J&J shows how to find the money for sustainability projects

[Editor's note: This is the second installment of WRI's five-part series, "Aligning Profit and Environmental Sustainability." Each post, which will run on Thursdays over the course of five weeks, will offer solutions to help businesses overcome barriers to better integrate environmental sustainability into their operations.]

As companies tackle environmental sustainability initiatives, such as developing a climate change strategy, early steps involve getting the CEO on board and committing to public goals.

But the process doesn't stop there. In fact, that's only the beginning. Companies also need to find the money to implement projects and make good on the promised goals, all while delivering financial results.

Finding the money: A case study from Johnson & Johnson

Finding the funds for environmental sustainability initiatives can be a tall order, especially since many companies' sustainability decisions are made separately from financial ones.

Johnson & Johnson experienced this conundrum firsthand. Back in 2004 the company had a public greenhouse gas reduction target, but was not on track to reach it. Although the emissions-reduction projects it identified could save energy and operating costs, managers were having difficulty getting approval for the capital they needed. Core business priorities like new product development were competing with the money the company had earmarked for its sustainability efforts.  

Managers, therefore, decided to rethink the way the company allocates internal capital. Johnson & Johnson started putting aside $40 million each year for "win-win" projects, such as greenhouse gas reduction initiatives that also reduced operating expenses, including solar panels. Projects like these sometimes require more upfront capital, but benefit from more predictable returns and lower operating costs than conventional energy systems. The strategy reduces the company's risk exposure over time and lowers its operating budget.

Fast forward to today and this approach has enabled Johnson & Johnson to reduce its GHG emissions by more than 138,000 metric tons through projects with an average return of 19 percent. The reduction in emissions is equivalent to the electricity use of approximately 21,000 homes. The company met its initial GHG-reduction target in 2010 and renewed its commitment with a new 20 percent absolute reduction target by 2015.

Next page: Overcoming the financial challenges