Why being green is smart


  • Business
  • Saturday, 01 May 2010

AMSTERDAM-BASED international expert on corporate responsibility (CR) and sustainable development, Paul Hohnen, says before looking at the business case for “going green”, it is good to be clear on one thing.

That it is possible in most countries for a company to be breaching laws or codes of good environmental conduct and not see their stock price or market share fall. Whatever activists may want or believe, being “sustainable” or “green” is not essential when doing business. This may not be right, but it’s how things are at the moment.

“Let’s look at palm oil prices. They have not been impacted by criticisms about their links to deforestation. The same with oil prices, which have shown no concern about global warming. But concerns about the environment are changing the way business does business and will continue to do so. Take this week’s high profile advertising by Unilever (Financial Times, 22 April, 2010),” he ponts out.

Unilever, a major user of palm oil, has been cutting ties with suppliers that are associated with illegal deforestation and is now committed to double the amount of certified sustainable palm oil it uses.

Retailers such as Tesco, Metro and Wal-Mart are also actively setting higher environmental and human rights standards for their suppliers. “They are not doing this because it’s mandated. They’re doing it because they understand there is no future in being seen as unsustainable and because it makes good business sense now. They are creating a new business model where sustainability is being integrated into the product.

“Companies that aren’t green, or who can’t measure and report their impacts, risk losing out on global supply chain access,” says Hohnen.

“Going green is smart management,” says Hohnen.

By going green, a company achieves several things at the same time. First, it reduces the time wasted on brand management “fire fighting”. Think of all the time and money lost when some accident or incident attracts negative media coverage. In a world increasingly worried about the impacts of climate change, air pollution and environmental damage, companies with poor performance can expect to spend more time defending themselves to regulators, investors and the media. Consider Exxon, which is still dealing with the consequences of the Exxon Valdez oil spill.

Second, smarter use of raw materials and energy, and producing less waste, can lead to quick improvements at the bottom line. The motto “make more by using less” has been adopted successfully by big chemical companies like BASF, Bayer and Dow.

Third is the market share. For many specialists, “green industry” is seen as the next IT revolution in terms of market growth and opportunities. Some assessments show that the global market for green products and services is more than 500 billion euros a year and growing.

Many of the world’s biggest companies, like Siemens, Philips and GE, are busy positioning themselves for the “green industrial revolution”.

Last but not least there is innovation. Making things with less or making them in different ways provides companies with a stimulus to think through their business model. This stimulates technological competitiveness.

In turn, this appeals to young graduates, investors and regulators. In the energy sector, it’s been notable that most of the new energy innovations are coming from non-traditional players.

Manufacturers of solar panels and wind turbines have enjoyed some of the fastest growth rates in the sector, helped by subsidies and positive profile. Chinese companies have been quick to exploit the potential of innovation for growing new markets.

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