Business leaders know the importance of being “green” these days, and almost every company is doing something about it. But too many think of sustainability as a “nice to have”, leaving it mainly to a PR effort by a corporate social responsibility team with a limited budget. This is short sighted and potentially damaging. And it doesn’t make business sense, either.
Maximising shareholder value and delivering an environmental boost to society need not be competing objectives. It does require us to look slightly beyond the immediate reporting horizon, but even in a 3 to 5 year outlook, there are at least nine business reasons why sustainability issues should be an integral part of every business’s key strategies.
1. It is the new expected minimum standard
Increasingly, customers are demanding higher ethics. Admittedly, research is showing that the shift to ethical consumption has slowed during the downturn, but the trend is still clear: customers want to know that what they’re buying is “green”. They may not want to pay more for it, but if other key factors are equal, they’ll choose the environmentally friendly item every time. But it isn’t just consumers: governments are regulating on these issues and requiring both increased transparency and higher standards from companies in all industries.
2. It is happening globally – and international regulations will affect you
The move to “green” standards is not happening equally around the world. Even if your immediate competitors are as complacent as you are, other parts of the world are moving much faster and further, and their products and services may very well end up influencing your market. China, in particular, is currently taking big strides and is likely to be one of the greenest nations in the world by the end of this decade. That would change everything.
Many industries have already seen the effects of EU legislation. If the US and China match each other in developing significant rules about energy usage, emissions, and ethics, it will affect every country and company everywhere.
3. It is a source of significant competitive advantage
If the first two points are even partly true, then it makes business sense to start planning for a “green” future in your industry and marketplace. Instead of waiting for everyone else and sticking to “industry standard”, these issues provide you with wonderful opportunities to pursue that elusive decisive advantage over your competition. If you own this space, your competitors will spend many years looking as if they’re just copying you and playing catch up. (The bad news is that your competitors – locally and internationally – are probably already thinking about what they’re going to do.)
4. Your staff want you to do it
Graduate recruits are stating that the environmental policies and ethical image of potential employers is “very important” in their decision making process. And research shows that staff who are involved in the sustainability efforts of their companies are more engaged and committed to their employers. In the “war for talent”, environmental issues are increasingly a deciding factor. This may not have been that important over the past few years of recession, but it will become vital for attracting and retaining your best people in the near future.
5. They’re watching you – activists will not leave you alone
The bigger your brand, the more likely it is that environmental and ethical activists will be watching you, and taking any opportunity to engage you on these issues. It is no longer true that “any publicity is good publicity” – negative press on environmental issues can significantly hurt you. On the other hand, there are significant PR opportunities in this space: many companies touting environmental improvements have gained from the good publicity it normally attracts.
6. You can save significant money
It isn’t just about reputation and potential future issues, though. By becoming “greener”, your organisation will very likely save costs on energy usage, waste management, resources and environmental taxation. Most companies that have actually done the hard work of going green have discovered a vast range of cost savings that have made their efforts very worthwhile. In addition, many government schemes around the world provide incentives and “smart start” payments to help companies go green – make sure you investigate all the options you have available to you.
7. You can reduce your risk (and increase access to capital)
Not only can you save costs, you can also significantly reduce risk in your business by being more environmentally friendly and ethical. Investors will reward you with access to cheaper capital, and so should your insurers. Since climate related insurance claims have increased exponentially over the past decade, the ability to demonstrate that your business is future-proofing itself against these types of risks will have a significant downward effect on insurance premiums.
8. It is a sign of a progressive and well-led business
Research is showing that being sustainable is taken as a sign of good leadership and innovation by all of your stakeholders. In particular, savvy investors (and media commentators) are using environmental records as a proxy for good management and hidden value.
9. Just because you can
Of course, ethical consumption is more than just a new consumer fad. The reason that people are becoming ethical consumers is because they understand that we are over-utilizing – in many cases, even abusing – the planet’s resources. We know that this cannot be sustained, and we know that we have to do something about it.
There are good business reasons to do something now: it is in a company’s best interests to be environmentally proactive. There are compelling moral reasons, too.
Doing Well by Doing Good
The issue of environmental performance should therefore be on every business leader’s agenda, and should be a non-negotiable line item in every strategy session your company runs over the next decade. You don’t have to abandon everything else and focus solely on this issue, and you don’t have to go overboard and overspend on items and programmes that have little or no return on investment. With some clever thinking and simple planning, you can make money and enhance your business.
The business case is clear, when you take the time to investigate it. Now is the time to act.
Dr Graeme Codrington is a futurist, author, speaker and expert on the new world of work. He helps his clients understand the impact of disruptive forces that will change their industries in the near future.