The business case for gong "green" Flashcards
What does business case mean?
A justification for a proposed project or undertaking on the basis of its expected commercial benefit.
What does going “green” mean?
To adopt a corporate policy that prioritises:
– The identification of environmental aspects linked with business operations
– The implementation of a business strategy that:
A. mitigates business impacts on the environment and,
B. sustains natural resources for current and future generations
Adoption of environmentally friendly practices and justification of these practices on the basis of their commercial benefits – basically does it pay to go green.
Why has the ‘Sustainability Imperative’ emerged? (lubin and Etsy, 2010)
Due to escalating public and governmental concern
over climate change, industrial pollution, food safety and natural resource depletion.
Typical responses? (Dunphy, Griffiths and Benn, 2007)
- Proactively resistant - Stealthy saboteurs actively resist sustainability, typically working to undermine related activities e.g. Exxon Mobil & Climate change.
- Reactively resistant - Fire fighters do not think about issues until forced to, at which point they will use minimal resources to return to business as usual e.g. Nike and Child labour.
- Reactively embracing - Risk catchers address issues as brought to their attention but often treat as opportunity to improve e.g. Gap and child labour.
- Proactively embracing - Strategic embedders make social and environmental issues central to their mission, operations and offerings e.g. M&S Plan A and culture.
Why go green?
• Increased sales
• Legal and tax advantages
• Reduced waste - improves EOS and so can expand and become more profitable
• Improved workplace
• Customer loyalty and public response e.g. H&M
• Increased brand value: Awards and recognition (world’s greenest companies as listed in newsweek.com and fortune.com)
• Risk management - You can deal better with setbacks and behave more effectively with both environmentally and social risks.
• But most of all, because it’s the right thing to do!
- improved public image
- decreased environmental impact
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Three motivations that induce corporate ecological responsiveness are: (Bansal and Roth, 2000)
Competitive- position in market, directly influence its competitiveness against others.
Legitimacy – implicit social contract between stakeholders and companies, company’s need to abide by requirements of stakeholders (3rd parties directly and indirectly affected by the actions) and so won’t be legitimate if they don’t abide by requirements. If they do, reputation will improve and position in market will improve.
Environmental responsibility – moral imperative to adopt, reasoning to address green issues.
It was found that the three motivations that induce corporate ecological responsiveness are:
- competitiveness (e.g. improve LT profit)
- legitimation (e.g. hiring environmental manager to oversee a firm’s ecological impacts),
- ecological responsibility (the concern that a firm has for its social obligations and values).
These motivations were influenced by three contextual conditions: field cohesion, issue salience, and individual concern.
Ways to embed motives into corporate strategy? (Kauffeld et al, 2009)
- Elevate sustainability to a core business strategy.
- Embed green principles in innovation efforts.
- View the entire product life cycle through a green lens.
- Consider green principles in making major decisions.
- Integrate sustainability into corporate and brand marketing and messaging.
Case for global economy to go green?
- Creation of jobs and new industries
- Catalyst for innovation
- New market opportunity and wealth creation.
- Investment in renewable energy in 2013: USD 214 billion worldwide.
- Creation of nearly 80,000 jobs in the clean energy 2013 in USA alone (HBR, 2013).
- Doesn’t just rely on morale grounds, money grounds and other issues affect it.
How to elevate sustainability to a core business strategy?
- Green awareness must be a cultural trait throughout the organisation, always on the agenda of the senior leadership team.
- To the highest degree possible, the company’s products or services should be marketed as environmentally friendly.
- Often this means making public statements that make the company accountable.
e. g. Apple announced its intentions in becoming the number 1 environmentally friendly tech company.
- “Apple the greenest tech company in the world: Greenpeace” 2017
Embedding green principles in innovation efforts example…
Nike Inc.
- developed a series of product engineering concepts it called “considered design” principles.
- Nike focus on innovation, which focusses on trial and error until reached launch of product.
- “Considered design” principles aim to reduce environmental impact by eliminating waste, using environmentally sustainable materials, and eliminating toxins in manufacturing processes and the shoes themselves.
- Nike plans to apply considered design standards to all its products by 2020 and estimates that doing so will reduce waste in its supply chain by 17% and increase its use of sustainable materials by 20%.
Viewing the entire product life cycle through a green lens example….
Dell
- launched a program called Design for the Environment that seeks to minimise the company’s deleterious impacts on the environment by controlling raw material acquisition, manufacturing processes, and distribution programs, while linking green policies with consumer use and disposal.
- V difficult to fully control your supply chain as a huge company.
Considering green principles in making major decisions issue and example…
Green considerations, such as carbon emissions, the use of renewable energy sources and recycled materials, energy efficiency, and material yields, have not been given proper weight against risk, cost, growth, service, and quality.
e. g. PepsiCo Inc.
- adopted sustainability as a criterion in determining capital expenditures and tracking expenses. All funding requests of more than $5 million must include a review of environmental concerns and green opportunities.
- Only over 5 million though.
Integrating sustainability into corporate and brand marketing and messaging example…
Walmart
- uses a sustainability index to evaluate all consumer products for their environmental impact.
- This represents a good example of how green initiatives can be structured and communicated in ways that bolster corporate credibility.
- Walmart invest significantly into effort that will make stakeholders perceive them as more credible.
Why has investment in renewable energy dropped?
Technology is out there, used to be expensive, in some sectors it still is, but in general has got cheaper. This drop is due to drop in costs associated.
e.g. In 2016, the advance of renewable energy slowed in one respect, and speeded up in another. Investment in renewables excluding large hydro fell by 23% to $241.6 billion, but the amount of new capacity installed increased from 127.5GW in 2015 to a record 138.5GW in 2016.
A major reason why installations increased even though dollars invested fell was a sharp reduction in capital costs.
Some of worlds most ethical companies:
- Accenture
- 3M
- Loreal
- Xerox
- M&S
- Dell
- Pepsico
Clear evidence of private sector and global economy accepting to go green:
- Our information is coming from economically developed countries – Western based facilities but maybe not less developed. May not be able to hit targets
- The developing world lacks infrastructure in regards to addressing these issues.
- Now it’s the turn of the developing world to do so – other countries pass the knowledge on.
Ikea example (henriksen et al, 2012)
- IKEA’s design process starts with the product price, based on which the product design, manufacturing processes and logistics are conceived. Cost minimisation through maximum resource utilisation and business process optimisation are key topics in the company’s design process
- Investing into environmental issues doesn’t pay back directly, the costs in the short run drop slowly then more in the long run.
- Developed its own initiative (IWAY standard) which has enabled the company to integrate social and environmental standards throughout the supply chain (in house code).
- Developed partnerships with UNICEF and Save the Children to get input in developing the IWAY guidelines on child labour and other social aspects (stakeholder approach).
- Developed partnerships with stakeholders with social focus to make up for wrong doings in past e.g. child labour.
- stopped using Euro pallets and now uses cardboard or recyclable plastic pallets for product transportation and do not involve return transportation. This leads to more efficient shipping snd also, the cardboard pallets can be reused.
- Employees will pay you back in terms of productivity, wanting to come to work, doing well for the company.
Key takeaways:
- Costs and access to cash are more directly related, whereas other topics, such as employee or customer loyalty, are less certain but may have positive impact on sales/ price per unit or reputation.
- Different motives to go green and different corporate approaches.
- Clear evidence of benefits of environmental management/ sustainability
