CFOs haven't been at the center of the corporate sustainability movement. After all, people usually think of us as bean counters, not social activists. But in my job as CFO, sustainability is a strategic imperative. And it should be for your CFO, too. But it's up to you, as someone who cares about sustainability, to convince your chief financial leader that sustainability matters.
In the wake of the global recession, the CFO's role has shifted from fancy accountant to co-driver of corporate strategy. We can't just worry about quarterly results; we must focus on long-term growth strategies, which are inseparable from economic, social and environmental issues. A CFO's job is about using resources wisely and ensuring that an enterprise can thrive for decades to come. That makes sustainability part of a CFO's remit.
My own journey at UPS helped me to prioritize sustainability. Early in my 33-year career, I was an industrial engineer. I did time-and-motion studies to determine the best ways for our people to perform certain tasks. By cutting a step here and a movement there, we could save time and money. Today, those kinds of processes save gallons of fuel and reduce carbon emissions, too. So there's no question that lean is green, both in terms of the environment and in dollars.
To help your CFO see how sustainability matters to your business, you must use terms he or she appreciates, such as risk mitigation, cost savings, and productivity gains. To get the conversation going, here are five things you can say to your CFO about how sustainability pays off, and some success stories you can share from one CFO to another.
1. Being sustainable reduces costs and improves efficiency. Environmentalism is rooted in using resources wisely. In the logistics industry, there's no getting around it: It takes fossil fuels to transport goods. Fortunately, when we reduce fuel usage, we reduce costs, and in the process, we cut carbon emissions (which by the way helps any other company that ships goods via UPS).
We also reduce miles and fuel through more efficiency delivery routes. The routing is managed by our Package Flow Technology (PFT). PFT includes process enhancements like shortening delivery routes, minimizing engine idling times and combining multiple deliveries into a single stop. It also helps us minimize left turns. That's music to an engineer's ears. But here's where it translates into green – PFT has shaved 100 million miles from our delivery routes since 2003. It has also reduced fuel use by 10 million gallons and carbon emissions by more than 100,000 metric tonnes.
2. Focusing on sustainability mitigates risks. A big part of a CFO's job is to assess and reduce long-term risks. Looking through a sustainability lens presents a new way of looking at forecasts and risks.
At UPS, we identify potential risks and prepare strategies to deal with them. One of those scenarios involves oil reaching $200 a barrel, which would be a significant challenge for us. While our issue is fuel, your company's issue might be water scarcity, climate change or activist pressure. When your CFO understands that sustainability affects an organization's long-term viability, he or she can prepare for these risks.
Another area of risk involves shareholder preferences. Socially responsible investing is growing faster than overall investments: 18 percent between 2005 and 2007, compared to 3 percent for all investments, according to Ceres. Wise investors look for companies with responsible business practices, a promising future and a long-term perspective that reduces risks.
Finally, there are regulatory risks. With the emergence of climate-change legislation, smart companies are figuring out how to report and reduce their environmental impact. Those that don't will be at financial risk. For example, in London, companies are being taxed for their electricity bills, a tax that will be returned if you meet carbon reduction targets in the next five years. We had to fork over hundreds of thousands of dollars so far. How much is your bill going to be?
Excellent article
This is a well-written, insightful piece Mr. Kuehn. These seven points are all valid and have been supported and substantiated through much of my other reading and research. But as someone who is working to promote sustainability and energy efficiency for small businesses, I find that some of this information may not ring as true for them as it does for a large company such as yours. Small businesses owners and CFOs (if they have them) are primarily concerned about the upfront cost of efficiency and sustainability programs and how quickly that investment will pay dividends.
Because many small businesses have fairly thin profit margins and rely more heavily on direct contact and referrals to generate business, as opposed to using sustainability as a brand-building effort like UPS and other large corporations can do, they may be more hesitant to get into this game in the short term. I think that it is particularly important to emphasize your point that sustainability improves efficiency, promotes creativity, increases productivity, and cuts waste. When one takes these benefits into account, the payback period on that initial investment into energy efficiency or sustainability can shrink significantly, even to less than a year.
But as an advocate for small businesses in this movement, I applaud UPS’s efforts and appreciate your willingness to share your insights. Even if every point is not 100% directly applicable, you do make very valid arguments that we can use to make the case for sustainability to our member businesses.
Tim Kovach,
Product Coordinator, Energy at COSE
www.cose.org
Sustainability Resources for the Little Guys
I couldn't agree with you more, Tim. Have you found a good source of sustainability advice and success stories for SMBs?
Colin
AlleyTree Media