Over the past several months, I have attended several presentations, forums and discussions centered around the idea of sustainable business practice. And although I have only just begun to get some sort of a grasp of what the industry of sustainability fully encompasses, I have come to one very important conclusion. If you are a business owner, and you haven’t already started to get a grip on the issues surrounding sustainability, you are in serious danger of falling victim to what I’ve called the eighth reason the bank won’t back your business. So what do you do about it? Is it even a problem that you’ll have to worry about in the next couple of years? Is it really worth it to “go green”? Let’s look at a couple of aspects of this massive issue.
Sustainability – What is it?
The term in all its modern day complexity defies dictionary definition. There are numerous factors included under the banner of sustainability. Climate change, water, energy, air quality, food supply, waste, population, natural resources and other elements (depending on who you ask) all combine to make for an issue that is hard to define and even harder to know what to do about. This is especially true for businesses, whether the organisation is small or large. We often hear terms like Corporate and Social Responsibility (CSR), triple bottom line reporting, carbon footprint, carbon neutral thrown around; but what do any of these have to do with sustainability or with running your business?
Remember that I have said before that a key issue for any business seeking the backing of its stakeholders, particularly the bank, is being able to answer the question “Is there an underlying sustainable business here?”. Because Sustainable = Bankable. The idea of sustainability is further tied to my previous discussion of having a backup plan as well. If ever there was a time to start thinking about changes that could significantly impact on your business and having a backup plan to deal with contingencies, that time is now. Things will only get more complicated in this area, not less. The sustainability of your business is an issue – today. And it will become an increasingly more important issue as governments and businesses all over the world start coming to grips with what it means to be sustainable and what we should be doing about it.
It’s important that businesses start thinking about the issues surrounding sustainability now rather than waiting for the government (or your competitors) to dictate what their plans will be. Defining the issues that impact on the way you do business and coming up with a sustainability plan for your business now will put you on the front foot when it comes to your carbon footprint. Understanding what impact your business is having financially, socially and environmentally (the 3 measures included in triple bottom line reporting) on the wider community is an important step toward knowing if your business is a viable, sustainable organization. In other words, sustainability is about more than just saving money, saving power or saving trees – at its most basic level, its about whether or not your business will be around ten years from now.
The next big competitive advantage
There’s literally too much to consider to effectively communicate everything you need to know about the topic of sustainability within the confines of this article. So I want to concentrate on what having a sustainability plan can do for your business. The “what’s in it for me” aspect if you will. From the viewpoint of any stakeholder in your business, Sustainable is about how you stack up to your competitors. How do you perform against the benchmark set for your industry? Is there a benchmark established for your industry? Are your competitors perceived as “greener” than you? Are you in an industry that is particularly sensitive to sustainability issues (think commercial fishing, manufacturing, fossil fuels)? Having a sustainability plan can get you thinking about your firm’s impact on the world around it and by simply going through this thought process, you could be getting a competitive edge on your rivals.
The first step in gaining an advantage from sustainability is to understand what benefits your business could derive from running a “green” operation. Can you save money, time, or effort by switching to greener alternatives along your supply chain? If so, you will already have one good reason to switch. Being the first to switch amongst your competitors could also give you a competitive advantage beyond cost savings. But in order for this advantage to be realised, you have to look for sustainable solutions that go beyond what is legally required, because everyone will have to do the things that are legislated. Simply achieving a level of “doing no harm” will not be a sustainable competitive advantage. That’s why you will need to fully explore what specific advantages you are going to derive at all levels (not just economic) because some of your competitors will look only at the costs involved and be turned back from copying something that could end up giving you a significant advantage in some other way.
The second step in sustainability planning is to look at your entire supply chain. This is about determining the impact of your inputs and following the process through all the way to the end users of your product or services. The less resources you utilize (natural, human or otherwise) to produce a set amount of output value (in terms of products or services) the better it should be for your business, your customers, the community and the environment. It’s getting to this stage, where you are measuring your impacts and asking “What can we do and how much can it save?”, that will really see sustainability become a competitive advantage. Because so much focus today is on becoming “carbon neutral”, the opportunity is there to move beyond neutrality to really seeing some efficiency gains across your whole organization and even the possibility of having an overall net benefit to your operations. Once you’re recognized as having achieved this, you can move to the third step and watch the benefits multiply exponentially.
The third step in the process is reaching the point where you can leverage off of what you have achieved by applying the efficiencies you have implemented in your business to your whole supply chain – inside and outside your organisation. Proving that what you have done could be of benefit your suppliers and other stakeholders not only multiplies the efficiencies across the network, but sets you up as the expert in sustainable practice, at least with other businesses that are similar to yours. Being recognised as an expert in sustainable business (whatever the scope) allows you to reposition your marketing and cash in above and beyond the original savings derived from implementing your sustainability plan.
It is in the area of “green marketing” that you can see benefits that go well beyond your initial investment and the initial savings achieved. It has been proven that there is a not insignificant portion of the community that is willing to pay a premium for “green” products and services. The keys to tapping into this market power is to make sure you can back up your claims 100% and continually improving your leadership in the sustainability stakes. If you get caught out faking it or start to let your competition catch up to you at any time, you’ve lost the leverage and it will be extremely difficult to regain.