The Strategies and Planning behind Sustainable Business and How it enhances revenue, margins and brand value.
Akanksha Dalal
| Cluster Lead North India and Gujarat | Youth Change Maker & SDG Advocate | Global Citizen | Green Strategic Partnership |
By definition,?sustainable business, or a green business, is an enterprise that has minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy—a?business?that strives to meet the?triple bottom line (TBL) i.e. an?accounting?framework focusing on three parts:?social, environmental (or ecological) and financial (or economical). Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value.
When people choose to engage with any company for the purpose of utilising their goods or services, they care what a company stands for. This includes social and environmental aspects that may not have seemed important in business in the past. Consumers nowadays are demanding more sustainable goods and services.?Because of this demand, companies must focus on their?environmental impact?to gain?consumer loyalty. Ecological awareness can be treated as a choice of personal taste rather than a necessity, it can also be a method in order to increase capital from a marketing standpoint.While marketing a product or service it is important that a business?recognize the relevance of sustainability initiatives, their portfolio of responsibilities, and the greater role in driving those initiatives.
Sustainability in business generally addresses two main categories:
At first, organizations were just trying to be good corporate citizens, focusing on energy conservation and offering “green” products. It felt good to do, but it wasn’t central to the business.
More recently, many business leaders have begun to view sustainability as a more integral component of their business strategy, identifying opportunities and risks as a way to enhance revenue, margins and brand value.
Organizations with a broader, more strategic plan for sustainability will not only drive innovation across their enterprise—including transforming key processes—but may also influence what their customers want and how their suppliers operate.
Understanding innovation
Efforts to drive innovation can either be sustaining, providing an incremental advantage within the current competitive landscape, or they can be disruptive, both types of innovation are important because they add value to the company.
For instance, major beverage bottlers require about five ounces of crude oil—a significant cost component—to manufacture a single 16-ounce plastic water bottle. Of course, crude oil is a major risk factor in production cost control, subject to price volatility due to the turmoil that often surrounds oil-producing countries. Similarly, its production, transport and use entails some level of environmental risk. With this in mind, one major bottled water manufacturer was able to decrease the amount of plastic in each of its bottles by approximately 40%. By mitigating a key supply chain risk factor, the manufacturer realized significant cost savings and also cushioned itself from crude oil price shocks. While sustainability concerns certainly entered into the equation, the benefits accrued in more than one column of the “triple bottom line” ledger.
Cutting resource use without losing productivity
Sustainability-driven innovation goes beyond designing green products and packaging solely on their inherent virtue. It entails improving business operations and processes to become more efficient, with a goal of dramatically reducing costs and waste. It’s also about insulating a business from the risk of resource price shocks and shortages. Taken together these enhancements can deliver business benefits that go far beyond the bottom line—whether it’s improving the overall carbon footprint, enhancing brand image or engaging with the employees in a more profound way.
Developing and enacting a broad strategy to manage energy and resources and drive process innovation involves several steps. Briefly, these include:
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Developing a broad sustainability strategy
Financial and sustainability analysis can reveal surprising and often valuable insights. Some of the most important include:
Lesson 1: Dig deeper
Lesson 2: Collaborate where it makes sense
When drawing a heat map for their company’s market, most leaders are especially attuned to places where there are consistently high sustainability priorities across neighboring sectors. For example, if areas of potential collaboration occur in the product design phase, a company may have opportunities to jointly focus on innovation to design products that are sustainable from end to end. This type of collaboration may result in cost savings and improved compliance with regulatory mandates.
Lesson 3: Follow the money
Investigate issues where high financial impact aligns with high sustainability priority. Companies in the consumer packaged goods industry, for example, might reap relatively larger financial benefits by improving sustainability performance across their entire value chain—think beyond the manufacturing footprint.
Lesson 4: Mind the gap(s)
Discrepancies between financial impact and sustainability priority may indicate that companies are giving too little or too much attention to one sustainability priority over another. For example, a manufacturer initially focused on the presumed large impact that proposed carbon legislation would have on its business. Further analysis revealed that the proposed legislation posed virtually no financial risk. Instead, it suggested that the company should focus on its global sourcing approach. Although it sourced from a number of low-cost countries, the company did not have effective practices in place to monitor working conditions and product safety associated with these goods. The investigation helped align priorities with the most significant financial benefit.
Lesson 5: Look over the horizon
Sustainability strategies should address current issues but leave room for future opportunities and risks as well. Although the heat map provides a current-state snapshot of an industry and company, leaders should keep in mind that the future landscape could look quite different. For example, companies may not currently view water as a sustainability risk or even a financial risk. However, population growth and pollution could create a situation where this critical resource may become significantly limited, which in turn could affect the ability to run operations to meet your revenue plan.
To reach this new frontier, leading organizations are taking a hard look inside their operations and across their supply chains, assessing where they are, prioritizing initiatives, and then formulating a broad sustainability strategy to foster product and process innovation to achieve their goals. They are also adopting metrics that more accurately measure their progress and improve their image in the marketplace. Companies that achieve this vision have the opportunity to enhance revenue and brand value, engage effectively with key stakeholders, manage risk and reduce costs.