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Have you recently been targeted for your lack of progress on addressing climate change and sustainability issues? Have you not incorporated sustainability strategy into your operations because you think you have more important issues to focus on?
Then this article is for you.
If you know a CEO who fits this description, please pass this on. If you are already sold on the business case for going green, but need advice on how to get started, Part II of this series will be of interest to you.
Because even though there are plenty of companies that are leading the charge in the green business movement -- and reaping significant rewards in the process -- there are just as many, if not more, laggards who are slow to the game. So I will lay out three of the simplest reasons why sustainability makes good business sense from a bottom-line perspective.
The elevator to pitch to a skeptical CEO on why sustainability makes good business sense would contain these top three reasons:
• It will save you moneyIt Will Save You Money
• It will provide better access to capital
• It will drive top-line revenues
More efficient use of energy and cutting out waste saves you money. Big, expensive sustainability plans are not necessary to get started. Bonnie Nixon, Director of Environmental Sustainability at Hewlett Packard (HP), advises to scan your operations and begin by looking for quick wins. HP has recently focused on areas that would quickly provide both cost-savings and environmental benefits such as consolidation of their real estate and data centers and a commitment to teleconferencing. HP’s Halo system enables companies to cut travel time, dramatically reduce travel costs and lower one’s carbon footprint.
The Environmental Defense Fund's (EDF) Climate Corps program places specially trained MBA students into corporations to identify energy efficiency improvements. In 2008, their fellows discovered efficiencies in lighting, computer equipment and heating and cooling systems that could save the participating companies $35 million in net costs over five years.
According to EDF, "companies are missing significant savings in annual operating costs -- around $40,000 for every 50,000 square feet in office space using no-cost or low-cost measures…"
Teams from Natural Capitalism Solutions have shown companies how to save millions each year by turning off unnecessary lights and unused computers. Nationally, turning off unused computers would save $2.8 billion and enough carbon emissions to equal removing 4 million cars from the roads.
A recent study by A.T. Kearny cites a global consumer packaged goods company, featured on both the Dow Jones Sustainability Index and the Goldman Sachs SUSTAIN focus list, that increased production by 76 percent since 1998, but reduced its greenhouse gas emissions by 16 percent -- improved energy efficiency saved the company about $30 million in 2007.
Aberdeen Group's recent report Sustainability Matters found that companies in the top tier of sustainable performance had a 9 percent decrease in energy costs, 10 percent decrease in overall facility costs, 11 percent decrease in paper costs and other costs savings in waste disposal, transportation logistics and packaging, while the laggards had an 19 percent increase in energy costs and 15 percent increase in facility costs.
It Will Provide Better Access to Capital
Institutional and socially responsible investors are pushing companies to integrate climate risk and sustainability into their business strategy.
"Another aspect of the integrated bottom line," explains Hunter Lovins, president and founder of Natural Capitalism Solutions, "is better access to capital. Companies that are high on Dow Jones Sustainability Index may find that they have an easier time getting capital. Socially responsible investors typically won’t lend to companies that don’t have a sustainability policy."
"The most sustainability-focused companies may well emerge from the current crisis stronger than ever -- recognized by investors who appreciate the true long-term value of sustainability," according to the A.T. Kearny report.
It Will Drive Top-Line Revenues
A commitment to sustainability can also drive top-line revenues. It can catalyze innovation, attract the best and brightest talent, inspire new products and increase market share by differentiating products.
Lovins points to the example of STMicroelectronics, which made a commitment to become carbon neutral by 2010 with a 40-fold increase in production. The process of figuring out how to achieve this ambitious goal was a catalyst for corporate innovation, increasing the company's market share and saving millions of dollars in the process.
Yale University set a goal of designing a new, carbon-neutral building for the School of Forestry and Environmental Studies. Despite all kinds of impediments, the commitment to being carbon neutral spurred the design team to stretch, try new technologies and ultimately set a new benchmark for a sustainable building. The school's new Kroon Hall is a great example of how an audacious commitment can spur innovation and create opportunities to advance change.
