Sustainable Business – Where is the ROI?
Customers, employees and (most) executives agree that companies should be concerned about their environmental impacts and that sustainability is sexy – whether they like it or not.
Return on Investment (ROI) is the term that is thrown around to identify if and when a company’s expenditure will return a profit, either monetarily or non-monetarily. This is based on spending, speculation, expectation and forecasting.
So where is the green in going green?
To answer this question we are going to take a look at what Sustainable ROI (S-ROI) means, how to track it and some great examples of sustainable companies in action.
S-ROI is a measure of performance that provides a gauge on a company’s gain from investing in sustainability initiatives. These gains can be measured in a number of areas such as:
- Brand value
- Investor attraction
- Employee Fulfilment
A Nielsen report demonstrated that sustainable product sales in North America have grown by a staggering 20% since 2014, showing the support from consumers for companies who are environmentally minded.
This consumer demand provides a consistent growth opportunity for businesses, developers and manufacturers who are looking to ‘go green’.
This industry stimulation is seeing sustainable companies attract a lot of investor interest. Large advisors and investors are progressively looking for Environmental, Social & Governance (ESG) funds. According to Forbes, ESG is now “big business”. The ESGs are looked to as a guide for companies who are trying to be ethical or at least appear so.
Employees have embraced the swing to sustainability.
38% of Millennials have chosen a job because of company sustainability. 75% of Millennials said they would be willing to take a pay cut if it meant working for a company that is environmentally and socially, while less than a quarter of Gen X and 17% of Baby Boomer respondents said the same. In fact, nearly 70% of respondents from the same North American study said that if a company had a strong environmental impact and sustainability plan, it would affect their decision to stay with that organisation long term.
Sustainability equals Satisfaction!
Green environments are now proven to boost employee productivity, overall health and satisfaction levels.
Another separate study revealed that $40 USD spent per person, per annum to increase office air quality resulted in mean gains of $6,500 USD per annum in employee productivity!
7 areas for measuring your sustainability action
- Energy Usage
Your energy consumption is the largest component of your sustainability. Use less, save more! Simple right?!
This improves operations while saving costs, positively impacting that bottom line, improving your financial performance and directly reducing the amount of greenhouse emissions and other compounds, which your business is responsible for.
IoT sensors can be used to continuously measure and monitor your energy consumption in a dynamic, live and real time process, rather than an overall measurement at a single point in time (when the bills need to be paid).
This gives you quantifiable data, which you can use to make changes and show actual reductions. These diminutions can then be translated into environmental impact such as carbon offset and reduced air pollution. These IoT sensors provide an analytical framework, cataloguing data for monitoring and measurement from a suite of sensors.
The major contributor to climate change is the emission of CO2 and other compounds as a by-product of fossil fuel burning.
Efforts to improve energy efficiency and migrate towards renewable energy sources provide us with an effective way to reduce our harmful emissions.
This chart is based on EPA data and shows the average emissions per megawatt-hour of electricity reduction:
Remember, the source of your energy matters too. Utilities are moving from coal natural gas because methane (the primary component of natural gas) is 85% more efficient in producing electricity than coal. Greater efficiency is achieved while lowering GHG emissions.
In theory, a complete migration to hydrogen fuel would eliminate CO2 emissions while offering the highest level of fuel efficiency.
This next chart shows the energy of fuel sources as measured by kilojoules of power per gram of fuel.
3. Water Usage
Water is a primary component in everyday usage within virtually all companies and facilities. Similarly to energy consumption, water usage can be monitored in a dynamic way with the use of IoT sensors, giving your business a live view of consumption.
Data from the US Energy Information Administration (EIA) suggests that on average 75 litres of water is used per square foot each year in building spaces. This may seem insignificant, but when you apply this over a 100,000 square foot building, you are looking at over 7.5 million litres of water consumed per year.
It is important to make sure pipes and water distribution lines are monitored for leaks and faults. Leakage off course can have a huge impact on water consumption in businesses and facilities.
We should always be striving to reduce the waste and pollution we produce where feasible.
Ask the questions:
- Am I using recycled materials?
- Am I incorporating sustainable energy sources?
- Am I recycling a large portion of my own waste?
- Am I using less packaging, using recycled packaging or redesigning the way my packaging is made?
Reducing waste and pollution are crucial practices for any sustainable business and your customers and employees will see it firsthand.
5. Employee Health & Safety
Sustainability and corporate responsibility go hand in hand. Creating a safe and healthy working environment includes looking after the quality of air within your buildings, promoting safe work practices, inspecting practices to minimise risk, encouraging employee health programs, providing training to help employees safety on tasks and helping employees reduce or manage stress.
Employees are known to perform tasks better with greater air quality when working indoors, have greater productivity, less time off for health issues and sick days. This is better for the employee and employer.
6. Supply Chain
Your organisation is (probably) a part of a larger system or network, which allows finished products to be used and consumed. As a sustainable business it is your responsibility to take steps to improve the sustainability and minimise the environmental impact at all levels of your supply chain.
This may include auditing suppliers, changing where necessary, minimising inefficient freight and logistics and working closely with suppliers to help improve potential issues.
As a sustainable company you need to know where your materials are being sourced from, if your supplier is adhering to the legal methods of extraction, how so and how the waste products are being treated and disposed of.
Transparency in your supply chain allows you to communicate with your customers on the origins of your products or services, adding to your company’s image and legitimacy.
7. Management Behavior
These changes all start with management. Ask yourself the questions:
- Does your culture support sustainability?
- Have you implemented policies and procedures that support this?
- Are you ethically responsive to your people, the planet and your products?
- Do you compromise your beliefs and company position on sustainable business in any part of your business?
If the culture is supported from the top down your employees will ‘buy in’ internally and it will attract external parties. This is an integral part of developing and executing a coherent policy to ensure that your entire organisation is on the same page.
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