Pick up a copy of just about any mainstream business publication these days and you’ll find at least a couple of articles about “green business” (or “sustainable business” as it’s often called). Stories about how Wal-Mart is saving hundreds of millions of dollars a year through improved fuel efficiency of its truck fleet, or how MillerCoors has reduced the amount of water it uses to brew a gallon of beer by 30% in the last 3 years. The Harvard Business Review routinely runs articles on sustainable business as a key driver of innovation and competitive advantage (here’s a recent one). And more and more serious business commentators are describing sustainability as the leading business megatrend of our time.
What’s interesting is that this megatrend doesn’t seem to be shaping the strategic thinking of CEOs of smaller companies – with some notable exceptions – to anywhere near the same extent. Why? Well, there are some good reasons and some not so good. Part of it seems to be the idea that green business is all about tree-hugging and saving the whales, activities that are the province of the traditional environmental activists and NGOs and nothing to do with the hard realities of earning a profit in a business. A related perception is the idea that any “green” business initiative either costs money or, at best, yields an ROI that doesn’t meet the company’s requirements. It’s obviously a reality that some green or sustainable business initiatives require a significant up-front cash investment and, if a small company either doesn’t have cash in the bank or can’t borrow it at an acceptable rate, then any such initiative is simply off the table.
Many of the misconceptions about the financial benefits of sustainable business programs are due to the fact that the renewable energy fanatics have hi-jacked the terms “green” and “sustainable” business such that the first thought of many smaller company CEOs when they hear them is to announce that they don’t have $100,000 to put a windmill on the roof! No, of course they don’t and, even if they did, they almost certainly shouldn’t do it because it would deliver a lousy return on investment even with all the government handouts and subsidies available (which the US as a nation cannot afford anyway!). Major investments in renewable energy – are NOT the place where green and sustainable business thinking should start.
Green business – better thought of as sustainable business – is a way of thinking about the activities of a business that focuses on how they waste increasingly expensive scarce resources (energy is just one among many) and/or how they damage the natural environment on which we all depend. Looking at business activities (to use an ugly phrase) “through a sustainability lens” allows a CEO to identify ways in which often quite simple and inexpensive initiatives will create a financial benefit while – at the same time – having a positive impact on the environment and our natural resources.
In fact, the basic drivers that have made green and sustainable business thinking a core component of strategy for major corporations apply just as much to smaller companies and can achieve equally significant results. Here are the three basic ways in which green business thinking can yield benefits to ALL companies, large or small:
- Reducing costs and/or risk (risk, after all, is just a cost that hasn’t happened yet)
- Stimulating innovation in products or services that create new or enhanced revenue streams
- Creating a productive people culture in which employees feel good about the company because it’s providing them with an opportunity to go beyond just earning a paycheck by doing something useful for the environment and the planet.
In Part II we’ll examine each of these in more detail using examples of smaller companies that have embraced sustainable business thinking as a driver of competitive advantage, innovation and improved financial performance. The driver for adopting sustainable or green business practices MUST, in the end, be financial. But make no mistake, the sustainability megatrend is upon us and it isn’t going away!
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