A few decades ago, a green corporation would symbolise one that was rich in dollar terms. In today’s society, however, a green corporation is one that is conscious of the environment, adheres to a triple bottom line, and is equipped to adapt to ensure long-term sustainable growth.
Global specialists in energy management, Schneider Electric, believes that the environment will be the next disruptive force in business and companies that do not address environmental issues today, can expect to become obsolete.
“Once a concern mainly for hippies and extremists, the environment has become a pressing issue for everyone living in our world today and it will impact business. Nevertheless, a small company, an enterprise or an industry can make changes to mitigate the negative impacts and explore business opportunities in this new and exciting sustainable world,” says country president of Schneider Electric South Africa, Patrick Gaonach.
His views are supported in the publication Green to Gold: How smart companies use environmental strategy to innovate, create value and build competitive advantage, where the authors write: “In today’s world, no company, big or small, operating locally or globally, in manufacturing or services can afford to ignore environmental issues”.
One of the fastest growing and most immediate business threats related to the environment comes from investors and stakeholders, who, in growing numbers, are watching the indicators and asking tough questions about environmental responsibility. Business leaders who ignore these stakeholders can be subject to a public relations scandal, a destroyed market, ended careers and millions to billions of dollars lost.
In 2007, Greenpeace issued a guide to electronics that ranked major corporations on their reduction of toxic chemicals and electronic waste, with Apple ranked last. This was ill-timed with the release of the iPhone and stockholders took notice. America’s most innovative brand could not afford an environmental attack and Steve Jobs, the company’s CEO, quickly issued a letter that promised a “greener Apple”.
Many companies with well known brands and multinational operations are finding that customers and shareholders are becoming vocal about business practices. “Your customers and your bottom line are driving climate initiatives and business innovation. That is exactly what makes it so disruptive. So, why do we have so much trouble recognising them in time?” asks Gaonach.
He attributes three reasons to companies failing amidst a disruptive change Firstly, failure to see – companies simply fail to see change; secondly, failure to act – recognising the disruptive change but not having a plan to circumvent it; and lastly, failure to perform – recognising and planning for the event but not being able to implement these plans.
At the “Carbon trading and bottom line” Green CFO conference (2008), the top five environmental issues and their business consequences where identified as:
* Climate change: This leads to changes in the agriculture industry, insurance industry managing natural disasters, government funding and an increase in regulation and legislation.
* Energy: The consequences are an increased cost to manage operations and facilities, regulation and legislation, market perception and shareholder equity.
* Water: Companies seen to use too much water or damage quality will face political attack, public outcry, intense regulation and potential legal action.
* Biodiversity and land use: The location of factories or stores will impact a business, as well as the pharmaceutical industry research into plants and animals.
* Chemicals, toxics and heavy metals: The regulation, cost of handling chemicals and disposal, tracking, and legal liability will all be business consequences.
Stephen Schmidheiny, a leading business and non-profit activist in sustainable development, has written: “When viewed within the context of sustainable development, environmental concerns become not just a cost of doing business, but a potent source of competitive advantage.
“Enterprises that embrace the concept can effectively realise the advantages; more efficient processes, improvements in productivity, lower costs of compliance and new strategic market opportunities. Such businesses may expect to reap advantages over the competitors who lack vision.”
History is unfortunately littered with stories of companies that failed to see a coming tide or failed to react fast enough or just plain failed. Gaonach concludes: “To embrace environmental sustainability development, it is not important that CEOs become tree-hugging activists, not is it vital to adopt a ‘principles before profits’ mentality. But it is important to accept the serious impact of the environment on your business and that it is fast becoming a driving force behind public, governmental and economic activities around the world.”