Increased Return On Investment: A Business Case On Working With Sustainability

19-11-2019

Sustainability in business has many benefits, one of them being an increased return on investment (ROI). This article is part of a series to discuss the benefits of what happens when organizations work with sustainability in their core operations.

On June 1, 2017, US President Trump declared that the United States was going to exit the Paris Agreement, an agreement to reduce global carbon emissions to slow down climate change. The agreement was signed under the former United States President Obama, promising to cut US emissions 26-28% of their 2005 levels by 2025.

Increased Return on Investment (ROI)

Working with sustainability requires a strategic and holistic approach. The importance of a strategic approach can’t be emphasized enough, as a lack of a strategic approach can lead to major losses. When properly implemented, a strategic and holistic approach leads to a strong business case for sustainability, of which increased ROI is usually one of the first signs you’re on the right path.

ROI is often reported as the first and most important message to “peak” the C-suite’s (CEO, CFO, CMO, COO, etc) ears. Everyone likes money, and if you find that there is a way to increase it, most organizations are willing to listen (and hopefully make the change). Recognizing that ROI is such an important part of sustainability, SustainOnline has implemented two profit calculators in Tools to support organizational transition towards sustainability.

Our profit calculators are based on the work documented by Bob Willard, a top IBM executive.  In his book “The New Sustainability Advantage”, it was discovered that using a sustainability approach yields many positive results

Profit improvement:

  • Revenue increased by 9%

  • Energy expense reduced by 75%

  • Waste expense reduced by 10%

  • Water and material expense reduced by 10%

  • Employee productivity increased by 2%

  • Hiring and attrition expense reduced by 25%

  • Strategic and operational risks reduced

By focusing a business case on sustainability, proper metrics are monitored so that reporting is accurate and honest. This will gain CEO support to allow for maximum ROI, because as the company grows, so will the profits and ROI.

“…these benefits lead to profit improvements of at least 51 percent to 81 percent within three to five years for two sample companies, while avoiding a potential 16 percent to 36 percent erosion of profits if they did nothing more than they are already doing to be more environmental and socially responsible.” – Bob Willard

Green Giants Example

One example of increased ROI is documented in “Green Giants: How Smart Companies Turn Sustainability into Billion-Dollar Businesses” by Freya Williams. Her book focuses on the worlds first $9 billion sustainable brands: Chipotle, GE, IKEA, Natura, Nike, Tesla, Toyota Prius, Unilever, and Whole Foods (later on, Costco, Hain Celestial, Kroger, Organic Valley, REI, Target, Vestas, and Walmart were added, based on her research criteria.) A stock analysis over five years found Green Giants performed 11.7% better than its competitors.  Furthermore, Green Giants outperformed S&P 500 by 6.8% per year where comparison companies trailed by 4.9%.

Conclusion

All in all, being sustainable is an important initiative by any organization. But one of the strongest reasons to document the journey is with ROI – the universal language of money is understood by everyone.

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