with the production of the imported goods. CBAM applies to the following categories: iron and steel, cement, fertilizers, aluminum, electricity, and hydrogen.
The CBAM acts as a CO₂ adjustment, requiring importers to the EU to pay the same CO₂ price as producers within the EU pay under the ETS system. The CBAM is designed to prevent "carbon leakage," where companies relocate production outside the EU to avoid paying for CO₂ emissions.
The impact of EU ETS on CSR & Dutch SMEs
Under the current EU Emission Trading System (ETS), the system mainly affects large Dutch industrial companies, meaning that small and medium-sized enterprises (SMEs) have felt little direct impact so far. This will change with the introduction of ETS 2 in 2027, which will price fossil fuel usage in buildings and road transport—sectors that virtually all SMEs are involved in.
With the expansion to ETS 2 in 2027, SMEs will face stronger incentives to invest in sustainability. This effect will be further amplified by the implementation of the Corporate Sustainability Reporting Directive (CSRD) and standardized supply chain reporting (scope 1, 2, and 3). The annual New Economy Index (NEx) published by CSR shows that the percentage of the Dutch economy classified as sustainable is growing every year.
The upcoming introduction of the CSRD directive has already contributed to a 30% increase in supply chain transparency. This number is expected to rise further after the full implementation of the CSRD.
That's why ABN Amro commissioned research into the relationship between investments in sustainability and profit margins, specifically focused on the Dutch market. The study shows that Dutch companies actively investing in green technologies have, on average, higher operating margins than competitors who do not.
ABN Amro advises: Now is the time to invest in sustainability
Based on these findings, ABN Amro advises Dutch SMEs to continue investing in sustainability and even bring planned investments forward. Short-term investments may be more cost-effective than mid-term investments, as the number of emission allowances under the EU ETS will decrease. This means investment costs will likely be lower until 2029 than after 2030.
Furthermore, research by the University of Amsterdam (UvA) shows that companies engaged in corporate social responsibility are better positioned to attract talent in a tight labor market. The majority of workers would be willing to sacrifice 20% of their salary for a sustainable job.
Conclusion:
Contrary to common belief, research from ABN Amro and McKinsey shows that sustainable companies are more profitable and grow faster than their non-sustainable counterparts. The expansion of the EU ETS system (from 2027) will further strengthen this trend in the coming years. Corporate Social Responsibility (CSR) is therefore future-proof business.
Want to learn more about achieving sustainable profitability? Regreener has compiled essential resources for you:
• NEx Check: The NEx Check is a quick and easy tool for companies to assess how they score across the seven themes of the New Economy Index (NEx).
• Guide: Use the Dutch Chamber of Commerce (KVK) guide on how to start with CSR.
• Sustainable Investments: Use the subsidy and financing guide.
• Checklist with 100 CSR Tips
