Business Has a Sustainability Role
It’s become accepted that business has a role to play in improving the environment and dealing with climate change. What is undecided is how to do that, and for some, what actions are expected. Generally, companies are comfortable doing business as usual, and few want to threaten their competitiveness in favor of green virtue.
My point is that this is not an either or question. A growing number of examples, from diverse industries, show that sustainable business practices can be good for business. Many companies just do the right thing. While others are spurred to act because their customers expect it.
A good example is Unilever which has developed washing-up fluids that use less water. And their sales are growing fast, especially in water-scarce markets. Most of us can name a favorite product or two whose brand is intimately associated with its green credentials. My point is that sustainability can be much more, that it has a role in any and all sectors.
Sustainability Can Be Profitable
A major brewer identified 150 possible improvements that could reduce Green House Gas emissions—while saving $200 million over five years. Implementation of the improvements was a major cost savings move which went directly to their bottom line.
Sustainability Programs Can Be Complicated
The nitty-gritty of sustainability programs can get complicated. But the principles are actually pretty simple —and should be familiar to most business people. First, and most important, is to acknowledge that sustainability is important. The case is often not difficult to make.
In a recent survey of 340 executives, more than 90 percent said risk management—whether from consumers, regulators, or the market—was an important factor in pushing them toward sustainability initiatives.
Define Your Sustainability Goals
It is important to define targets that are both specific and achievable. It’s much better to say “Eliminate X million pounds of packaging,” than to use the vague “Reduce the footprint of our packaging.”
A recent analysis found that only one in five companies in the S&P 500 had defined, long-term goals when it came to sustainability. Despite the fact that more than a third (36 percent) said sustainability was a top-three priority.
Set Measurable Sustainability Goals
Once the decision is made, define your company sustainability priorities, setting measurable targets. These should be easy to establish after evaluating their costs and benefits. To make these goals easier to achieve you may need to create consistent incentives, including those related to executive compensation.
For example, Nike tracks its suppliers on a range of metrics, including quality, timeliness, cost—and sustainability. Falter for long on any of these, and the consequence is fewer orders. Result: many more suppliers are hitting their sustainability mark.
DuPont has no trouble justifying its sustainability initiatives to shareholders. it’s sustainability initiatives are generating billions in revenue from products that reduce emissions. Intel has a dedicated finance analyst whose job is to calculate the value of its sustainability efforts.
To reduce emissions and improve other environmental metrics in its food chain, Wal-Mart tracks not only Green House Gas output, but also it’s yield, water use, and other factors per ton of food produced. In addition to achieving environmental improvements, it cut the price of food and vegetables in the United States by $3.5 billion.
Develop a Sustainability Culture
The point is this, real business sustainability efforts are core business efforts. Because they are not always easy, they can help a company to raise its game and perform better in all kinds of ways.
In mid-2014, McKinsey did a study that found a strong correlation between resource efficiency and financial performance. Their study discovered that companies with the most advanced sustainability strategies did best of all.
In a study for the Harvard Business School that drew similar conclusions about a higher return on equity and assets for higher-sustainability companies, the authors concluded, “developing a corporate culture of sustainability may be a source of competitive advantage in the long run.”
Sustainability Creates Value
To think of sustainability as a niche gets it wrong. To do it right, your business sustainability goals need to be rigorous, goal-oriented, and accountable. Evidence is building that sustainability initiatives work, and that they are an important factor in creating long-term value.