Sustainability Mythbusters Part III: Sustainability Is Too Expensive
Welcome to the Sustainability Mythbusters series presented by Schneider Electric. In this six-part series (see part I and part II), Schneider Electric’s Global Sustainability Services team explores common misconceptions related to the topic of sustainability and presents a business case to “bust” each myth.
In times when the economy is recovering and budgets are tight, corporate focus on sustainability can begin to drift because of the myth that sustainability is an unproven cost. However, an effective program can actually accelerate bottom-line results by contributing to short term operating cost savings. A long term focus on product or service innovation, value chain resiliency and other macro strategies will provide a roadmap for success as well. Organizations must effectively balance short term investment toward proven sustainability measures while driving a vision and strategy of evolving their business for future environmental and social conditions.
Key to making the costs behind sustainability pencil out favorably is taking the right approach. Over the years, I’ve seen it a number of times – leadership never really defines their company’s sustainability goals or the return on investment (ROI) they were hoping to achieve. The program becomes stagnant due to lack of investment and focus. It’s hard for the responsible team to get the necessary time and resources to make a program excel because there is a lack of cohesion amongst decision makers on sustainability measures.
Like any initiative, detailed planning and processes are needed for success. There has got to be a big-picture strategy from the start. You wouldn’t launch a new product without a well thought out sales and marketing strategy would you? Strategies can start as simple as identifying how and where to reduce energy, waste and other resource costs within your footprint to more complex strategies of managing impacts up and down your value chain. In our experience, coalescing the leaders within your organization to rally around a consensus view of the sustainable return on investment or “SROI” criteria by which investments will be evaluated is key to success. As an example, we’ve worked with a 20% reduction goal in resource conservation that equates to upwards of $10 million in savings over the years where the investment is a fraction of the savings.
From a short term perspective, programs often start with investment in operating measures that reduce energy consumption and greenhouse gases plus optimize waste management costs. Sometimes it can be beneficial to focus on water efficiency if the intensity of water use within an organization is relatively high. We generally find that up to 30% of utility costs can be reduced by buying better, controlling use with automation and optimizing consumption through investment in better operating processes or high return capital projects. Also, providing visibility of performance over time to employees in turn drives their contributions to find ways to do more with less. We’ve seen it work everywhere – from manufacturing to retail to your local hospital. Savings generated from these activities can have a significant impact on operating costs and thus short term bottom line results.
Also important when weighing the benefits of sustainability is taking the long view. Take the apparel industry for example. The globalization and diversity of the apparel value chain is extremely complex. With complexity, comes varied risk and opportunity. The magnitude and impact of issues like global climate change, water scarcity, worker conditions and overall social well-being are critical to understand. NYMEX Cotton has traded around $0.90 per pound for the last year. If the weather changes significantly in regions where cotton is grown and crops suffer, what will happen to global cotton prices? How much will it cost to make a t-shirt? Will it even be possible to make a t-shirt anymore? In response to these types of issues, companies are reassessing the materiality of environmental, social and economic aspects with potential to impact their business and using these results to design future strategies. For example, many are working with the Sustainable Apparel Coalition (SAC) to assess how facilities and manufacturers within the industry are managing environmental and social issues as a way to baseline their supply chain. From there, companies can understand what they are dealing with and engage their business partners in improving environmental practices or social conditions thus building a resilient supply chain infrastructure. In the end, this investment drives continuity and long term vitality of the business whether it’s managing commodity costs, reputational risks or other material impact.
Taken together, the big-picture benefits, returns and risk management strategies that come from investing in sustainability more than overshadow the price tag connected to well-executed programs. If you appropriately design a strategy, you’ll be in position to deliver efficiency and sustain results; turning the myth from “It’s too expensive to be sustainable” into “It’s too expensive not to be.”
John Hoekstra is the Director of Sustainability (Americas) at Schneider Electric. John is responsible for planning, developing, and implementing client sustainability strategies, greenhouse gas, water and waste management, renewable energy portfolio development, corporate social responsibility (CSR) reporting and broader supply chain sustainability management. His team serves a variety of global organizations including those in the apparel, chemical, automotive, packaging, food & beverage industries as well as governments and cities. Schneider Electric has a proven record of leading organizations to thriving sustainability programs across economic, environmental, and social dimensions. As a global leader in sustainability services, the company provides an unmatched end-to-end solution that encompasses every phase of the sustainability journey. Through our offering of strategy, technology, and implementation, Schneider Electric is able to drive successful sustainability programs that accelerate business performance. Learn more about Schneider Electric’s Sustainability Services at, https://vimeo.com/58187366, or email: email@example.com.
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