Improving Profitability Going Green

Monday 21 May, 2012

by Tony Innes

As soon as you mention the words "go green", most CEOs usually roll their eyes and declare that it's something they would like to do but just can't afford at the moment. However this stance could be robbing organisations of opportunities to improve their bottom line and at risk of losing market share.

Here are five major areas where organisations could improve their profitability by going green and adopting a business sustainability philosophy:

1. Reduce energy costs
   
   The first step in any business sustainability strategy is to measure the green-house gas emissions attributable to the organisation's business activities. This invariably involves tracking electricity, gas and transport fuels used by the organisation over the past year (or years) and then establishing procedures to continually monitor these activities. A reliable carbon management system will then convert this information into a single carbon dioxide equivalent to determine the carbon footprint of the business.
   
   Based on the business principle that "what gets measured gets managed" this process together with a carbon reduction program will help put the spotlight on driving down energy use. An energy reduction target of at least 10% over 12 months can easily be achieved in most cases by applying a number of basic energy efficiency strategies. With energy prices continuing to rise at an alarming rate, diligent CEOs would be well advised not to ignore energy management as a priority.
   
2. Reduce production costs
   
   For organisations in the manufacturing sector, the adoption of some LEAN principles such as minimising defects, reducing waste and streamlining processes will lead to a reduction in greenhouse gas emissions as well as a reduction in production costs. Non-manufacturing firms can also benefit from the application of LEAN principles such as reducing paper use, minimising travel and buying locally produced supplies. Once again these simple action steps will reduce the carbon footprint of the business and at the same time increase profitability.
   
3. Increase your chances of winning supply tenders
   
   Many Government and Council supply tenders now require successful bidders to demonstrate evidence of how they manage their environmental impact at the very least, and at most they look for International standards certification. Large multinational organisations such as IBM and McDonalds and a number of major Banks have also taken this approach in order to be seen to manage their supply chain.
   
   As a result, if an organisation has no formal environmental policies in place, there is a growing risk that it may be overlooked when tendering for lucrative supply contracts with larger organisations. CEOs should be developing a sustainability strategy as a risk management issue and also as a tool to increase revenue.
   
4. Attract green customers
   
   Green customers were once a very small passionate sector of the consumer market, however this segment has grown rapidly in recent years and sustainability attributes are now believed to be one of the major factors driving consumer behaviour. There is no doubt that the vast majority of consumers still place a high priority on price, quality and service when making their buying options, but when all else is equal, environmental attributes can sway consumer behaviour. The success and popularity of hybrid cars is an example of environmental factors impacting on consumer behaviours.
   
   Rather than ignoring this trend, CEOs should be evaluating prospects to "green up" their existing product range or looking for opportunities to introduce new green products. However, a word of caution: be aware of the dangers of being accused of "green-washing" i.e. not being able to back up any environmental claims with reputable evidence.
   
5. Improve your brand
   
   You probably believe your organisation is a good corporate citizen, however "going green" provides an opportunity to communicate this view. This is particularly the case if your organisation adopts a wider sustainability approach by not only minimising environmental impacts, but also giving back to the local community. 
   
   This approach will further enhance your brand's reputation, making your organisation more attractive to potential clients, partners, investors, the general public and prospective employees. Embracing sustainability can also improve your "internal brand" resulting in a more engaged workforce and higher retention of good staff.

Going green and introducing a culture of sustainability across your organisation will lead to many environmental and community benefits that will in turn improve the long term viability of your business. In fact, CEOs who fail to consider sustainability options could well be putting their organisation at risk of losing a percentage of its current market share - particularly if major competitors are going down a "green path". Regardless of your stance on the current climate debate, you need to ask the question - "Can we afford NOT to go green?".

Author Credits

Tony Innes, Owner/Founder Sustainable Directions Pty Ltd. Visit www.sustainabledirections.com.au