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Sustainability and Profitability Drive 21st Century Success

Companies are discovering that efforts to save the planet can also have financial benefits.

A photo voltaic panel sits to the right of skyline views
October 25, 2019

Make no mistake:  In 2019, discussions on the subject of sustainability are generating enough excitement to power a big city! The current level of engagement on the issue stems in part from our growing understanding of how sustainable practices impact the quality of everyone’s lives, as well as the fact that it simply feels right to contribute in whatever way we can to our stewardship of the environment, our resources and our world.

But sustainability also speaks the language of business — and in very concrete, bottom-line terms.

Look around and you’ll find that the business case for sustainability spans a wide spectrum of industry sectors — from real estate, where smart buildings turn utility savings into huge cost savings, to consumer goods (from a marketing perspective, sustainable items are “hot”), all the way to the investment arena where, according to Bloomberg, the total value of so-called green bond issuances passed the $600 billion mark in 2018.

This is just the kind of promise and progress that excites Catherine Sheehy, who leads the advisory practice in UL’s Environment and Sustainability division. Think of it this way:  Instead of the legacy notion that a business’ financial performance takes priority over the good of the planet, sustainable practices and profitability are increasingly being viewed as synergistic drivers of enterprise success in the 21st century.

"Like any business strategy, I put this in business terms," said Sheehy, who is based in Silver Spring, Maryland. “We do this work because there are revenue opportunities, cost-saving and risk mitigation opportunities and business representational opportunities. These are four key drivers that are important considerations in any business, regardless of the nature of the activity they’re considering.”

The good news is that corporate sustainability initiatives “really align pretty well across all four of those drivers, depending on the levers that you're trying to pull and what your priorities are,” Sheehy said. “Knowing where you want to prioritize your interest, or your focus can help you better understand where you might want to go next.”

Cautious approach

Sheehy and her team at UL are hardly alone in their view of sustainability or in their proactive approach to it. Yet, before anything of substance happens, the case must be made to business leaders in organizations of all sizes that sustainability is worth the time and effort. Even the most successful companies are cautious when embarking on a new initiative that requires the use of other precious resources — time and money.

Such a tentative mindset is absolutely understandable, but the reality is more complex when you examine the whole picture. Sheehy cites a study conducted by the McKinsey Global Institute who found that businesses with a long-term focus have 40% higher revenues and 36% greater earnings than those that think and act from a short-term perspective. When it comes to top-priority, long-term trends, according to Sheehy, “I’d say sustainability is not an add-on or a ‘nice-to-have,’ but an integral part of that long-term focus.”

One path for moving beyond the status quo is to “make smaller sustainability changes first and measure those returns before taking bigger steps to ensure profitability,” said sustainability expert Kevin Haseney, district commander at JDog Junk Removal & Hauling Tampa, a Military Veteran Partners company. “Switching out the lighting in an office building is low cost and will result in increased returns in the long term. Plus, it can encourage bigger changes down the road.”

The same goes for something as simple as going paperless. When Colorado Springs, Colorado moved the city’s asset management over to a software-based system that eliminated paper-based records and leveraged mobile technology, it realized a $2.5 million return on investment, according to Cartegraph.

Small sustainability experiments can ultimately lead to sustainability achievements with significant impact. For example, the athletic apparel company Nike is working with Avangrid Renewables to build on its use of sustainable energy. Having already contracted to purchase all of the electrical power produced by Avangrid’s three wind farms in Oregon, Nike announced in January its plans to buy an additional 86 megawatts of power from Avangrid’s 286-megawatt Karankawa Wind Farm just northwest of Corpus Christi, Texas. These renewable energy initiatives have proven so successful that Nike is targeting to source half of the electricity it consumes worldwide from renewables by fiscal 2025.

“No matter how forward-thinking a company’s leadership is, the overall economics must intelligently drive the business process to stay profitable,” said Jim Mathers, CEO of Energy Professionals, an energy strategy company based in Clearwater, Florida. “By installing efficiency measures — whether it’s energy intelligence software, LED upgrades, renewable energy generation, or other developments from the expanding green-power marketplace — you’re reaping the rewards of decreased operational costs, which directly impacts profitability in a positive way.”

Consumers (and investors) are noticing

The type of sustainability efforts being implemented by Nike and others is likely to gain further momentum as news of these changes begins to influence consumer spending. A recent study conducted by the Center for Sustainable Business at New York University’s Stern School of Business tracked point-of-sale data on purchases. Authored in conjunction with market research company IRI, the study found that sustainability-marketed products delivered 50.1% of market growth from 2013 to 2018 while representing 16.6% of the consumer-packaged-goods market in dollar sales for 2018.

"These results were directly related to marketing efforts that highlighted the sustainability of those products," Sheehy notes. "This is not just about what consumers say they'll do. We say all sorts of things about what we will do. This is about what consumers actually do. And the proof is in the numbers."

Investors are also taking notice of these trends. According to its most recent “Global Sustainable Investment Review,” the Forum for Sustainable and Responsible Investment reports that $12 trillion is now directly associated with sustainable investment assets in the U.S.

Sheehy recalls her reaction to hearing that statistic. “$12 trillion is a number I couldn't even conceive. That's one in every four dollars invested. I looked at the 2018 GDPs of various countries, and that's more than Germany, the United Kingdom and France combined. I mean, that's how huge that is.”

Apple gets on board

Speaking of big money, sustainability has become a major priority for Apple — which, with a market value of about $1 trillion, is the most valuable company on earth. Apple has announced that its suppliers have achieved UL Zero Waste to Landfill validation for all final assembly, test and packaging facilities for its iPhone, iPad, Mac, Apple Watch, AirPods and HomePod.

"Our suppliers conserved 7.6 billion gallons of freshwater and 100% of our final assembly sites adopted safer, greener cleaners in their manufacturing processes," according to the company’s 2019 Supplier Responsibility Progress Report.

For UL’s Sheehy, “Apple really applied the UL 2799 Zero Waste to Landfill program across their supply chain — and they're using that Standard and that program to engage their suppliers in understanding and taking action on waste.”

Although obtaining Zero Waste certification can be difficult, the results are well worth it. Certification becomes a point of pride that certified organizations can leverage as they plot their sustainability journey.

“There's a level of rigor associated with third-party, science-based auditing that some companies will not choose to undergo — because it's scary and they don't necessarily want to find out certain things,” Sheehy said. “I think that approach, that rigor, that willingness to basically expose their operations to auditors who are going to scrutinize them and give them feedback — that, I think, is incredible.”

This article was originally published in On the Mark, a UL magazine.  Lou Carlozo is the author. Read more stories about the growing connection between sustainability and business by downloading the magazine.

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