Sustainable Business Has Been Directly Linked With Profit

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Sustainable business is no longer an idea being pushed on us by tree-hugging Quorn-eating ferals with body-piercing issues. It is becoming as much an economic reality as a double espresso in the morning.

Is the company you work for riding the sustainability train? If not, the train may run over your workplace and squash the accounting staff on the way through. This is because sustainability is now directly linked to profit. That’s right, if you run your company sustainably, you will make bigger profits.

Triple Bottom Line

The bottom line is not what it used to be. In fact, there is now a triple bottom line (TBL – people, planet, profit or “the three pillars”). The idea of the TBL is that a company’s success cannot be solely based on outright money grabbing at the expense of the planet and its inhabitants. In this day and age, the business community expects more from us. We have to be nice and do things right or people just won’t buy our crap anymore.

Public institutions have adopted the TBL accounting practice, especially since the United Nations have fully backed the TBL standard for urban and community accounting since 2007. It is known as public-sector full-cost accounting.

While private sector companies aren’t legally required to do this (yet), their customers are starting to nag them about it. TBL has defo gone mainstream. So if you work for a private company, you need to find out what this is, because conforming to it will make you much more competitive. Using the TBL system will also allow your company to calculate its ecological footprint. And customers are getting very voicey about eco-credentials.

Ireland is still far behind the rest of Europe when it comes to sustainable business practice. What happened? We used to be so trendy and cutting edge with our bag taxes and smoking bans. With Arctic ice melting and governments making plans for carbon-neutral economies in the near future, sustainable business practice is not going to be an option. It will be a necessity.

What Is Sustainable Business?

Put simply, it is when an enterprise meets its own needs without compromising the ability of the next generation to do the same thing.

Take for example, American company Interface, a global flooring manufacturer. Their global presence is not small-fry – if you walk into any office in the world, there is a 40% chance you will be standing on Interface carpet. For 40 years Interface was manipulating oil-based synthetic materials into carpets. The oil formed over the course of several million years, but it ended up in carpets at the local dump, where it will be around for just as long as the oil was in the first place. Not funny and not clever.

One day, the CEO of Interface, Ray Anderson, read The Ecology of Commerce by Paul Hawken. Suddenly it dawned on him that he was doing something really wasteful and stupid with his company. So, he set out to make his petrochemical conglomerate environmentally benign. Their journey from there to here has been fascinating. Interface have evolved from being bratty environmental vandals, into a restorative ‘zero footprint’ company in just a few years. The company has introduced waste reduction programs (reducing their landfill impact by 65%) and have expanded recycling and reuse operations. They have shifted their business model towards leasing rather than selling carpeting.

Interface now reclaim worn out carpet tiles and reuse the old material rather than use new material to manufacture more. The company have embraced their environmental and social responsibilities whilst delivering sustained shareholder returns. And because of this, they have become the international role model for sustainable business practice across the world. If other companies follow suit, then in twenty years’ time we just might not be coughing up our own internal organs from horrific global pollution. If this guy can do with his company, there’s no reason why Irish companies can’t do the same.

Why Now?

Interested in getting on the band wagon? So why your company? Why now? In the words of Philip Kotler, a global marketing demi-god, “There are companies that make things happen. There are companies that see things happen. There are companies that wonder what happened…” Do you want to be one of the ones that wonder about what happened? And, why am I coughing up my internal organs? It’s time to address this prickly issue before it becomes so thorny that we all die from lacerations.

The reality of stepping up to the sustainable business plate is in front of us. According to the OECD, if there was a car in every driveway in China, Irish-style, we’d all be up the polluted creek. Just this change in China alone would need an extra 80 millions barrels of oil a day thrown into the market. This is more than the world currently produces in total. Fun stats huh? So much for the fossil fuel driven throw-away economy. If China catches on to this style of economy, we are gonna have to throw away entire nations. And we don’t want it to be Ireland.

So you may ask yourself, why should I take the initiative and put extra effort into making the company I work for a sustainable one? I am drowning in paperwork, the CEO is turning the screws, the kids need help with their homework, the Mother-in-law is coming over to disapprove of the garden…what motivation do I have to get on board?

It’s All About the Money

Forget the feel-good factor. We already feel good. We have challenging jobs and run houses and bring up little humans and feed people and look suave. The motivation is monetary. Most people think that putting in place a sustainable business model takes time and effort and money. But actually, the opposite case is true, especially over the time line of your company. Overall, it creates higher profit margins, and requires less energy and attention into the future.

