A profitable shade of green
Ready, set, go! More businesses are joining the race to redefine the corporate bottom line, including the U.S. SEC, global stock indexes and many businesses from around the world. It’s becoming increasingly apparent that linking the interests of businesses, governments and consumers around the world is merely one degree of separation away. The challenges of carbon emissions management and coping with a resource-constrained, highly competitive future are two of the key components that fuel the trajectory of corporate sustainability activities.
Changes that address the financial impacts of resources, growth, carbon, ecosystems and climate change are fully underway. Many large businesses are maintaining (or increasing) investments in sustainability despite the economic downturn. Aligning strategies, business practices, systems and public image has emerged as a business and strategic necessity. Businesses, lenders and investors are now focusing on the long-term social, environmental and business implications of their strategies and capital allocations.
An accurate assessment of business risks, costs and opportunities is the cornerstone of any successful enterprise. But how do you accurately account for such items? The 21st century has seen the advent of the triple bottom line which encompasses the environmental, social and fiscal value of corporate activities. Or, in the words of Amory Lovins, “We aren’t harnessing the full power of capitalism unless we start playing with a ‘full deck of capital' encompassing the material, financial, human and environmental varieties.” [1]
Whatever the motivation, be it the possibility of significant cost-cutting through efficiency gains, a desire to improve public relations, or the specter of government regulation, many companies are harvesting new and unexpected profits from their sustainability programs. For some, the waste products they had dismissed as a cost of business yielded a new product or revenue stream upon closer inspection. For others, public and investor scrutiny created a pressing business case to improve governance, controls and disclosure, reducing long-term risk exposure and potentially preempting regulation. For yet others, a commitment to reduce carbon intensity in-house led to lucrative innovations they could sell up and down their value chain.
There are inherent obstacles to any kind of systemic change as well as challenges in implementing new ideas even after the business case has been made. In addition, trends point to more government regulation, increasing stakeholder scrutiny, greater competition for resources, and skyrocketing global demand for energy. The issue of how to grow amidst myriad constraints is not going away. Perhaps more importantly, with a majority of executives polled by The Economist identifying senior management as having a key role in driving their companies’ sustainability efforts[2], confident and informed C-suite leadership appears essential to meeting these challenges.
[1] Michael S. Hopkins, What Executives Don’t Get About Sustainability (and Further Notes on the Profit Motive). MIT Sloan Management Review, Fall 2009 (October 1, 2009).
[2] Economist Intelligence Unit (2010), Managing for Sustainability; 54% of Sustainability, CSR and Financial executives identify leadership by senior management as key to their companies’ efforts.
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