Making Sustainability Profitable
Today I read a great article on the Harvard Business Review about making sustainability profitable. The article highlights a study by the World Economic Forum that investigated international companies considered to be sustainability “champions” in the developing world. Some highlights from the article:
- Companies implementing sustainability practices have “above average” growth rates and profit margins
- Sustainability efforts have been the most successful in resource constrained economies
- Efforts that involve more sustainable operations can require more long term investment- but those investments have payed for themselves many times over
Business benefits like these are often overlooked when sustainability initiatives are taken into consideration. When speaking with clients that are skeptical of the business value, or that need help selling the value proposition to top management, I try to emphasize the common business benefits related to sustainability (along with some estimated dollar amounts where applicable):
- Reduced material costs- Less energy costs. Less water use. Less waste disposal costs. Less is more these days, and it is hard to deny that reducing the inputs into your product and operational systems will keep more dollars in your pocket. Easy argument to make because these are realized costs for every company.
- Reduced risk– Managing risk can prevent compliance issues and fines. It can also stop supply chain shortages that would prevent a company from producing more of their products. This is often overlooked because it is preventative, but it is an important consideration- and a consideration most sustainability champions have already taken care of.
- Enhanced branding- Being considered “green” is just one facet of growing a strong brand. Kraft, 3M, Toyota, Siemens, Johnson & Johnson, Honda, Volkswagen, Cisco, and HP are just a few of the high performing companies within the Fortune 500 that have deep and successful sustainability programs that have bolstered their images as top international companies. Harder to put a actual dollar amount on- unless the company is being acquired or purchased!
- Top line revenue growth- Phillips just reported that roughly half of their revenues in 2012 were attributable to green products. $15 billion in revenue is an incredibly easy argument to make, and if companies aren’t utilizing Life Cycle Assessment, green product design standards, EPD’s or other systems that improve the environmental performance of their products, they will continue to sell less of their products to high performing competitors as consumer demand for more sustainable products increases.
These are just the business values- there are other reasons, like “doing the right thing,” or the whole preserving-the-environment-for-future-generations idea (crazy, right?!). But when we are talking about business, the reality is that we need to speak in the language of money.
These opinions are my own. Love it? Hate it? Let me know!