article by Dr Graeme Codrington
Environmental sustainability should be at the heart of
strategy and business objectives, and not treated simply as corporate social
responsibility.
"Going green" is often seen as a "nice to
have" policy for companies – something to allocate a small group of well
meaning lower level staff members. This is short sighted, and ignores some very
significant strategic reasons to improve your company's environmental
performance. This is one of the easiest and most powerful ways to increase your
business and differentiate for your company, while improving bottom line
performance.
Yet many businesses continue to ignore these issues,
relegating it to a low priority task team. This is short sighted and
potentially damaging.
There are significant advantages for the companies that take
energy efficiency and business sustainability seriously. You don't have to be a
do-gooder to develop processes and systems to improve the environmental
performance of your business.
Here are nine reasons why you should take these issues
seriously, and see business improvement as a result. Doing well by doing good
is possible. And desirable!
1. You are wasting
money
Energy, water, materials and resources all cost money. Most
companies use more of these resources than they actually need to. Our problem
is that most of your staff have grown up in a world where energy, water and
other resources (supplied by "utility" companies) have not been
managed as a habit or lifestyle. We grew up just expecting lights to burn and
water to run, and not really counting the cost of this. That has changed, of
course. Our children are very aware of the cost of the use of these resources –
not just the monetary cost, but also the cost to the planet. But that
generation is not yet working for you in significant numbers.
It's no surprise then that we use unnecessary energy and
resources. The good news is that most companies can easily and quickly reduce
this usage. And this will result in immediate savings, reduction of costs and
therefore increased profit. Savings from reducing waste (whether that is wasted
materials, resources, water or energy) go straight to your bottom line. If your
profit margin is 25%, every £1 saved in this way is equivalent to £4 worth of
new sales. During the recession, when every penny counts, this must be worth
considering. And unlike reducing staff, reductions in waste costs improve
rather than detract from your ability to deliver value to your customers.
There are four simple steps to reducing your costs. You must
start by measuring your usage. You can improve what you can measure. You must
then empower your people to make adjustments to systems and behaviour. Thirdly,
you might need to make some physical changes and upgrades to your facilities.
This need not scare you – there are ways to do this whereby a return on
investment within a few months is guaranteed. Finally, you need to report on
what you have done, communicating to all stakeholders.
Of course, there is some complexity in each of these steps.
But the principle is simple, the execution can be easy, and the results are
immediate. Stop wasting money, and start reducing your resource usage now.
2. Your energy, water
and waste management costs are rising
Energy costs have more than doubled in the past two years.
Waste management costs continue to rise as landfill tax escalates and the type
of materials that can be landfilled is increasingly restricted. Water resources
are becoming more and more scarce, especially in densely populated regions of
the world, leading to rising costs. These costs will not be reduced in the
years ahead. In fact, they will increase in price exponentially, as both the
underlying costs increase due to shortage of supply and government imposes
further taxes on their usage. Doing nothing on environment performance means
going backwards rather than standing still.
3. Your compliance
costs are rising and you could end up in court
The UK is one of the first major economies to pass a Climate
Change Act. The Act was promulgated by Parliament in December 2008, and is now
being followed by a raft of policies and programmes to ensure it is implemented
and adhered to. The same will happen in economies around the world. President
Obama has promised to do something similar within his first term, and Prime
Minister Rudd has been doing so in Australia since he came to power. There are
literally hundreds of pieces of environmental legislation being drafted around
the world. Most companies have not begun to fully understand the implications
of this trend for their businesses over the next decade.
In addition to legislation, regulators such as the US
Environment Agency are increasingly taking a risk-based approach to
enforcement. If, for example, your company routinely stores hazardous
materials, or you are regarded as having poor environmental practices, you will
be targeted for inspections and audits. This will be time consuming, disrupt
your activities, and could end up in fines, court action and even closure of
your business.
Your response over the next few years could be to
continually shift in an incremental fashion, to keep just ahead of the law. But
this is an expensive hobby. Eradicating problems completely is much cheaper in
the long run and will keep you miles ahead of the lawmakers. Maybe more
importantly, it will also potentially keep you miles ahead of your competitors,
and allow you the luxury of calling for greater regulation in your industry,
thus putting more pressure on your competition.
4. You can reduce your risk (and increase access to capital)
When this recession is over, a new landscape of credit and
risk management will have emerged. We are not going to go back to how things
were. Probably the greatest change will be access to funding and credit. Simply
put, your access to capital is dependent on your future prospects and your risk
profile. The lower the risk, the more funds you'll have access to and the
cheaper your credit will be. It really does work like that.
Increasingly, before the recession, savvy investors were
using environmental records as a proxy for good management and hidden value.
After the recession, they will increasingly analyse your environmental record
for signs of risk. Given the legislation in the pipeline, and the public's
demand for ethical behaviour and environmental excellence, your record on
environmental issues will be hugely significant to potential investors and
creditors. Now is the time to develop your reputation in this area.
In addition to access to cheaper capital, lower risks also
mean cheaper insurance. 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 effect on premiums payable.
5. Your customers or clients demand it
If you sell to the public, certain markets are going solidly
"green". A new generation of ethically aware consumers is demanding
that your products and services meet certain standards in this regard. And they
are becoming increasingly educated on what questions to ask, and where to look
for the answers to their questions. The proportion of white goods rated
"A" for energy efficiency has risen from none to 76% in the ten years
to 2006. The same trend is evident in many sectors and products lines.
