A Midas touch - turning sustainability programs into gold
As I mentioned in my previous blog post, sustainability reporting is a growing trend with implications beyond just greening your workplace. It’s also about the pursuit of benefits from cost savings to meeting stakeholder expectations and more! A key lesson for many, long-term gains don’t need to come at the risk of short-term profits.
What are some benefits of successfully implemented sustainability programs?
Cost savings. Perhaps the most intuitively attractive benefit is cost and efficiency savings. However, for industries with high carbon intensity due to energy use, cutting waste of any kind is an economic imperative. The cost-saving know-how you gain through streamlining operations might present opportunities to turn your savings into new revenue streams.
Whoever figures out how to squeeze the most “bang” from their increasingly expensive resource “buck” will gain immediate advantage. Whether you start with energy, water, waste or raw materials, the metrics used to identify and reward savings, along with the systemic knowledge gained from tracking efficiency, may well illuminate new opportunities. Imagine if every product design not only had an accounting for its upfront value and cost, but also for the potential value and cost of any waste products and the future value of recycling its raw materials. The math might look a little different.
Competitive advantage. Sustainability and revenue growth need not be mutually exclusive. Traditional market factors such as brand image, price, value and production scale are impacting the environmental and social credentials of a given product. And in so doing, companies are establishing new market niches and upending traditional competitive logic. This bottom-up, supply and demand-based approach emerged from a combination of increased consumer awareness, greater public demand to understand the hidden (environmental) costs of products, and the realization that a product’s story can be just as important as its tangible qualities.
Accountability to shareholders. Investors are becoming a key driver of sustainability activities, establishing powerful groups and developing increasingly relevant measurements intended to persuade companies to disclose their triple bottom line risks and opportunities. Many institutional investors are demanding greater transparency and accounting for sustainability and climate change impacts.
Indeed the competition is fierce in achieving listing on the Dow Jones Sustainability or FTSE4Good Indexes. While disclosure and reporting can win over some powerful investors, a more significant impact may be the initiation of a holistic approach to internal accounting. Once a company begins tracking environmental and social performance with the same degree of acumen reserved for its finances, it is expected that goals will become harder to renege on and progress will be more closely scrutinized. Sustainability reporting is under the microscope and the non-disclosure of material social and environmental progress within those reports could negatively impact an organization’s reputation.
Regulatory compliance. In the hopes of minimizing the potential impact on compliance with any new law, agile companies seek to position themselves ahead of new requirements, and collaborate with policymakers to ensure that their early or voluntary actions are recognized. Many companies appear to see a business case in beating the curve. A top-down regulatory approach often elicits a defensive reaction. But rather than consider shifting operations to another jurisdiction, some companies have found oversight to be a catalyst for innovation, learning to identify and design as much of the “waste” out of their operations as possible. The goal, then, becomes: How do I make this burden a competitive advantage?
A new mindset. The cross section of companies realizing early and increasing returns from their efforts in sustainability is diverse in industry, motives and execution. A key ingredient for success is an emphasis on building an organizational culture of accountability. For many companies that view sustainability as a secondary imperative compared with short-term financial performance, or for those that don’t sense a clear opportunity in their industry, it will take vision, commitment and leadership to motivate organization-wide change and innovation. Holistic, systems-based thinking is beginning to replace the assumptions that may incorrectly define sustainability as a trade-off or an add-on. Moving from an approach that treats the sustainability “suite” as a collection of risks to one that regards it as a toolbox of potential rewards takes time, but the most significant risks are those of inaction – a high cost in missed opportunities and stifled innovation.
