Going Green & Building Profits

Sustainability is Good for Business

Fads, by definition, come and go. But at the height of their respective crazes, it wasn’t so obvious that bell-bottoms would become Halloween costumes or that the dot-com bubble was destined to burst. When the “go green” campaign first picked up speed, it begged the question: is sustainability just another soon-to-be-forgotten fad?

By Keely Stockett

 

Years later, it’s tough to find a company that hasn’t jumped on the sustainability bandwagon, yet skeptics continue to argue that corporate environmental efforts—whether altruistic or drawn-out PR campaigns—will be dropped by the wayside as soon as the costs begin to outweigh the benefits.

But a recent study suggests that sustainability is here to stay. In 2011, MIT Sloan Management Review surveyed managers and executives across the globe. According to respondents, 70 percent of companies have permanently placed sustainability on their management agendas, and two-thirds of executives surveyed said that “sustainability is necessary to be competitive in today’s marketplace.”

As businesses strengthen their focus on the environment, research shows that there’s more to it than a desire to be socially responsible: sustainability is providing long-term economic advantages— and just might be able to sustain itself.

 

 Leading the Charge

That would explain why some big name companies are doing more than just taking out the recycling. Consider Mars, Inc. The world’s second largest chocolate company boasts more than $30 billion in sales, and its global brands—including M&Ms, Skittles, Snickers, Twix, Uncle Ben’s Rice, and Pedigree, among others—have become household names that consumers trust.

Recently, the corporation set some lofty sustainability goals, all guided by science. By 2040, Mars says that its offices and factories will emit no greenhouse gases and use no fossil fuels.  Additionally, the company pledged to buy 100 percent of its cocoa, coffee, tea, fish and palm oil from sources that have been certified as sustainable.

If Mars can meet its sustainability goals, the environment could see a quantifiable impact. Those goals, however, also could be classified as business objectives. Take the company’s supply chain efforts. Mars, which buys about 10 percent of the world’s cocoa, is working to change the way cocoa is grown through its global plant science division. If the company produces more cocoa on less land, forests threatened by agriculture will see some relief. But what’s more, the supply of chocolate will increase. And that’s not bad for business.

IBM, too, has discovered that sustainability makes environmental and economic sense. Positioned at the top spot of Newsweek’s 2011 “Green Rankings,” IBM recently requested that 28,000 suppliers in 60 countries establish environmental goals and quantify their energy conservation, greenhouse gas emissions and waste management practices. If those suppliers don’t report results and make improvements, IBM may be taking its business elsewhere.

The requirements are intended to be more motivational than mandatory, and the reasoning is two-fold: while IBM hopes to minimize environmental impact and improve social outcomes, the corporation wants to do so in a way that maximizes performance. Increased efficiency, in the long run, often leads to increased profits.

Another major player in the sustainability game is Procter & Gamble, whose $82.6 billion brands include Duracell, Charmin, Pantene Pro-V, Bounty, Tide, Dawn, Crest, Pampers, Vicks and Olay among others. In the coming decades, the company plans to power its plants with 100 percent renewable energy, use renewable or recycled materials for all products and packaging, and send zero consumer and manufacturing waste to landfills.

The environment undoubtedly would benefit from such an aggressive sustainability program. As GreenBiz.com stated, P&G is seizing the business advantages “that can come to companies taking leadership roles in environmental and social well-being.”

 

Beyond the Tipping Point

Mars, IBM and P&G illustrate an expanding trend: corporate America is learning that social responsibility equals market opportunity. That’s not to say that these sustainability leaders possess selfish motives—they’ve made it clear that environmental concern is at the forefront of any sustainable efforts. But the benefits derived from those efforts are not mutually exclusive; they can be shared between the planet and the companies themselves. And in the not-so-distant future, sustainability might become less “opportunity” and more “necessity” for businesses that want to stay competitive. So where, exactly, do sustainability and the bottom line meet?

As Bloomberg reporter Duane Stanford put it, “the corporate sustainability movement has a simple premise: saving the planet can save big bucks.” Direct operating costs can be cut substantially simply by doing what’s best for the earth. Reevaluating the way that resources are utilized allows companies to pinpoint inefficiencies in their manufacturing processes, slashing unnecessary expenses and ultimately doing more with less. In fact, a study performed by the Society for Human Resource Management, BSR and Aurosoorya found that firms with active sustainability programs reported a 43 percent increase in efficiency.

In that sense, sustainability also lends itself to risk management. Thanks to the recession, Stanford pointed out, raw materials markets that were already prone to volatility have become even more unstable. If companies can lessen their dependency on commodities such as fuel, agricultural products and packaging materials, they can create a buffer, and reduce the current impact of unpredictable price increases.

Reusing waste can further cut unnecessary costs while reducing waste disposal fees. In just a few years, that might become a requirement for businesses that want to stay in the game. According to Inc. magazine, companies that insist upon using only virgin materials in their manufacturing processes could have trouble staying competitive—or even afloat—due to limited resources.

Overall expense reduction is another checkbook-friendly byproduct of sustainability. Energy costs have hit sky-high levels in recent years, and businesses that refuse to examine and reduce their energy consumption could be hurting themselves just as much as they’re hurting the planet.

However, many companies remain leery; reducing energy usage often requires some upfront capital. But companies that choose to make energy efficiency investments can see huge (and often underestimated) returns. Hugh Jones, managing director of Carbon Trust Advisory Services, noted in The Guardian that “few other investments get anywhere near” the rates of returns that energy efficiency projects often see.

