Sustainable Business:
Sustainability is Good Business!

Hari Srinivas
Concept Note Series E-119. June 2020.

Sustainability is Good Business!
The concept of 'Triple bottom line' balances economic viability, environmental sustainability, social equity.

Businesses are adopting ethical, socially responsible and sustainable practices in the hope that it will ultimately improve their bottom line - meaning more profit for them. Sustainability in business operations is an idea that is rapidly gaining currency' when businesses choose to reinvest in communities and protect the environment, they also energize the economy.

The now familiar benefits of a business supporting sustainability include reduced costs, higher productivity, avoiding or reducing regulatory burdens, lowering liabilities, attracting and retaining the best workers, and includes improving the businesses' public image as a "green" company.

For example, environmentally sustainable building design embraces an abundance of natural sunlight, fresh outside air, and efficient energy use. A healthier, more appealing office environment equates to more productive workers who call in sick less often, with lower health-care costs, less absenteeism, higher productivity and savings on energy.

The primary driver for a business to be environmentally sound is cost savings effected through both material efficiency and energy efficiency. These two efficiences also provide opportunities for businesses to increase their market share as a "green" company, besides opening up to new eco-markets. Broader issues of environmental law compliance, reduced environmental liability, using eco-labels/certifications (eg. ISO 14001) etc. also help in enabling cost savings for the company.

Figure 1:
For a business, the two strategies of material efficiency and energy efficiency primarily helps it achieve cost savings, but also increased market shares and reduced environmental risks.

On the longer term, business action helps in reducing risks from a changing environment (including and particularly climate change) and risks associated with pollution and emissions. Non-compliance with environmental laws and regulations and other such liabilities could also increase the risks faced by a company. Avoiding these risks are also a key driver for a company to go green.

Figure 2:
With pressure from industry associations, national/local governments, and customer groups, businesses adopting environmentally friendly measures benefit from cost savings, reduced environmental risks, and a better "Triple Bottom Line" that balances their economic, social and environmental contributions.

Sustainable businesses in principle keep an eye on the "triple bottom line" [1] - not just the return of value to shareholders and owners but also their impact on society and the environment. They rate themselves on social, ecological and economic scales.

A strategy that pays The main business drivers of sustainability for manufacturing firms make a good strategic concept for improving business performance:
  • Eco-efficiency: Reducing inputs of limited natural raw materials or fuel consumption, reducing waste production and utilizing by-products from other industries, allow firms to cut costs;
  • Improving product added value: With a sustainability approach, firms expect to be able to expand their product lines to sell more complex and technological products, with more value added (licenses, exclusive technology, etc). Links with customers and users will become closer and better established in the long term and loyalty will be improved;
  • Creating new market opportunities: A sustainability policy should facilitate firms’ expansion into new countries or regions through more sensitive and proactive methods of integration and an enhanced environmental approach. New products will allow firms to respond better to the emerging expectations of their customers;
  • Strengthening socially responsible management: Such a policy will strengthen corporate culture, help firms to maintain the loyalty of their employees and attract high-potential new employees;
  • Improving reputation: A proactive strategy will help firms keep their “license to operate”, and improve their corporate image in order to maintain brand value, as well as their relationships with local authorities and communities. This helps to reduce the prospect of inappropriate new taxes and regulations and avoid crises.
- Chris Boyd

Taken together, a matrix of business actions emerge that enable a company to be environmentally friendly, using material and energy efficiencies to achieve cost savings, increase market share, and reduce risks.
Cost Savings

  • Use of eco-design principles to use less materials
  • Modification of manufacturing processes
  • Use of recycled inputs, instead of virgin materials.
  • Use "design for disassembly" principles to facilitate recycling and reuse
  • Produce less waste in manufacturing, packaging, use and disposal (life-cycle approach)
Increased market share

  • Use of eco-labels to produce environmentally friendly products
  • Codes and standards certification (eg. ISO 14001)
  • Promote green purchasing with customers and along supply chains
  • Lower product prices due to cost savings
Reduced risks

  • Less air, water and land pollution
  • Proper processing of toxic and hazardous wastes
  • No need to pay fines/fees for pollution
  • Compliance with environmental laws and regulation (current and possibly future)
Cost savings

  • Use of renewable energy, particularly solar and wind
  • Use of low-energy electric/electronic devices (eg. LED bulbs)
  • Using waste materials as energy pellets (eg. Waste sludge compressed and dried as briquettes for use in furnaces)
  • Use of recycled materials requiring less energy for preparation.
  • Less energy use for manufacturing and for use of product
Increased market share

  • Create markets for low-energy products
  • Low energy certification (Eg. Energy Star)
  • Less dependence on uncertain non-renewable fuels markets
Reduced risks

  • Reduced CO2 emissions (and contribute to carbon markets)
  • Reduced risks due to political and other global events affecting energy supply

This does not just mean being 'green': Reducing waste and pollutants, conserving resources, and using alternative energy sources are important, but so are progressive management practices, attention to employee quality-of-life issues, and volunteerism.

Ultimately, it is "Be green to make green" - Being green is not just about the environment, but it is also about saving money and creating new business opportunities.

Contribution to the environment by Tokaido Shinkansen (Japan's 'Bullet' Trains).

When you buy a bullet train ticket, it comes in a small envelope. Written on the envelope is a short para on the fact that CO2 emissions from traveling by Shinkansen is about 1/8th that of airplanes, touting itself as an 'environmentally friendly transportation system'. It provides more details: If it takes 100 units of CO2 emissions to move one person for a distance of one kilometer using local trains, travel by the Bullet train emits only 81 units in comparison, while air travel emits 653 units.

This is a classic case where more and more business and industry entities are using sustainability and environmental issues to sell their products or services.

[1] The triple bottom line (TBL) is a policy where businesses focus on social and environmental concerns just as importantly as they do on profit making. So the TBL concept promotes three bottom lines - profit, people, and the planet, instead of just the economics (or profit).

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