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November 14, 2008

Sustainability – Businesses’ Best Defense Against Recession

Kevin Wilhelm
CEO
Sustainable Business Consulting

In these uncertain economic times, companies often gravitate towards budget cuts and to scale back sustainability or “green” programs because of the notion that they take away from the bottom-line.

In reality, this thinking is the exact opposite of what business leaders need to do. Sustainability may actually be the best defense against market volatility during uncertain economic times.

Consumers, lenders, and decision makers have all been thrown for a loop over the past weeks as the nation has undergone a financial crisis that would have been all but unthinkable a year ago. Consumers are unsure about where not only to put their money (banks) but also how and where they should spend their money. As disposable income decreases, consumers will increasingly be more conservative with their spending, and try more than ever to get the most bang for their buck. They will also want to deposit their money with companies they trust, think will be around for a while, and share their values.

Just as the Enron/WorldCom debacle led to Sarbanes-Oxley and a new framework for financial reporting emerged, many companies are preparing to be asked to show greater transparency, regarding issues such as climate change. This new style of reporting will likely follow many of the corporate social responsibility reporting principles that have come out of the Global Reporting Initiative – the de facto standard in CSR reporting.

In fact, it’s no coincidence that four of the largest financial institutions that survived the crisis – Bank of America, Citibank, JP Morgan Chase, and Wells Fargo were all signatories to the Equator Principles – which considers social and environmental risks in project financing across all sectors.

The bottom-line is that budgets are being squeezed everywhere, including the public, private, and NGO sector.  Governments across the country (City, County, and State) are facing major budget shortfalls due to decreased tax collection with the extreme being New York City which traditionally gets about 30% of its taxes from the financial industry.

Companies across the board, but especially in the retail sector, are bracing for below average 4th quarter earnings, forcing companies to hoard their cash and lay off workers. Non-profits are also feeling the pinch as philanthropic giving has dried up with the market in the tank.

That being said, when it comes to how companies can save money, sustainability is the answer. In many ways, “being green” or sustainable business is smart business that focuses on efficiencies in energy, waste, and processes.  Here are just a few examples of companies are acting more “sustainable” and are saving money at the same time.

Energy – The Washington State Convention Center installed more than 6,000 energy efficient lights and saved $120,000 annually with a payback of less than 1 year. Simple low cost ideas, such as ensuring that employees turn off their computers at night, can save $21/computer a year and over 920 pounds of CO2e, according to the Department of Energy.

Travel – As air travel costs have sky rocketed over the past year, investments in videoconferencing software makes more sense than ever. A typical round trip flight from the Bay Area to NYC for instance can cost upwards of $750 for a coach ticket, and emits over 1,450 pounds of CO2e.

Waste – Eliminating waste upfront and implementing recycling and composting alternatives helps lower waste costs and emissions.  For example, the Hotel Monaco in Seattle composted its food waste and recycled its kitchen oil saving $20,000 annually. Umanoff and Parsons of Brooklyn, NY sold its leftover corrugated cardboard packaging to an outside shipping vendor and saved $2,500 annually in disposal costs.

Water – SC Johnson’s facility in Racine, WI landscaped with native and drought tolerant plants and saved roughly $2,000 annually in reduced water and maintenance costs.

Paper – By setting printer defaults to double sided and margins to “1” instead of the typical “1.25,” my own company has cut paper usage, emissions, and costs by over 50% in one year with zero effect on company behavior or performance.

During this economic downturn, implementing sustainability within your company makes fiscal sense more than ever.

Kevin Wilhelm is CEO of Sustainable Business Consulting.

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