Caroline Rennie describes how working sustainably can make companies more profitable.
In 2005 H Lee Scott, then CEO of Walmart, announced that his company, one of the world’s largest, was committing to zero waste, sourcing 100 percent of its energy from renewables and selling products that sustain the environment. Within a few years M&S and Tesco were making similarly bold announcements, as were suppliers such as Procter and Gamble, Unilever, Coca-Cola, Pepsi, Kraft and a slew of others.
What gives? Most businesses believe sustainability means additional costs, so how could retailers in an industry with profit margins of 2 to 4 percent be boldly sustainable yet still profitable? Is it just PR?
Past experience would suggest we be sceptical – as the greenwashingindex, sourcewatch and stopgreenwash websites demonstrate. But this time it’s different.
Yes, greenwash takes place. But the big boys are now playing a far more comprehensive and sophisticated game. They’ve discovered that sustainability saves them money, motivates and aligns employees to common values, and makes meetings with analysts and shareholders more meaningful. But, most importantly, they’ve learned that engagement with sustainability issues gets them much better intelligence about what customers and stakeholders really want. In short, sustainability helps them grow.
M&S last year announced it has saved £50 million since 2007 through energy and waste reduction, logistics and packaging redesign, and hundreds of small initiatives. Ray Anderson, founder and Chairman of Interface, a carpet manufacturer, says sustainability has saved his company $364 million over 10 years. At Walmart, Mike Hagood, Senior Director of In-Store Logistics says: “We no longer see a cost with waste. If you take our reduction and waste hauling expense, then add recycling income, we now see a profit in these areas.” Greg Trimble, Walmart’s Senior Director of Global Energy Development and Reporting says: “We are saving more than $150 million dollars in energy and refrigerant expenses each year.”
So at the factory/store level, reducing energy and waste means making money. And, for a retailer, a pound saved is the equivalent of £12 of revenue.
However, without a top-level commitment to sustainability, companies would be unlikely to save so much. When marketing says, “We need extra-strong lights to make frozen foods look good” and operations says, “Those lights require extra coolers to cool the freezers,” it’s likely that the sales argument will trump the savings one – since savings might hurt sales. But, when Walmart committed to sustainability and established working groups to determine how to meet its targets, one cross-functional group quickly discovered that installing LEDs inside the freezers provided all the light they needed, at 1/100 the electricity demand, eliminating the need for extra coolers.
Where does top-level commitment come from?
Investors have become more interested in assessing the impact of sustainability on a company’s economic value. The Carbon Disclosure Project (CDP) was set up by the largest financial institutions in the world, which control $64 trillion in assets. Public companies report risks to them of, as well as their impact on, climate change. For example, they might compare the impact of producing in few facilities with global distribution against distributed production and local transportation. Critically, this information is openly available on the CDP’s website.
In 2005 355 companies responded. Today 2,500 respondents – including consumer product companies such as P&G, Unilever, Walmart and Coca-Cola – report. Success has encouraged expansion: the CDP now ensures that impacts along the value chain from raw material to product are assessed through supply chain reporting. It has also expanded its remit to include water. Similar initiatives focusing on forestry, packaging and recycling are making supply chain behaviour increasingly transparent.
Just as important as transparency is the practical reality of working within resource limits: Unilever used to be the world’s largest fisherman but faced decreasing catches. It built larger boats and catches increased briefly before starting to decline again. Eventually Unilever realised it was fishing at a rate higher than the fish could reproduce, thus systematically depleting stocks.
Despite forming the Marine Stewardship Council with NGOs to develop standards and labelling for sustainable fish, progress was so slow that Unilever determined it wasn’t possible to run a profitable fish business and sold its interests. Today Findus, among others, is complaining that the rising cost of fishing exceeds consumer willingness to pay.
So a smart understanding of a company’s resource needs can ensure profitability through both investment and judicious disinvestment.
Sustainability breeds profitable innovation too. When carpet company Interface committed to being fully sustainable, it started to break some deep traditions like Six Sigma, a process that aims at product perfection. As the company’s engineers and designers studied sustainable design principles, they realised that nature doesn’t do perfection – it does aesthetically and practically useful variation. Do adjacent carpet tiles really have to be identical? The company launched two lines of floor covering based on these insights and each became a bestseller within a year.
And sustainability can increase consumer loyalty: P&G studied its detergents (Ariel, for example) and realised that as much as 90 percent of their life-cycle impacts came from heating water in the washing machine. By developing cold-water Ariel and promoting it widely – for example in the “Turn to 30” campaign – P&G has reduced consumers’ energy costs and considerably reduced the environmental impacts associated with detergents and washing clothes. It has also increased loyalty: benefit-led sustainability increased sales by a reported 10 percent in 2009. It further developed ultra-concentrated detergents that lowered transportation, packaging and logistics costs, thus saving retailers money and securing itself better shelf prominence and enhanced sales.
In 2009 General Electric invested $1.5 billion in “Ecomagination” products, with a commitment to put in another $2 billion a year for the next five years. It has made $18 billion on these products so far and is aiming to double the rate of growth of green products relative to its traditional offerings.
As these examples demonstrate, sustainability doesn’t have to be consumer-driven to be profitable.
These changes are happening remarkably quickly. In 2000 almost no major consumer goods company was making public commitments about its environmental performance. By 2005 Walmart and Campbell’s were. Since the beginning of 2010 most of the major consumer goods companies have made public commitments regarding their sustainability performance across a broad array of criteria: waste reduction, consumer packaging and packaging waste, renewable materials and energy, energy reduction and greenhouse gas reduction. Not only do they have commitments, they have ambitious commitments. For example:
- Unilever has committed to doubling its sales while reducing its absolute footprint.
- P&G has committed to no consumer waste from its products and packaging, 100 percent of its energy use from renewable resources and 100 percent use of renewable or recycled materials in its packaging.
- Campbell’s has committed to reducing its environmental footprint by 50 percent and using 75 percent renewable material for its packaging.
- Coca-Cola and Pepsi have both committed to being water neutral in the communities they produce in.
These companies understand how to align their businesses with sustainability imperatives. And this has turned out to be profitable because they can create brand new business models, grow new product lines and protect themselves from the price shocks associated with limited natural resources. The better that companies understand sustainability, the better their business drivers reflect public expectations, Nature’s constraints and market benefits, meaning that everybody wins.
Caroline Rennie is founder and managing partner of ren-new, working with people in organisations to make sustainability profitable. ren-new.com
How Going Green Can Save A Company Money
What is going green?
Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.
The first step in going green
There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.
Making needed changes within the company
After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.
Reducing the common paper waste
Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.
Make money by spreading the word
Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.
5 Easy Things You Can Do to Make Your Home More Sustainable
Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.
1. Weather stripping
If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.
Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.
Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.
2. Programmable thermostats
Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.
Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!
3. Low-flow water hardware
With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.
Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.
Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.
4. Energy efficient light bulbs
An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.
New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.
5. Installing solar panels
Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.
Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.
From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!
These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.
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