How Unilever, GE, Ikea Turn a Profit from Sustainability
At least nine companies globally generate a billion dollars or more in revenue annually from sustainable products or services — those that focus on sustainable living and/or are produced sustainably, according to The Guardian.
Target also expected to join the list in 2015: the retailer last year said its Made to Matter line of “better-for-you and better-for-the-world products” would see sales hit $1 billion in 2015.
This represents a major change in business strategy, which, for years, has seen sustainability as something that costs companies money or, at best, will save them money on energy and water bills, writes Freya Williams, CEO, North America for Futerra, a sustainability strategy and communication firm and author of Green Giants: How Smart Companies Turn Sustainability into Billion Dollar Businesses.
“For the green giants, sustainability is not about how they save money, but about how they make it,” Williams writes. “They’ve shifted sustainability from the bottom to the top line — and that move has had profound implications for sustainability in the context of business. No longer are sustainability and profit at odds; on the contrary, rather than being a drag on profit, sustainability can drive it.”
Environmental Leader talked with some of the “green giants” about how sustainability drives profitability.
Unilever Sustainable Living Plan
Unilever in 2010 launched its blueprint for sustainable business, dubbed the Unilever Sustainable Living Plan. Sustainable living brands, including Dove, Lifebuoy, Ben & Jerry’s and Comfort, “integrated sustainability into the contribution they make to the world and into their products’ ingredients and lifecycle,” the company says. One of the goals is by 2020 to halve the environmental footprint of the making and use of Unilever’s products.
The consumer goods giant says about 50 percent of its growth in 2014 came from sustainable living brands, which also grew at twice the rate of the rest of the business.
Not only are Unilever’s sustainable living products more profitable than standard products by 2 gross margin points, these products also drive other top-line benefits, Unilever says. “This sense of purpose and our USLP attracts and retains talent,” according to a Unilever spokesperson. “We are LinkedIn top 3 most sought-after employers globally and 50 percent of graduates cite our sustainability credentials as the main reason for wishing to join us.”
GE’s Ecomagination line of products and services has generated more than $200 billion in revenues since GE started the program 10 years ago. Revenue from Ecomagination products totaled $34 billion in 2014, representing about 30 percent of total GE sales, the company says.
“A key success factor for Ecomagination was that our top management set bold targets with measurable metrics for the company in the areas of R&D, revenue targets and reducing our own footprint,” says GE spokeperson Josef Skoldeberg. “Between 2005 and 2014, GE invested $15 billion in R&D, reduced our GHG emissions by 31 percent and reduced our freshwater use by 42 percent. In 2014, we announced updated targets for Ecomagination: by 2020 we will invest another $10 billion in clean technology R&D, and to reduce our own greenhouse gas emissions and water usage by 20 percent.”
The next phase for GE’s Ecomagination focuses on building partnerships with other-like minded companies including Walmart, BHP Billiton, Goldman Sachs and Intel to improve productivity, reduce impact and increase returns — “challenges that are bigger than any one company,” Skoldeberg says. For example, to reduce energy and water waste in manufacturing, Intel will work with GE to develop advanced manufacturing and digital optimization techniques to increase resource productivity in manufacturing.
Ikea Sustainable Home Products
Ikea says in fiscal year 2015 it saw a 29 percent increase in sales of products that contribute to a more sustainable life at home for consumers. It’s entire lighting range is now LED.
“We want to become resource and energy independent which means helping to transform the industry for our key raw materials like cotton and wood, investing in renewable energy and becoming more efficient in operations and supply chain is our goal,” Ikea spokesperson Mona Astra Liss says. “This means making every product more sustainable while keeping the quality, function, form and affordability our customers love.”
As Williams writes in The Guardian, these businesses showed that sustainability can turn a profit before the Paris Climate Deal. Now that a global climate agreement has been reached, she forecasts that sustainability as business as usual will accelerate.
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