In recent years, the topic of sustainability has emerged as an area of increasing focus across the business sector with large upside potential as a tool for creating value in both the developed and developing world.
Sustainability, which takes many definition forms, involves the combination of environmental, social, and economic values, or a method of production today that does not diminish the potential for future production. In the business sense, this is the triple bottom line.
Although many businesses acknowledge this indisputable trend and see sustainability as a noble pursuit, there is a persistent disconnect between industry, leaders, and those concerned with the triple bottom line (although not as severe a divide now as it used to be).
The problem arises from the very essence of a business model driving shareholder value and profit is the ultimate goal and measure of a company’s success. The fact of the matter is that sustainability is not yet at the core of most business structures, and the corporate world has a natural tendency to focus on the last two words of the triple bottom line.
Solution: Presenting a financial viewpoint of pursuing sustainability initiatives and their profound impacts on the bottom line.
Achieving increased shareholder value and sustainable growth can and should be one in the same, and sustainability managers at large corporations often push their agenda by addressing financial incentives rather than focusing on the many other positive impacts.
Noteworthy financial benefits could include lower taxes, avoidance of penalties and fees, product innovation, new market entry, and improved resource efficiency. As seen in such well-known companies as Ikea, GE, and IBM, pursuing a sustainability strategy is not only an ethical way to do business, but can also be incredibly successful.
Sustainability initiatives have the potential to boost profit by increasing market share.
Approximately 83% of all US consumers are some shade of green and express their value for environmental protection through purchasing behavior. It pays to be green when environmental investments can be leveraged as a source of competitive advantage by appealing to niche customers.
For example, products with health-related benefits command higher prices, and consumers are willing to pay a premium for those products, such as a shampoo that is free of certain potentially harmful chemicals. Third party eco-labels, such as Green Seal, provide the transparency and confidence to identify those preferable products and leadership in industry.
Another cost-effective incentive is decreased material waste and the associated monetary expense of purchasing raw materials. For example, Walmart attempts to make use of this strategy with certain packaging by recycling and reusing pizza boxes and essentially closing the loop of production. This process has a visible reduction on costs (as well as use of limited resources and greenhouse gas emissions).
Improved employee satisfaction, morale, and retention are also noted in conjunction with sustainability initiatives. A strong stance on green policies can help recruit and retain talent, such as business students who are looking to pursue a career at an environmentally conscious corporation.
For example, Mendoza College of Business, the #1 rated Undergraduate Business School by Bloomberg Businessweek for the fifth year in a row, places high emphasis on ethics and the idea that business should be used to generate more than just profits. In 2011, Notre Dame even teamed with Deloitte to create the Notre Dame Deloitte Center for Ethical Leadership as a facility for research, teaching, and practice of ethical leadership. As an alum of Mendoza, I most definitely agree with the persistently high ranking and believe that the program undoubtedly shaped my path in the years since graduation as I recently made the transition from a big 4 accounting firm (not so ironically Deloitte) to a Sustainability Management Graduate Program.
I do view the world through a financial lens as a result of my education and career background, and I clearly see that there is a way to target an audience which is concerned with profit by highlighting the monetary savings of efficiency measures.
Ultimately, I believe that it is possible to achieve public benefit and corporate profit simultaneously, and that goal is worthwhile regardless how we get there, be it by intrinsic motivation or appealing to financial savings.
Kerianne Masterson graduated in May 2010 with a Bachelors Degree in Finance from the Mendoza College of Business at the University of Notre Dame. She then worked for three and a half years as a Securitization Consultant at Deloitte & Touché, with clients such as Deutsche Bank, Bank of New York Mellon, and Lehman Brothers. Keri recently finished her Maste’sr of Science in Sustainability Management at Columbia University to pursue her true passion for environmental issues and sustainability. She also has interests in energy efficiency, green building, and the clean technology sector. Her internship at Green Seal was a valuable experience for a transitioning student to learn more about eco-labeling on a broad scale, as well as its capacity to change behavior and promote green business practices.