Why Are We Still Debating Whether to Embrace Sustainability?
One of the most interesting aspects of working in the field of corporate climate responsibility (CCR) is how the debates and discussions are generally grounded in reality. In politics, the conversation is all too often focused on whether or not climate change is real, while in the business world -- even within the energy sector -- debate is more often centered on questions related to risk, reward and return on investment.
A perfect example of the issues facing corporations today arose out of a debate that took place during the COMMIT! Forum earlier this month in New York City. Dr. Aneel Karnani, PhD at the University of Michigan, and Gerald Sullivan, President of the Vice Fund, argued that companies expending resources on corporate responsibility and sustainability destroy economic value.
Defending corporate responsibility were Paul Herman, CEO of HIP investor and Dr. Vinay Nair, PhD at Columbia Business School, who offered empirical insight on how companies that invest in environmental and social initiatives typically perform better in the market than industry averages.
For Climate Counts, an organization founded on the idea that corporations need to be seen as allies in addressing climate change, it was like being on trial. It was a fascinating conversation, but it also seemed to miss the point.
To us it has always been clear that corporations, like consumers, have a vital role to play in protecting people and the planet. Following another summer with record-breaking heat, droughts, storms and flooding, it is clear that all members of society -- corporations included -- have an obligation to be a part of the climate solution.
Although it would be altruistic to think that companies would put sustainability above profit, our experience has shown that actions to reduce greenhouse gas emissions can often benefit the bottom line as well.
How? As a starter, in three ways:
1. The customer is always right. The average consumer is becoming increasingly aware of global warming and the corresponding impacts on weather patterns, agriculture and human health. It may not be enough to force political action yet, but it's much too large a segment of the population to ignore as a company.
The growth of corporate sustainability ratings and sustainability indexes enable consumers to more readily identify which companies are adopting comprehensive approaches to sustainability, and which are simply using "green'' as fortuitous marketing fodder.
In essence, the customer is still king, and environmentalism is fast becoming the mainstream for consumer purchasing. Companies that fail to adapt will soon find themselves vulnerable to eroding market share.
2. CCR investments save money. As Dr. Karnani was quick to point out during the debate, corporate commitment to increasing operational efficiency, reducing waste and engaging employees are all elements of good business, whether it's called corporate social responsibility or not.
Similarly, assessing and managing risks associated with climate change is also an element of good business. In 2010, Levi Strauss & Company acknowledged in their Carbon Disclosure Project survey that 95 percent of their products are made from cotton that is sourced from over 110 different countries, some of which are starting to feel the impacts of climate change.
Realizing this risk and adapting to it has not only made Levi's a pioneer in sustainable cotton harvesting and responsible water management, but it has provided a way for the company to better manage long-term costs associated with a primary input material. More simply put, Levi's approach to climate leadership in this case benefits not only the environment, but also their long-term ability to remain profitable.
3. Long-term brand protection is key. Brand image can take years to develop and hours to destroy, as was evidenced by BP's Deepwater Horizon catastrophe in the Gulf of Mexico last year.
As sustainable business practices become the norm across industry sectors, companies are increasingly enticed to adopt eco-marketing strategies without having internal sustainability goals to support them. Consumers react well to companies on the leading edge of innovation, but tend to respond negatively to false advertising and being duped into something they thought to be true.
When New Scientist released a report last year on brand perception, it was of little surprise that some companies were perceived to be strong environmental performers, but actually weren't. Del Monte for example was ranked 2nd out of 22 companies in green perception, while ranking dead last in actual environmental performance.
As consumer and investor demand continues to grow for environmental reporting and operational transparency, companies that exhibit a false front to being green risk exposure and backlash that can drastically affect their brand integrity.
All three points are critical to understanding that CCR investments are just that -- investments -- and they pay dividends in increased efficiency, brand value and customer connection.
Perhaps this is why most major corporations have moved onto the bigger and more interesting questions, such as: how can our company best measure its corporate climate impact? What are the best strategies for reducing that impact? How should our corporation be supportive of climate and energy policy? How can our company best disclose and communicate corporate actions to our customers?
By Mike Bellamente