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The Business Forum Journal

 

Why Going Green Creates Business Value

by

David Dietrich

Introduction

Every day we are being bombarded by some element of "going green". Whether it is climate change, global warming, carbon offsetting, greenhouse gases, rising of the oceans; we hear it all. What we have not heard is “Where is the value?” Sure there is the supposed payoff for future generations; but what about my business now? I’ve heard that going green isn’t cheaper or very clear cut. This article is going to show where you can extract true value by taking your company green and how you can simultaneously reduce business costs.

"As a global transportation company, UPS acknowledges that greenhouse gas emissions impact the climate and pose a serious challenge to the environment — and ultimately the global economy. It is the responsibility of all segments of society to improve energy efficiency and to reduce carbon emissions in the atmosphere."

Scott Davis, CEO of United Parcel Service (UPS) - quoted in their 2008 Sustainability Report: [i]

This tells a lot how one of the largest companies in the world views their role in helping foster a greener environment for each of us, while remaining profitable.

The Challenge

The greatest challenge of going green is deciding what is applicable to helping the bottom line while balancing the pressure to be socially responsible. As CEO of Skky.net, I’m constantly asked by executives of all ranks, “What are the benefits to me and my company by going green?” This question is quickly followed by “What impact will green business have on my bottom-line?”  Fear of additional expenses has lead to a significant trend to downplay green options; especially as our economy struggles. Although these challenges are present, there still exists a serious case for all companies to meet the challenges of going green.

Let’s pose the following questions for thought. Would you choose a green company over a non-green company if it cost exactly the same? Would you still purchase from a green company if it was 5% more, 10%, or even 20% more? A significant segment of American consumers are willing to initially pay a small percentage more for the green option. Why?

There exists in all of us a desire to help and do what’s right. We want to be personally successful. We want to be professionally successful. And we want this success to be the best it can be. I would argue that this is an innate psychology in all of us - to help where we know we can make a difference. The challenge becomes, how and at what price can I reasonably provide the most benefit for my stakeholders and my sphere of influence?

One answer is in green business.

How green adds value

Next time you consider the purchase of a “green” product, consider what a green company brings to the table. On the surface it may sound like lip service to say that a company is green. However, by taking a deeper look, there are many opportunities for green business to add value to literally every company in the world.

I propose that green business adds value through:

  • A better understanding of the business on many levels
     

  • Supply chain optimization
     

  • Finding ways to lower production costs
     

  • Reducing building and office space
     

  • Optimal use of materials and resources
     

  • Reduction in waste and excess
     

  • Increased recycling
     

  • Reusability wherever possible

These are just some of the ways the going green adds value to the bottom line. In terms of social responsibility, companies can create further value by linking with green through:

  • Promoting a socially responsible message
     

  • Targeting potential customers eager to buy green
     

  • Passing on savings to existing customers brought about by reduced costs
     

  • Better community relations

By combining the elements of operational cost reductions with the public relations benefits that going green provides, value is maximized sooner rather than later.

Understanding the business

If you could look under the hood of the company you’re about to make a purchase from, there is little information for you to go on. There is packaging, there is the commercial seen on television last night, or there could be a recommendation from a friend or business associate. But how can you really gauge that this product and/or company is everything marketing says it is? If it is a green company and/or a green product, this adds a new mix to your decision regarding the company.

If the company that you are considering is green, there is a high probability that this company knows its business on a more intimate level than the company that is not green. To be considered a green company, the company has most likely reviewed and inspected some or all of their business processes to see where they can better help the environment and reduce costs. To do this, there is a deep reevaluation that must be done. In going green, the company must analyze its products and processes to find solutions that reduce its footprint. Competitors that have not gone green have most likely not gone through the process of deep introspection and are continuing legacy business as usual.

When I purchase from a green company, I feel more confident in the company's ability to understand their business. If a company is willing to take the extra steps to go green and help the environment, chances are they have taken additional steps to consider my well being.

It is a millennial market

Today, going green is driven in large part by the millennials, Generation Y, [ii] or Generation Next as they are sometimes called. Companies want this target group and their spending influence because millenials are the next generation of employees and product consumers. Thus, they are gaining more marketing weight everyday in the marketplace as the rest of us gentrify.

To successfully target this group, it’s absolutely imperative that a company connects with this group’s core values. Millenials are digital from birth and they are more socially conscious, more socially aware, and possess a genuine concern for the future of their planet. They view being green as vital to their very existence.

Supply Chain Optimization - Cost as a factor

I am repeatedly asked, how can going green save me money? The truth is that while in the beginning, taking a business green can be a cost increase, but the overall cost savings will outweigh the initial upfront investment. Consideration must be given to the business by looking at your supply chain to:

  • Learn best green business practices

  • Analyze for efficiency gains to reduce green impact

  • Evaluate how your company can positively assist the environment

  • Find greener packaging and delivery methods to your customers (digital delivery included)

In order to learn and become green, the education will cost you an investment in time and relearning your supply chain. However, in the long run, the cost efficiencies that emerge as you improve your greening strategies are going to far outweigh the costs of not greening your supply chain.