That’s not news to IBM, a company that’s turning energy reduction into a science. To control energy usage, IBM is gathering data from sensors in energy-consuming devices and analyzing the information. The ultimate goal, according to the company, is to enable “intelligent decisions and actions that can lower energy use and help reduce maintenance costs.”

Large-scale energy projects aren’t the only way that sustainability is slashing overhead. Green office polices have the potential to cut thousands of dollars in expenses. Exhibit A: according to the Hartford Business Journal, ING saved $500,000 on paper costs simply by printing on both sides of a sheet. Eliminating paper cups in the break rooms saved another $100,000. Likewise, the U.S. Postal Service cut back on ink and transportation costs by hiring a third party to redesign its printing and labeling system. Those modifications resulted in $1.5 million in savings.

The economic advantages of going green have potential to stretch beyond utility bills and office expenses; a solid sustainability program can help businesses recruit and retain employees. For most companies, a high employee turnover rate is more than a nuisance. The hiring and training process leeches time and money, and low tenure rates can negatively affect the value of a company.

A 2010 study shows that today’s job seekers, particularly members of Generation Y, are increasingly drawn to companies that demonstrate concern for the environment. Johnson Controls Inc. surveyed approximately 5,300 people regarding workplace values; more than 3,000 of those surveyed were 18 to 25 years of age. Of that subset, 96 percent of respondents indicated that they want to be in a workplace that is “environmentally aware.” As Greenbiz.com noted, “with the Baby Boomers retiring and millions fewer in the younger generations to replace them in the workforce,” companies would do themselves a favor by understanding, and meeting, Gen Y’s expectations.

It’s not just about luring the potential hires; it’s about keeping them. Firms with sustainability programs experienced a 55 percent increase in employee morale, as well as a 38 percent increase in employee loyalty, according to the Society for HR Management study. Many companies are taking note.  The MIT survey stated that employee interest is one of the top three drivers of sustainable business practices, with corporations citing “enhanced recruitment, retention and engagement as benefits of addressing sustainability.”

Consumers, too, care about a commitment to sustainability. Businesses can endear their products and services to consumers by using sustainable practices—and, of course, telling the public all about it. Ultimately, that can lead to greater sales and a greater market share. According to Businessweek, a 2010 study from Accenture and the UN showed that 93 percent of CEOs view sustainability as critical to their companies’ success. What’s more, the CEOs revealed that consumers are a major force behind the decision to push sustainability. Those findings were echoed in MIT’s study: 58 percent of respondents cited “consumer concerns as having a significant impact on their companies.”

 

Chattanooga: Giving Sustainability the Green Light

Clearly, Chattanooga is doing the math. Local government has taken a lead in supporting the green movement: Chattanooga’s Office of Sustainability is using the city’s “smart city” technology to report, analyze and rate sustainable business practices in the area. The goal is to improve Chattanooga’s “Triple Bottom Line”—the environment, the community and the economy.

And they’re well on their way. The downtown area is brimming with green initiatives. Streetlamps have been outfitted with radio controlled LED lighting, potentially cutting lighting bills by 75 percent. A new greywayer system alleviates storm water issues, collecting runoff and reusing it for irrigation. Solar arrays at Finley Stadium provide electricity cheaply and efficiently. The city also has prioritized about 40 buildings to monitor and retrofit with the intention of making the structures and internal equipment more energyefficient. That plan could save taxpayers big bucks while improving environmental quality and resource usage.

Chattanooga businesses are following the city’s lead, setting themselves up to bolster their own bottom lines. Chattanooga’s Volkswagen manufacturing plant is the first and only automotive manufacturing plant in the world that has received platinum certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) green building certification program. LEED certification is an internationally recognized certification system that provides building owners with a framework for implementing green building solutions. Volkswagen earned the certification through a range of sustainable features in the facility – such as hydroelectric power and superior insulation – that conserve energy and resources.

Access America Transport Inc., a third-party logistics provider based in Chattanooga, is embracing sustainability as well. The company works with its customers to decrease the number of trucks on the highways, ultimately reducing the industry’s carbon footprint while increasing efficiency.

Local sustainability efforts are facilitated by initiatives such as green|spaces, a 501(c)(3) foundation that provides incentive funding for commercial projects to be built green and certified sustainable. green|spaces has advocated for, incentivized and consulted on 25 LEED projects. And thanks to the nonprofit’s work, 17 solar array installations and 10 green roofs have been put into place. green|spaces also teams up with commercial and residential builders to educate them about sustainable practices and encourage them to remain environmentally responsible throughout the construction process. The company believes that “design and building best practices can do away with unnecessary waste and improve performance.”

 

Ahead of the Curve

Is sustainability more than a fad? The proof, they say, is in the pudding. And the pudding just may be Chattanooga. Bestowed the not-so-honorable title of “most polluted city in the nation” in 1969, Chattanooga has since experienced the economic benefits that can be gained from sustainable practices. Scenic views and a thriving outdoor culture are now pillars of the city’s economy. As local businesses continue to go green, they can expect a significant payback – in the environment, yes, but also on their profit and loss statements. Sustainability, it seems, is creating a win-win for Chattanooga. And if that’s the case, it won’t be going out of style anytime soon.

 

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