The
ROI of Going Green: A CEO’s Rationale for Adopting Sustainability
By Anna Clark, President
of EarthPeople
If you think your
business is too small or too service-based to benefit from going green, or
you’re waiting for the hype about green and sustainability to die down, then
you’re missing an opportunity to chart an upward course for your company.
The green movement has transitioned from a cause to save our environment
into a full-fledged, vetted economy. This new economy is projected to be
larger than the Internet-related economy by orders of magnitude.
What is
sustainability?
While many interest groups define the term “sustainability” differently, the
term, as it relates to business, means:
conducting business to meet human needs
without rapidly depleting resources, degrading the environment, or
compromising nature conservation efforts. In this article I use
the terms “sustainable” and “green” interchangeably.
The concept of
sustainability is broad, but the bottom-line goal is to balance a company’s
financial objectives with social and environmental considerations.
Some strategies that
companies use to reduce their environmental footprint include:
1.
Conservation
of energy and resources in the workplace
2.
Conservation
of energy and resources in the lifecycle of product manufacturing
3.
Compliance
(and exceeding compliance) of mandated environmental regulations
4.
Sustainable
harvesting/mining of natural resources
5.
Use of clean
energy (wind, solar, biomass)
6.
Carbon
emissions offset programs
7.
Management
of upstream environmental impact by greening supply chain
Sustainability
strategies vary from business to business, so there is no universal approach
to going green. But the approach may vary based on size and industry type,
companies across the board are finding that being friendly to the planet can
also lead to profits.
Why consider
going green?
Consumers increasingly prefer to purchase products that are free of toxins,
produced with a minimum of pollution, and that that have a minimal
environmental impact. Opportunity in the emerging eco-economy is not
narrowly limited to consumer products or certain industry sectors.
Companies that adopt a
pro-environment policy generate profits, provide positive social impact, and
reduce environmental impact. This trinity of effects is known as the
triple bottom line--a paradigm
that weighs a company’s social and environmental contributions along with
its financials as a measure of success.
Companies that look out
for the triple bottom line position themselves as sector leaders, lower
operating costs and increase revenues.
Where are you
now?
Companies today can be classified in one of five stages as corporate culture
advances toward sustainability. Those stages are:
Awareness:
Company becomes aware that environmental concerns are permeating discourse,
though sustainability as a value is absent from corporate culture.
Resistive:
Company becomes aware of its own environmental impact of doing business, but
demonstrates no commitment to environmental responsibility and possibly some
reaction against it.
Legalistic:
Company strictly focuses on
compliance to minimum environmental regulations, with no commitment
to raising standards for conservation or energy efficiency.
Reactive:
Company recognizes strategic value of sustainability opportunities, but
pursues only opportunities that do not create new risks.
Strategic:
Company
uses proactive approach to sustainability opportunities and evaluates the
impact of sustainability initiatives on the long-term value of the
enterprise.
In spite of the payoffs
that some big businesses have received from going green, many companies
still view a sustainability commitment through the lens of compliance. When
companies progress beyond compliance and extend their sustainability actions
strategically, they become more nimble, and better equipped to meet the
rapidly changing demands of the marketplace.
Steps toward
sustainability for service or office-based companies
Sustainable practices are not limited to high-energy, high-resource
enterprises. As many Vistage members are aware, small and mid-sized
businesses represent 85 percent of the U.S. economy. In fact, 99.9 percent
of businesses in the U.S. contain 500 employees or less. Many of these
businesses are office-based, service-based or non-manufacturing enterprises.
A well-conceived green strategy is based on certain fundamentals, and small,
non-resource intensive firms can customize these fundamentals to achieve
highly specific growth results.
There is no
one-size-fits-all approach to sustainability, but here is a good plan of
action:
-
Investigate where your company can conserve resources.
-
Engage your employees as champions of the effort.
-
Implement conservation measures throughout operations and facilities.
-
Communicate your green efforts to stakeholders.
-
Seek ways to integrate a strategic approach to sustainability in other
areas of your enterprise.
-
Support industry and community sustainability initiatives.
For more information on
sustainability steps that a company can take request the comprehensive
article “How to Green Your Business.”
Rewards of
going green
Companies that adopt a pro-environment policy will see numerous positive
results, both tangible and intangible. Early adopters of environmental
strategies:
-
Earn publicity with the local, regional or even national media
-
Uniquely differentiate themselves from competitors
-
Attract the interest of top job candidates
-
Attract consumers in the rapidly-growing green marketplace
-
Transform their companies into industry leaders
-
Reduce operating costs
-
Create brand distinction and recognition
-
Create significant competitive advantage
-
Enhance employee satisfaction
-
Become preferred vendors in green supply chains
-
Attract top job candidates
-
Build credibility with stakeholders
-
Attract investors
The media notices
companies that show their green stripes. For example, when Aspen Ski Company
switched to green power, it was featured in
Newsweek and made the front page of
Fast Company. Positive
publicity for going green is not reserved for large companies. When
Dallas-based law firm Gardere completed its first sustainability report and
became an EPA partner, it was recognized by the American Bar Association and
featured in a half dozen articles that reached key audiences in Texas and
around the nation. Companies taking voluntary steps to become greener will
gain visibility, earn credibility, and develop a reputation for leadership.
Employee loyalty and
retention are less tangible, but equally important benefits to going green.
A sincere sustainability strategy will help your company attract top talent.
A recent survey revealed that 81 percent of MBA students polled said that
business should work toward “the betterment of society.” In a Stanford
University survey, MBA students who were polled across North America were
willing to forgo an average of $13,700 to work for a company with a better
environmental reputation than most. Attracting competitive candidates
without raising starting salaries directly enhances your company’s bottom
line.
Companies that market
consumer products or provide consumer services can tap into the emerging
Lifestyles of Health and Sustainability (LOHAS) market, which includes
more than 35 million adult consumers putting some $209 billion into the
economy each year. Those figures are expected to grow as more Americans
identify with the goals of oil independence and seek ways to minimize
climate change.
The cost of
sustainability
There is no easy way to quantify the cost of going green. Companies should
look at the cost of sustainability initiatives as an investment. Hiring a
consultant or an energy auditor may require an initial outlay of funds, but
this can lead to exponential returns, saving your company tens or hundreds
of thousands in savings.
Bank of America has
committed $20 billion to green lending and clean technology projects. Small
businesses considering energy-efficiency projects could easily get funding
through a traditional small-business loan. The cost is not what keeps more
business owners from investing in sustainability; rather it lack of
knowledge or mere complacency. The fact is, when you sit down to do the
math, most initiatives will yield profits or savings far beyond the cost of
implementing them.
The bottom line
The ROI of going green can be more sales, increased market share, enhanced
visibility, happier employees, and a better brand. Cleaner air, a healthier
climate, and a better future for your kids are not bad benefits, either.
Anna Clark is
President of Earth People, a consulting firm that helps companies of all
sizes save money and bolster their brand through the leading-edge principle
of sustainability.
Books on the
subject:
Green to Gold by Daniel C.
Esty and Andrew S. Winston
The Triple Bottom Line by
Andrew W. Savitz
Natural Capitalism by Paul
Hawken, Amory Lovins and Hunter Lovins
Copyright 2008 Vistage
International Inc. All rights reserved. |
