‘What is the business case?’
When Credera’s nascent Sustainability Committee began getting organized and seeking sponsors from our partner team, these were the words we heard most often. After researching the tangible benefits of embracing sustainability, the business case became clear.
Between the opportunity for improving business operations and the green beliefs of younger generations, our world is moving in a more sustainable direction. Forward-looking companies should embrace the opportunity to get out in front of them with sustainable business practices. Specifically, sustainability provides five key benefits for organizations:
1. Reduced Supply Chain Costs
Building management, utilities, and shipping to customers are important expenses for most companies’ bottom lines. Perhaps counterintuitively, embracing sustainability has a proven track record of lowering these costs and making it easier for companies to compete.
Amazon’s Frustration-Free Packaging Program is one example. By issuing guidelines and incentives encouraging vendors to reduce the amount of packaging used in goods, Amazon has eliminated over 200,000 tons of packaging and 500 million boxes. Similarly, Hasbro has reduced the amount of material they use in packaging by over 50%. This reduction in packaging both decreases shipping costs and eliminates packaging material costs.
For companies dealing with complex logistics, optimizing routes and lowering shipping weight carries similar cost and sustainability benefits. Simple changes like replacing wood shipping pallets with plastic ones drastically reduces cargo weight, leading to better fleet gas mileage. Furthermore, monitoring systems encourage better fuel efficiency through lower driving speeds and optimal route selection.
While these changes may only impact certain companies, every company can save costs through energy efficiency. Investing in energy-efficient tools like LED lighting and solar paneling saves money in the long term. Each LED light can save as much as $60 compared to incandescent bulbs over a 10-year lifespan. Meanwhile, Microsoft made a significant investment to power their Silicon Valley campus with solar energy, saving $120,000 annually in energy costs.
2. New Innovation Opportunities
It is no secret that emerging technologies and shifting consumer behaviors open the door for innovative companies to thrive. The ongoing shift in public consciousness regarding sustainability provides one of these opportunities. To understand how innovation and sustainability can help businesses thrive, let’s explore portable solar charging.
Over one billion people live ‘off the grid’ and must find alternative sources of electricity. Many of these people rely on kerosene lamps to provide light, which can be dangerous to people in their vicinity. And the need for portable power is not limited to developing regions; world travelers, wilderness junkies, and soldiers also require portable sources of power. As a result, the portable solar market is expected to see annual growth of over 20% from now until 2025, highlighting a prime opportunity for innovation.
Waka Waka and other portable solar companies are stepping in to fill this market need. Waka Waka produces affordable, portable solar batteries for purchase and also matches purchases with donations of their product to developing areas. Over their eight years of existence, the company has delivered 330,000 products, serving 1.4 million people.
Portable solar power is just one avenue for innovation related to sustainability. Electric trucks, long-term storage batteries, and carbon capture technologies are some of the more well-known areas of innovation, but there are many more. Robotic recycling sorters, carbon-neutral plastics, and recycled fabrics are just a few examples of emerging verticals waiting to be captured by smart companies.
3. Proactive Risk Management
In the simplest terms, climate change is a risk management problem. World governments, lobbying organizations, scientists, and activists are fundamentally trying to answer the same question: “What degree of disruptive social and economic changes are necessary to lower the likelihood of even more disruptive crises, from extreme weather events to food and water shortages?”
Businesses are caught in this same risk continuum. In order to create products and services and deliver them to customers, businesses rely on infrastructure (roads, buildings, energy grids), materials, and labor, all while adhering to regulations. Each of these four components carries risk due to climate change. Infrastructure and supply chains can be disrupted by natural disasters, while labor may be forced to move by extreme weather patterns. We need only look at the recent unprecedented wildfires in Australia and California to see examples of a major risk event.
Measures such as flexible supply chains, sourcing contingencies, and crisis response plans provide resiliency in the event of climate-induced crises. For instance, diversified sourcing models can withstand natural disasters, and electrified fleets and renewable energy sources are insulated from oil shocks. While these may seem like significant reactions to potential future events, the fact is that resiliency planning saves $6 for every $1 spent. Managing climate risk may not save money in the short term, but there is immense business value in addressing it now.
4. Evolving Customer Trends
As climate change has made inroads in the public consciousness over the last decade, consumers are becoming more environmentally minded. Nearly half of all consumers have switched away from a product or service because it conflicted with their personal values. And sustainability concerns topped the list of values cited when consumers switched from a product or service.
And younger generations make for even greener consumers. Over 85% of millennials and Generation Z believe companies should address social and environmental issues, and even more importantly, they are willing to make purchasing decisions to back up their beliefs. It makes sense—the generations most exposed to the impacts of climate change are more willing to use their purchasing power to address the issue.
These shifts are reflected in recent consumer-packaged goods trends, where demand for sustainable goods is growing rapidly. From 2013 to 2018, goods marked as sustainable saw over five times faster growth than products not marked as sustainable. And despite only making up 16% of all packaged goods, sustainable goods made up over half of the market growth for all consumer goods over those five years.
The trends are clear—the modern consumer is green.
5. Improved Employee Engagement
Just as sustainability is top-of-mind for the modern consumer, sustainability is also incredibly important to workers. According to a 2019 HP Workforce Sustainability Survey, over 60% of office workers believe sustainable practices are a must-have for employers. Furthermore, 40% claim they would explore leaving their company if they did not implement sustainable business practices.
As with consumer trends, millennials take these workplace beliefs even further. 44% would leave a bad Glassdoor review if their company failed to implement sustainable practices and 45% would look to change jobs if sustainable practices were not in place.
Beyond hiring and retention, sustainable practices also contribute to employee engagement and productivity. Office workers who feel their workplace is ahead on sustainability practices are significantly more likely to be productive, loyal to their company, and actually advocate for their employer.
While these metrics may be frightening to companies who are just beginning their sustainability journey, the good news is that sustainable business practices are well within reach. Improving employee engagement along these lines does not necessarily require solar-powered offices or brand-new business units. Reductions in office supply waste, purchasing sustainable office goods, and reducing the burden of long commutes are relatively easy ways to make your business practices more sustainable.
Making Sustainable Changes
For too long the case for sustainable business practices has relied on moral arguments. And while those arguments have merit for many people, the fact is that sustainable business practices are just good business practices. From lowering operational costs to capturing new markets, sustainability makes the case for itself.
Credera is committed to partnering with our clients to help them realize their visions. To learn more about our firm and our strategy and operations experience, please contact us at email@example.com.