And while there is disagreement on whether in this economy consumers are willing to spend more for green products, according to a new report by the Yale Project on Climate Change, The Six Ways Americans View Global Warming [PDF], there is a growing group of "alarmed" and "concerned" consumers willing to reward companies addressing climate change by buying their products and also willing to punish companies by not buying their products.
Ready to Get Started?
If any of the above arguments resonate with you, create a senior level sustainability position and empower it with the resources to get started. Part II of this series, "You are a Sustainability Director: Now What?", offers seven tips for newcomers to the role.
Reports on the Business Case for Going Green
• Green Winners by AT Kearney
• Sustainability Matters by Aberdeen Group
• Green is Gold by Goldman Sachs (older, but still referenced)
• The Responsible and Sustainable Board by Deloitte
• Business Case for Climate Protection by Hunter Lovins
Deborah Fleischer is the founder and president of Green Impact, providing strategic environmental consulting services to mid-sized companies and NGOs who want to launch a new green initiative or cross-sector collaboration, but lack the in-house capacity to get it up and running. She brings expertise in sustainability strategy, program development, stakeholder engagement and written communications.
Leaders over Laggards: Innovators Will Thrive
The winners in the long run will be the companies that are leaders in sustainability. The laggards will not survive, as many companies have no innovative side, and it reflects throughout their entire corporate structure. These are the companies that only are interested in the public relations aspect of "going green".
Instead of looking at the elimination of a problem and creating a win-win situation, the CEO is so tied up in the bottom line, that innovation is out the door. Instead, the CEO takes the quick fix and in the long run these companies will become extinct.
In a global economy we cannot rely on corporate decisions that create havoc with our environment.Not to mention the waste that is created and that cost does effect the bottom line. Companies like Nike will be new leaders. As consumers become more informed, these corporations will thrive.
Leaders over Laggards: The critical point
I agree with Ms. Holtmann's perspective. Being less bad is not restorative. It simply continues (though to a lesser degree) to perpetuate the problem. Real sustainability recognizes that everything: people, planet and economy are connected and interdependent. Attention to any one at the expense of the others is self defeating denial.
Leaders over Laggards: The Step Beyond "Green"
Sustainability is not only good for the planet, it is smart and strategic. A popular strategy that many companies seem to be taking (and that you mentioned) is to focus on carbon output and waste. These are great starts and the low-hanging fruit that any smart company, sustainable or not, would want to pursue because they are obvious cost savers. If a company has not started to pursue at least these measures it should be lagging.
The companies that are leaders, not laggards, are the ones that are taking it a step further and considering not just “green,” but sustainable. A sustainable solution is one that completely eliminates the problem, not just reduces the problem’s impact. With creativity, innovation, and motivation from management these solutions will be reached by the best companies. When a company takes that next step, sustainability becomes a dynamic strategy, not just cost saving, “green” regulations. This type of strategy takes more to implement, but its payoffs are huge.
-Stacy Holtmann
Great article!
I love the examples you use in this article, and your list of reasons why to go the green route should get any CEO's attention. Access to more capital - that's a powerful selling point. I also believe that companies that align themselves with a solid sustainability strategy now will emerge as the victors following the recovery of the economy.
- Anna Clark, EarthPeople
Cap-and-trade is demanding executive's attention
I work for an energy saving company called Somar International: one of our recent clients took a little over a year to commit to an installation of low-energy lighting which would have already paid for itself had they gone ahead immediately!
Although far more companies are coming around to energy efficiency, the prospect of new cap-and-trade legislation on both sides of the Atlantic now looms large over businesses, and much of the attention at the moment seems to be in getting carbon accounting procedures in place before embarking on energy efficiency projects.
There's no doubt though that those companies who install decent energy efficiency solutions are better placed to capitalise on the post-recession economy, in which energy prices are only likely to continue to rise as old cheap coal power stations make way for greener but dearer alternatives.