Every middle market business leader knows that investing to reduce your energy consumption, shrink your environmental impact, and decrease your exposure to legal liability makes good business sense. Yet, aside from helping you manage your operating costs, these initiatives can also (quite literally) improve your stock with investors, especially institutional investors. In the long-term and in the aggregate, they may even help sustain our planet.

In a recent TEDTalk, Chris McKnett of State Street Global Advisors explained that adopting sustainable practices like the ones mentioned above isn't just about rainbows and unicorns, but "economic issues" directly "relevant to risk and return." Bad practices on sustainability issues can damage your middle market company's bottom line and leave you in the bull's-eye of regulators. "I think it's reckless to ignore these things," says McKnett, "because doing so can jeopardize future long-term returns." McKnett, whose Boston-based company helps invest billions of dollars, cited the fact that "about 80 percent of global CEOs see sustainability as the route to growth [and] competitive advantage in their industries."

Investors too are increasingly focused on the area of sustainability, not just a company's financial metrics. "Environmental leadership is compatible with good [financial] returns," says McKnett. And a Goldman Sachs report echoes just that: "Companies that are considered leaders in [sustainability] policies are also leading the pack in stock performance by an average of 25 percent," it said.

Increasingly, cash-heavy institutional investors are demanding good results on sustainability issues as a prerequisite for investment. McKnett offers the example of the massive pension fund for California public employees (CalPERS), which has $244 billion in assets. CalPERS is now using sustainability criteria when making investments decisions. As more investors put their money behind sustainability, companies will have to follow suit, McKnett notes. Paraphrasing President John F. Kennedy, McKnett makes the case for doing something on sustainability rather than being passive: "There are risks and costs to a program of action . . . but they are far less than the long-range risks and costs of comfortable inaction."

So if investing in sustainability makes good business sense and can attract investors to your middle market company, what kinds of sustainability initiatives should you be considering? Here are three areas to look at:

1. Environment. Look for ways to reduce your energy consumption and waste, both in your equipment purchases and changing your processes. Not only will this reduce operational costs in the long-term, but it will also minimize your exposure to potential regulatory problems and legal liability. You should also look to begin reporting on your environmental efforts both internally and externally, which will enhance your image with potential investors.

2. Social. Look to build community both inside and outside your company by creating more open communication and partnerships with employees and relevant outside groups. Efforts to promote health and wellness might be an obvious place to start, or even educational outreach efforts with local schools. Doing this informally can work, but approaching it in a systematic way will have more long-term impact. Internally, such investments can help reduce employee turnover, retain talent, and increase levels of productivity and creativity. Externally, they enhance your company's reputation among stakeholders.

3. Corporate governance. Make sure that you are aligning your compensation policies with your corporate values and sustainability initiatives. You should also set up communication and reporting structures in order to support all these sustainability efforts, including (of course) reporting about them to your internal people and your investors. Put someone in charge of such efforts, define targets, and hold people accountable for achieving them.

Adopting a sustainability approach in your middle market business can help your bottom line and enhance long-term value creation. Pushing your company in this area is good business and might even help transform our communities into better places to live. But like it or not, investors are increasingly demanding that you work on sustainability before they show you the money.

Boston-based Chuck Leddy is an NCMM contributor and a freelance reporter who contributes regularly to The Boston Globe and Harvard Gazette. He also trains Fortune 500 executives in business-communication skills as an instructor for EF Education.