Creative capitalism: There's sense in being green

Look thoughtfully and you will find business sense in being green, writes Rebekah White.

There are four main reasons you might be keen on making your company more sustainability flavoured.

Because you want to be hip. Because you want people to like you. Because you’re genuinely upset by the thought of the Great Pacific Garbage Patch, garment factories in Bangladesh or homeless polar bears. Because Greenpeace keep putting out nasty press releases about you. Let’s be honest: three of these reasons apply to me.)

But there’s another terribly important, often overlooked reason to green things up: Because it helps you make more money.

Take American superstore Wal-Mart, for example – it’s basically The Warehouse on steroids. It saved US$231 million in 2011 thanks to a couple of complex sustainability strategies that are pretty much rocket science, and that you definitely shouldn’t try at home: recycling more and wasting less. How? Diverting more than 80 percent of its rubbish away from landfill in 2011 helped. And Wal-Mart claims it’ll gain another US$150 million in the 2013 financial year from its renewable energy projects: a combination of solar, wind and fuel cell installations.

A 2011 Harvard Business School study of 90 companies over 18 years found those ranked as ‘high sustainability’ dramatically outperformed ‘low sustainability’ businesses “in terms of both stock market and accounting measures”. The report involves a good solid 40 minutes of nerding out, but here’s the gist. Companies who embed green ideas in their overall strategy, plus make their directors responsible for sustainability outcomes, do a whole lot better over the long term. Tie the Christmas bonus to being greener, and sustainable innovation suddenly becomes a priority.

Interestingly, high sustainability companies that sold direct to consumers performed better than those who did businesses with governments or other companies, suggesting individual people have much higher social and environmental standards. High sustainability companies were also more transparent about their supply lines and better at measuring inputs and outputs.
But the study’s authors warn that businesses “hoping to gain a competitive advantage in the short term are unlikely to succeed by embedding sustainability in the organisation’s strategy”. In other words, brief flings with greenness don’t work. You’ve gotta be in it for the long haul.

Another company that’s successfully turned bleeding hearts into profits is US-based TOMS, which has just launched in New Zealand. Buy a pair of TOMS shoes and another is donated to a child in need; buy a pair of sunglasses and someone receives their sight with a cataract operation. Tapping into the market of compassionate consumers works; TOMS’ estimated revenue in 2011 was just over US$20 million.

There’s also outdoor clothing company Patagonia, which famously took out a full-page ad in the New York Times in 2011 with the headline ‘Don’t buy this jacket’ with an explanation of the perils of overconsumption. Patagonia’s sales increased by 30 percent by the end of the financial year.

In 2004, fledgling shoe company KEEN donated its entire first-year marketing budget – US$1 million – to relief efforts in the wake of the Boxing Day tsunami. It went on to become the world’s fastest-growing outdoor brand, continuing to sponsor aid programs, volunteer work and other sickeningly civic-minded activities. Its 2011 revenue was estimated at US$240 million.

After all, the world’s got problems, and governments and philanthropists can’t solve them all – that’s what Bill Gates told the World Economic Forum in 2008. The solution? Businesses, he said, that engage in “creative capitalism”. Go figure out ways to meet the world’s needs that don’t involve busting up virgin forests or people’s lives in some distant country with lax labour laws. They’ll be applauding you all the way to the bank.