Is it sustainable to become sustainable?

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Adam Bernstein explains how to introduce sustainability into your business.

Over the past 20 years or so, it has become fashionable to talk about sustainability. Just like other phrases of the moment, some think sustainability is a flash in the pan, a bandwagon to hop-on to. But is it? Most certainly not, if the likes of Swedish child activist Greta Thunberg have their way.

The need for sustainability exists and a UN commission defined it quite neatly as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

It makes sense. With more people on the planet demanding more of our finite resources, we have to act responsibly and husband what we have. And if we follow Pareto’s law – the 80/20 rule, which suggests 80% of the effects come from 20% of the causes, then it follows that 80% of those in business generate 80% of the resource use and waste. They must be the target for advocates of sustainability.



So why should retail act to save on waste and, dare I say, become more sustainable? After all, the trade is busy trying to earn a living and surely being “sustainable” is just more work for no return?

Cost – increase productivity and reduce costs

Businesses exist, as opposed to organisations, to make a profit and so anything that detracts from this process by definition chips away at those profits that can be made. While some think that becoming sustainable means extra tiers of operation and more work (in separating recyclables from non-recyclables). The reality can be very different. At the simplest of levels, it’ll save on the costs of landfill tax.

Think about how sustainability should become ingrained into all employees so that they automatically think about conserving resources – fuel (turning a van engine off, while waiting in a queue), materials (reducing packaging, which ordinarily would be considered as acceptable). Think about travel and distribution, too. Replacing vans that are more fuel-efficient, which burn less fuel, which emit less CO2 will lower business running costs. Reducing cost also encompasses energy conservation strategies that can be as simple as turning off unnecessary lights and insulating walls to more sophisticated efforts, such as the installation of geothermal heating and cooling systems. Those efforts having a more significant overall impact will likely be more expensive to implement, but the long-term results justify the investment – and business conscience.

Legislation and regulatory requirements

Like it or not, businesses have legal obligations to comply with legislation both from the UK Government, and for the time being, the European Union. Sure, a firm can do what it wants, but it will feel the full weight of authority should it be caught breaking the rules; integrating sustainability into the business will help firms keep out of trouble. Consider, for example, the impact of the Environmental Protection Act 1990, The Single Use Carrier Bags Charges (England) Order 2015, Producer Responsibility Obligations (Packaging Waste) Regulations 2007. All have affected how businesses dealt with waste products. Then there are the EU Landfill Directive 1999/31/EC that was transposed into UK law through the Landfill (England and Wales) Regulations 2002 – this is the reason firms pay so much to dispose of waste at a tip (and why some prefer to illegally fly-tip); the renewables incentives give building owners a reason to be energy efficient; and then of course Enhanced Capital Allowances, which enables a business to claim 100% first-year capital allowances on their spending on qualifying plant and machinery.

Quite simply, the legislation offers incentives through both stick and carrot, to become more environmentally aware.



Market perception

To some, “being sustainable” is just something that needs to be acknowledged, but not actioned. Why? Because the public – customers, both private and corporate – perceive firms that do their bit for the world are a cut above the rest. But paying lip service to the concept won’t wash – it needs to be followed through.

Look at the website of Pets at Home. It has a section on its website – “Responsibility” – where it outlines its policies on saving water, minimising the impact of packaging, reducing waste and reducing energy usage. And then there are retailers such as Ethical Pets who stock recycle-related products, such as dog chewers, bowls and catnip toys.

Fundamentally, this activity is good for the environment and it’s good for their business, too. Consider that a May 2015 study, 2015 Cone Communications/ Ebiquity Global CSR Study, found that 81% of consumers said they would consume/ purchase fewer products to preserve natural resources, and 80% would buy a product from an unknown brand if it had firm social or environmental commitments.

Of course, a number of reasons why one product is chosen over another exist – and the cost is just one key element (there’s only so much someone will pay for a responsibly sourced rabbit hutch, versus a product that comes with minimal information). But even so, if buyers can get a feel-good factor about a firm, its services and the goods it provides, it may give them an edge over rivals.

However, it’s important to note the opportunity to enhance a brand’s image is lost if the company doesn’t do as it preaches. Volkswagen and their emissions-cheating software is a classic, expensive and a very destructive case in point.

Pleasing employees and investors

In a world where the media is king, it takes a strong individual or investor to want to be associated with a brand that is known to not care about the environment. In the same way drinking and driving is no longer acceptable (as it once was decades ago), so younger employees have been (correctly) indoctrinated to think waste is to be viewed negatively and it should be appropriately tackled. Where once everything was binned, now firms have different receptacles for different forms of debris. It matters not if the move is staff-driven or is a function of local authority waste disposal regulations. The point is, people like to see businesses do their bit for society and the economy, and it’s not hard – recycle what is possible and there will be less to send to landfill.

Financial institutions – the banks – are moving on sustainability. HSBC has pages of information on the subject in its April 2019 Environmental, Social and Governance Update. Some banks portray themselves as ethical banks that screen for bad investments or proactively fund social and environmental projects – the Co-operative Bank notes that it was the UK’s first ethical bank in 1992 and this policy is enshrined in its constitution. The point is, while a case for funding still has to be made on commercial grounds, there are some organisations and investors that will look more positively on borrowers that are sustainably orientated.



Remember the shareholder

Small or large company? Either way, it’ll have shareholders. In the smaller firm, the shareholders will be fewer and possibly easier to please. But the more considerable concern will be more disconnected from its shareholders and their views (and actions) will affect the value of the business. Happy shareholders don’t sell shares, but give them a cause to sell, and share price and company value can drop quickly.

A 2014 McKinsey report, “Profits with purpose: How organizing for sustainability can benefit the bottom line”, noted that companies with high ratings in environmental, social, and governance factors outperformed the market in medium and long-range terms. When it looked at the (global) Carbon Disclosure Project it noted the effect of sustainability on share price “an investment of $1 at the beginning of 1993 in a value-weighted portfolio of high-sustainability companies would have grown to $22.60 by the end of 2010, compared to $15.40 for the portfolio of low-sustainability companies”.

Granted, the report relates to US firms and large ones at that, but the point is that being sustainable can help a firm grow in value.


“And then there are retailers such as Ethical Pets who stock recycle-related products, such as dog chewers, bowls and catnip toys.”

To conclude

Businesses don’t have to be sustainable to make a profit and become valuable. However, those that do have the competitive edge of their rivals as they’ve instilled and use a lower cost recycling ethic. Perception and action are everything – make the change now and see what it can do for your business.

Remember – sustainability and recycling isn’t the enemy.

Resources

W: www.investors.petsathome.com/responsibility

W: www.conecomm.com/research

W: www.hsbc.com/news-and-insight/2019/our-esg-update

W: www.co-operativebank.co.uk/values-and-ethics

W: www.mckinsey.com/business-functions/sustainability/our-insights/profi ts-withpurpose-

W: how-organizing-for-sustainability-can-benefi t-the-bottom-line