A study by Morgan Stanley in conjunction with Oekom Research has crunched some numbers and has come up with some fantastic figures. They analysed 602 companies in the Morgan Stanley Capital International World Index that have received Oekom’s Corporate Responsibility Ratings. It was discovered that these sustainable companies easily financially outperformed sustainability laggards over the past four years.

Morgan Stanley aren’t the only company who have discovered that the case for business sustainability is compelling. A study conducted by Switzerland-based Bank Sarasin came to the conclusion that the shares of environmentally and socially responsible companies are at a lower risk for fluctuations than other companies from the same industry. They speculate that good sustainability performance leads to good financial performance through things like increased energy efficiency, which leads to lower costs. It’s pretty simple stuff.

Who Can Help?

Once you have decided to put sustainable business practices into your company’s future plans, what next? Are you overwhelmed at the thought of finding out how to do all this sustainable stuff? The good news here is that we don’t have to entirely understand it. Thankfully, there are other organisations who already understand it. All they have to do is tell us when we call them. Phew. Time for another espresso.

Most of these organisations in the know are charities that operate in a non-profit way, so you won’t need to sell half of the company fleet to be able to afford their advice. A good place to start researching is Irish organisation Sustainable Ireland. Another good resource is a Brit-based organisation is called Forum for the Future. They have partnered with companies hawking anything from ice cream to building to banking. They act as a critical environmental friend to over fifty individual companies and industry sectors. According to this bunch of corporate hippies…here are the hallmarks of a sustainable company:

  • There is a commitment to an absolute reduction of negative impacts.
  • Positive actions have been identified to restore the environmental resources the organisation depends upon or affects.
  • There is a clear understanding of direct and indirect environmental impacts.
  • A clear understanding of what it means to operate within environmental limits is evident.
  • Systems are in place to identify, understand and manage future environmental risks and opportunities, for example climate change.
  • The organisation is committed to internalise the business’s environmental costs, currently paid for by society as a whole.

I hear you asking, can a company providing airport infrastructure get to grips with the environmental impacts of flying? Can a drinks company really address the social costs of alcohol abuse? Can both companies turn these issues to competitive advantage? According to Forum for the Future, the answer to this is, hell, yeah.

100% Sustainable

Let’s have a look at the Swedes, and by that I don’t mean foul-tasting suspiciously orange vegetables that no one on God’s polluted earth eats voluntarily. The Swedish people have done – and are doing – something utterly remarkable. Up until now, their biggest export has been ABBA. But they are now exporting ideas that hopefully the entire universe will emulate.

In Sweden, sustainable development is a national priority. They have developed the concept of eco-muncipalities, i.e. local government bodies that have officially adopted a set of sustainability principles and are fully committed to implementing them. In fact, Sweden is set to become the first sustainable country in the world within only 20 years. What an achievement!

It’s clear that the magnitude of the Swedes’ progress cannot be understated. They are being completely awesome. But more importantly, they are being more awesome than us. We cannot let these Eurovision-winning dancing queens beat us and make us look like a bunch of polluting wussies. I say, game on!

Even more interesting is the reason WHY Sweden wants to become fully sustainable… it’s about the economy. According to Torbjörn Lahti, one of the green brains behind the movement:

“Through this initiative, Sweden will gain competitive and export advantages that strengthen the international position of the entire Swedish economy. As an example, Sweden already has the most certified environmental companies per capita in the world. In many regions intense work is proceeding where businesses together with the public sector and research institutes are manoeuvering society in a sustainable direction. One example is the Bio-Fuel Region in northern Sweden where the entire transport sector will come to depend on sustainable fuels from local forests. It has been calculated that thousands of new jobs will be created thanks to this conversion at the same time that we become independent of ebbing oil sources.”

The good news is that such models of sustainable business practice are completely adaptable to Ireland…it is simply up to us to decide which parts we will copy and which parts we will devise for ourselves.

So who is responsible for change in Ireland? Our government’s recently published climate action plan outlines the need for rapid change, but do we wait until we HAVE to do it? Or do we beat the crowds and kick off the process ourselves? And can we work this into our business day and still have time to pick up the kids and look hopelessly suave?

I think, yes. And easily. Let’s do it.

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