Consider the record companies evolution from CDs to digital distribution such as Apple and Amazon. With the rise of the Internet, digital music has reduced the need for CDs, CD packaging, and the environmental impact associated with getting those CDs to their distribution network and ultimately to you. All of these costs are reduced with the move to digital music downloads. At one time, there where hazardous chemicals that were used to create the plastics and metals for the CD; then we built warehouses to hold all of the CDs; trucks where used to deliver the CDs to record stores; and as consumers, we all drove to buy those CDs. By going digital, we are eliminating massive greenhouse gas producing distribution networks. Sure there is still a cost for the digital infrastructure, but it pales in comparison to where we were just 10 years ago. This is truly a green transformation that has dramatically reduced distribution costs to the record companies while massively reducing the total impact on the environment.

The drive to innovate

In the quest to rethink business supply chains and operations, the need to innovate is critical. When as a business you commit and challenge yourself to build sustainability, govern your business better, and take social responsibility to your customers and buyers, you need to rethink your business at a new level of cause and effect. Every business process that has impact on the environment now becomes an opportunity to help our environment and our communities. This kind of rethinking requires a look from top to bottom to find areas of greener operations and cost savings.

Business planners will invariably take a broader look at how their business is run. Streamlining operations requires creative ways to save time, resources and waste. Constructing a building that is Leadership in Energy and Environment Design (LEED) certified can have literally thousands of innovations that contributed to making the building a greener place to be. [iii]  All of these examples are green innovation at work.

Recycling, recycling, recycling

There is one thing that we can all do as just a matter of our daily lives, and that is to recycle. Most countries now require some form of recycling waste. This is easy to do and has instant impact. For example, metal recycling has grown from 3.5% in 1970, to 35.9% in the year 2000. Today, over 97% of all lead in America is recycled. And overall in the last decade, America has increased its recycling by 100% (nearly double). [iv]

Recycling is big business now and for the foreseeable future. There are companies that will come collect your plastics, aluminum, paper, e-Waste, and all other forms of scrap materials. This can be an added source of revenue to your company while significantly lowering the company’s footprint.

Reduction in waste

When looking at all business processes, take some time to focus on the waste from each of these processes. At many points throughout your company’s supply chain, there are opportunities to eliminate waste. Is there a way I can reduce how much waste I’m working with? Many times the products that you purchase for your business have an abundance of packaging that not only takes more time to open, it also generates more waste that must be dealt with. Opportunities to minimize the amount of packaging from your suppliers will help optimize your overall management of waste.

On the production side, by looking at greener ways to package your products, opportunities to explore reducing the amount of materials that you need arise. Also look at reusable packaging options. With smarter packaging, you can reduce your costs, while reducing the waste footprint to you and your consumers.

The cost of not going green

With a deeper understanding of what it is to be green, I would pose the question, “Do we truly understand the costs to our businesses by NOT going green?” The law of economics no longer is the only element to running a business. Businesses are now more actively working in communities, where they must constantly be aware of the environmental impact of running their businesses in the community.

We as communities and as people want cleaner water, cleaner air, and want our children to have a world free of unnecessary hazards to our core health. Ask yourself, “What is the cost of not going green?”

Conclusion

In conclusion, I’ve attempted to demonstrate a handful of ways that green business leads to both profitability and positive public relations. Additionally, the potential cost of not going green was also explored. By embracing elements of the green movement and implementing green business practices, companies can dramatically reduce overhead costs. Creating green companies not only reduces the overall costs to each of our businesses, it also sets the ground-work for businesses to operate efficiently and responsibly.

Our objective now is to work together to find the best and brightest ideas to transform our companies to become green, more robust, socially responsible, and increase profit to all of our bottom lines.
 


[i] D. Scott Davis (2008), “Climate Change Statement”, 2008 United Parcel Service Corporate Sustainability Report. http://responsibility.ups.com/docs/2008_CSR_PDF_Report.pdf

[ii] Wikipedia (2009), Generation Y. http://en.wikipedia.org/wiki/Generation_Y

[iii] Green Building Council (2009), An Introduction to LEED. http://www.usgbc.org/DisplayPage.aspx?CategoryID=19

[iv] Wikipedia (2009), Recycling in the United States. http://en.wikipedia.org/wiki/Recycling_in_the_United_States


David Dietrich is a Fellow of The Business Forum Institute and is the Chief Systems Architect for Maritime Projects for VESystems, inc. and the Chief Executive Officer of Skky.net. David served as President and Board Chairman from 2002-2003 for the American Marketing Association, California Inland Counties  He was Professor of E-Commerce at California State University, San Bernardino before 2001 when he became Chief Technology Officer for H.X.X.D. USA, Inc. in  Beijing, China, he is fluent in Mandarin Chinese.  David  served as the  Chief Software Architect for Gray Arrow Consulting in Newport Beach, California. He is a Fellow of The Business Forum Institute and holds a Bachelors of Arts degree in Management and a Masters degree in Business Administration and Marketing from California State University, San Bernardino.


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