9 Purely Business Reasons to “Green” Your Company

Monitoring and Evaluation

Some companies are hesitant about becoming “green,” concerned about the costs or considering it an exotic, non-business issue. They think of this as actions to “save the Earth,” which is not their responsibility. However, sustainability is now recognized as a valid business concern. Savvy companies which have comprehensively addressed the issue have gained core business benefits. This article presents 9 purely business reasons (with real life examples) to develop a robust “green” program.

1.  Making the Monetary Case

Reducing greenhouse gas (GHG) emissions is most commonly achieved by reducing both fossil fuel combustion and electricity usage. Given their high costs (example, >$4/gallon gasoline), such reductions will result in significant cost savings.

But energy savings are especially significant. If an energy audit saves your company $100,000/yr (less than $10,000/month) in expenses, what is the sales equivalent? At 10% profit, sales would need to be increased by $1 million/year to earn your company the same $100,000. Which is easier? The answer differs for each company, but for most increasing sales is more difficult (i.e, ads, salespeople, etc.). Also, energy reductions save perpetually, while increased sales must be repeated every year.

Reducing GHG emissions can also result in sellable carbon credits. The U.S. voluntary market can provide extra revenue if reductions are properly certified.

Finally, there are financial incentives to pay some upfront costs of “greening” efforts and gain tax rebates later.

Example: DuPont has reported investing heavily in energy reduction projects since the 1990’s. DuPont estimates that absolute energy usage declined by 18% since 1990, even though production grew by over 47%. In total, DuPont claims to have avoided over $5 billion in energy costs.

2.  Create New Products and Sell More

Re-branded “green” products can give you a competitive sales edge. Example: GE’s Ecomagination is an example of re-branding existing products as “green,” leading to doubling of sales in three years.

3.  Meet the Expectations of Customers and Suppliers

More customers care about product “carbon” data. Examples: Walmart requires many suppliers to submit GHG emissions data for eventual posting. According to Automation World, T-Tek Material Handling sells a beverage pelletizer using less energy than its competitors’ brands. Using “green” as its main selling point, sales of the T-Tek pelletizer soared.

4.  Raise Employee Morale

Replacing an employee (find and train a replacement) and worker motivation are major business issues. Firms with “green” programs have reported that many employees develop a new devotion to work and the company. Example: Ray Anderson, Founder of Interface, “I have never seen anything equal to sustainability as far as attracting, motivating, and bringing people together.”

Also, a company implementing building upgrades to meet LEED green building standards will likely see an increase in productivity and a reduction in sick days.

5.  Fast-tracking Future Projects

Green programs can be used as the moral high ground to negotiate for a project that some may dispute. Example: In the proposed buyout of TXU power plants, implementation of a climate change program was a major factor in the agreement for a proposed expansion. A number of ardent environ-mental groups agreed not to contest new coal-fired plants because a robust climate change program would be implemented. This ultimately saved TXU a lot of money and time in avoided litigation.

6.  Improving Efficiency

A “green” program resulting in reduced fuel and electricity use while growing operations will result in better operational efficiency throughout the company’s business, spanning all operational aspects. This results in improved profit margins, as well as avoidance of tripping other environmental limits.

7.  Evaluating Climate Change Risks

Scientists have forecast potential grave climate change effects, such as more intense storms, water shortages, and disease outbreaks. How may these impact your business, such as your ability to bring in raw materials when needed and bring your product to market? What would be the effects of hotter weather, tropical diseases, water shortages on consumer choices?  Example: A major tobacco company performed a modelling study of future tobacco farming, and determined that it will need to shift existing farming areas northwards. A climate change risk program allowed them to strategize to reduce future business risk.

8.  Improving Your Image

A growing number of people use environmental image in product purchase decision making. Example: Toyota successfully used its hybrid Prius to counter its recent poor image due to product recalls. Your company can use “green”, with an undeniable metric (GHG emission reductions) to show a positive image in reports and your website. Several registries exist to show certified GHG emission reductions.

9.  Company Valuation and GHG Emissions

A study published in 2010 (http://www.gsm.ucdavis.edu/uploadedFiles/GRIFFIN-Relevance%20to%20Investors%20of%20Greenhouse%20Gas.pdf) shows that investors read GHG disclosure reports and are influenced by them in terms of making decisions about a company’s value.