If you sell to other businesses, then your environmental
performance becomes their environmental performance. Increasingly larger
organisations are demanding information on suppliers' performance and Local
Authorities, the NHS and other public sector bodies are turning to "green
procurement" to meet Government targets. In February 2009, for example,
the UK's National Health Service issued a policy document entitled,
"Reducing Carbon, Improving Healthcare". This document highlighted
the role of suppliers in the NHS's carbon footprint, and mandated NHS
facilities to put significant pressure on its suppliers to reduce energy use
over the next 5 years. The NHS employs 1.3 million people (5% of the UK
workforce) and is the largest employer in Europe. The pressure on suppliers
will be significant, and your ability to compete for NHS work may be hampered
or helped by your environmental record.
6. Your competitors are doing it
Given what we've said so far, this point should be fairly
obvious. The issue of environmental policies is more and more going to be a
competitive advantage opportunity. You don't want to be the last company in
your industry to understand this. And, in a world where every competitive
advantage is temporary anyway, it would be a pity for you to miss such an
obvious and easy opportunity to take a lead in your industry right now.
Some sectors are already slugging it out in this space.
Retailers in the UK, for example, are fighting each other to become carbon
neutral and demonstrate energy usage reductions. It might be argued that a lot
of what they are doing has more to do with public perception and green image
than reality. That will ultimately trip some of them up, but for now none of
the big retail chains can afford to ignore this issue.
But it isn't all about image. If your competitors have a
better environmental performance than you, they will also have lower operating
costs, higher profit margins and opportunities to be more competitive on
pricing strategy. They will be more robust and able to adapt to future
legislation, lower risk, avoid environmental taxation and respond more
effectively to ethical consumer demand, with much better PR and marketing
opportunities. It's also been proven that companies with good environmental
policies have better motivated employees and are able to attract the best new
recruits. When you put it that way, you'd be mad not to do this.
7. Your staff want you to do it
An increasing number of graduate recruits are stating that
the environmental policies and ethical image of potential employers is
"very important" in their decision making process. In the "war
for talent" that companies of all sizes have to fight, environmental
issues can be a deciding factor.
This has been confirmed in the UK by both the Association of
Graduate Recruiters (AGR) and the Chartered Institute for Personnel and
Development (CIPD). In the US, a survey of over 4,000 people carried out by recruitment
job site MonsterTRAK found that 80% of young professionals are interested in
securing a job that has a positive impact on the environment. And over 90%
claimed they would prefer to work for an environmentally friendly employer. In
the UK, a survey of 5,000 job hunters showed that 43% would not work for a firm
which had no ethical or environmental policies, even if they were offered
£10,000 a year more than to work for a business with a sense of corporate
social responsibility. This was confirmed in a global survey of graduates by
PriceWaterhouseCoopers, "Millennials at Work", which found that 88%
of young staff wanted an employer whose CSR values matched their own. 58% of
employees specifically indicated that they wanted their employer's policy on
climate change to match their own.
This is not only a recruitment issue. Employees are much
more likely to be engaged in a company that makes a positive contribution to
the environment. The media coverage and goodwill generated will also serve to
motivate staff and engender a sense of pride in their work and association with
an environmentally progressive organisation.
8. They're watching you – activists will not leave you alone
In 2007, Apple Computers was one of the world's most admired
companies, with a remarkable image and stylish products. That was until
Greenpeace put them at the bottom of an environmental league table of
electronics companies and set up a parody of Apple's website to detail their
environmental infractions. Apple's CEO, Steve Jobs, at first dismissed the
campaign, but this only instigated a stronger backlash. It then became clear
that Apple's image could be very quickly tarnished, and the company did a swift
u-turn. Jobs personally launched and oversaw a radical programme to improve environmental
performance. This was publicised on the company's home page for a month. It
cost a lot, disrupted plans and was reactionary. But Apple will feel the
benefits for years to come.
The message is clear. You can wait until you are forced to
become green, or you can choose to do so at your own pace and on your terms.
But, ultimately, you will have to go green. And if the activists do get hold of
you, they can destroy years of brand building in an instant.
The higher profile your business, the more likely you will
be targeted by activists. These groups need high profile campaigns, like Apple,
Gap, Primark, Nike and others, to make the mainstream media take notice. If you
are a smaller business, but you do business with a high profile client, then
pressure groups will hold them responsible for your environmental sins. This is
a very easy way to lose a major customer.
The positive side of this issue is that the media is very
hungry for "green" stories at the moment. By embarking on energy
saving strategies and becoming environmentally progressive, you will make it a
lot easier to get PR and media coverage. And some of that exposure cannot be
bought with money.
9. Just because you can
Of course, ethical consumption is more than just a new
consumer fad. It is not just this season's "in-thing". The reason
that people are becoming ethical consumers is because they understand, even if
only instinctively, 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. We can no longer claim ignorance about issues
like global warming, devastation of natural environments, abuse of workers and
the like.
There are good business reasons to do something now. We can
no longer claim ignorance about issues like global warming, devastation of
natural environments. There are compelling moral reasons, too. Whether or not
you're convinced by science or media reports on global warming, there is no
doubt that our planet is under duress at the moment. The governments of the
world have started to put pressure on companies and individuals to reduce
energy usage and become more environmentally friendly and sustainable. With
some crafty rational and simple preparation, you can earn money and improve
your business dramatically.
Taking advantage of the expertise and knowledge of experienced
employees and professionals can help bring younger or less experienced
employees up to speed. This results in better efficiency across the
organization when bringing on new employees. In addition, coaching and
mentoring can help guide an employee along on her career path resulting in an
employee well versed on company expectations. Coaching specifically allows
individuals to resolve issues and concerns within the boundaries of a trusted
and confidential relationship. This can help reduce frustrations on a personal
level and improve the job satisfaction of the individual, providing a benefit
for the organization.
