Stages of ROI on Eco-efficiency

Eco-efficiency pays dividends year after year. Various practitioners have different titles and phases for implementing sustainability in organizations (and buildings for that matter). I have taken those stages and put them in financial terms. The good news is the more mature you get in the phases, the more money you make over time.

1. Pre-compliance was what we had at the turn of the 20th century all the way until as late as the 1960's. Reckless abandon with regard to worker rights, the environment and the community.

2. Compliance is where about 90% of buildings and companies are right now. They are doing what they need to do to meet the minimal requirements to stay out of the courts.

3. Easy money is the current sweet spot for most companies and buildings. If you haven't initiated any green initiatives or if you've implemented only a few, this is where to start. Usually by upgrades in buildings and the waste stream you can see huge savings. There are two great benefits to this phase at this point in history. First, there are plenty of tax breaks that make this available without any money up front and immediate additional cash flow. Second, these items require no cultural or work practice changes by employees or building occupants. So they can be done easily for immediate cash flow.

4. Long Term Gain happens when you combine what you have already done in stage 3 to changing procedures, supply issues, stakeholder relationships and more. At this phase your profit margins will soar as you can keep price where it is (or even raise price) but your customers stay with you and you even gain more customers because your reliability is so high and people like dealing with a firm they can trust (see the book "Firms of Endearment" for plenty of evidence of this). You will be able to recruit and keep the best employees and they will be more productive than they would have been if they worked for your competitors. You are now in the virtuous cycle (the opposite of a vicious cycle). At this phase employee turnover is very low, customer loyalty is high, margins are high and sales can withstand economic downturns. If you don't believe it just ask the owners of Stonyfield Yogurt, The Body Shop and many more...

5. Highest Company Value is where the dividends really pay. Because your firm has such high margins and is at low risk, the value of the company itself is very high. When you are ready to take on new investors or sell the company or building, you will get a premium price for it.

The bottom line: The more eco-efficient you are the more money you make at every phase of implementation.

Employees forego pay for carbon neutrality

Think employees only care about money and time-off. Think again. New Belgium Brewery in Fort Collins Colorado is most famous for its wonderful Fat Tire Amber beer. But it is also one of the leading companies in the world for creating a sustainable business. But the story of how it went to clean renewable energy deserves a page in HR manuals as well.

The owners of the business are committed to the environment and wanted to run on completely renewable clean energy. This is done through wind power and the on-site waste-water treatment operation.

In 1998 the 32% employee owned company brought the idea of going to wind power to a company vote. At the time it meant a 30% higher cost of electricity, most likely meaning the loss of significant end-of year bonuses for the employees. Despite knowing that their bonuses were going to suffer, the vote was unanimous to go to the clean energy solution. And not surprisingly, because of these high moral decisions, turnover is low and productivity is high because people feel like they are contributing to something bigger in the world.

To see how New Belgium produces some of its own power through it's waste-water treatment, check out this video.

New Belgium Brewing from whatis waste on Vimeo.

Sustainability delivers higher productivity

It has been proven over and over again that businesses that have a higher purpose than just profit can recruit and keep the best employees. Furthermore, those good employees are more productive than their counterparts in companies that are only focused on profit. But why is this so? How do you nurture those great employees to deliver their best? The answer is NOT money.

To learn what motivates good people, and why, watch this great lesson from RSA.

Sustainability Vision

If you think sustainability is important in our human systems, then you have some vision of what your company should be doing about it. Whether you are a line worker, middle manager or senior executive, your vision has some relationship to current reality. Here is a graphic I absconded from the excellent book "The Sustainability Champions Guidebook" by Bob Willard. It will help you see not only where your company is now, but what hurdles are in the way and what helpers might be available to you.

More Evidence: Conscious Capitalism Pays

OK. So nobody is colder and more bottom line oriented than Wall Street. And Goldman Sachs is getting the brunt of it now. So that's why if they say green is most profitable, it probably is. After all, The Street values profit over all else. According to a Goldman finding, "from 2005-2007, organizations that are leaders in leveraging environmental, social and corporate governance considerations for sustained competitive advantage outperformed  global stock funds by 25%."

Why would anyone start a business today and not make it green? It is clearly where the money is. And the good karma!

Speaking of Banks

Just for fun, lets say you inherited 4 million dollars from someone you didn't know. You could live off the interest right? After taxes, say 200K per year. So long as you don't screw with the principal, you have created a scenario of sustainable development. As a human you are still going to develop. Some of that interest paid to you will be invested for development (like buying a house or personal development training), but you haven't spent the principal so even if you lose the entire investment your still in a sustainable situation.

Isn't humanity in the same situation? The resources of the earth are our principal. We can use some of them and they grow back. But if we take more than the earth can regenerate, as a global society we are not in a sustainable life. Eventually the principal will run out and we will quickly starve to death.

Normally I focus on issues for entreprenuers and business owners... I know none of us alone can create a sustainable society. But the sum of our choices will create the tipping point that brings it about.

Vote with your dollars and your choices.

Taking Green Business to the Bank

Want to make your company more profitable with each transaction AND worth more during your exit? Then make it truly green and the money will follow. As of January 2008, a 0.15 oz tube of Burt's Bee's lip balm cost $3.00. The same size tube of Chapstick cost 1.69. Sure, Burt's production costs were about 25% higher, but the cost at the cash register more than made up the difference.

At the time that Burt's had revenues of $164 million, the company sold to Clorox for $913 million. At a time when many businesses will sell for 2-3 times net profit, Burt's sold for nearly six times revenue.

The Body Shop was sold to L'Oreal for nearly $1.1 Billion in 2006. Far ahead of the market cap of similar companies.

The evidence is clear. Profits are higher while doing business and the exit strategy pays better to the founders if your company is truly green and responsible. And you are doing better for the world at the same time.

Starting a business? Make it truly green and socially responsible. You'll sleep better at night and make more money in the process.

The Real Debacle of the Oil Spill

There are about a million reasons why the oil spill is such a problem. But the issue I see comes in the form of missed opportunity. The senate was ready to take up a rare bipartisan energy bill soon co-sponsored by a Democrat, an Independent and a Republican. Sure, the bill has its problems but it genuinely is a shot at real reform that will seriously kick-in growth of R & D and implementation of renewable's.

But instead we got bogged down in a debate about what to take up first, energy or immigration.

The lost opportunity comes in the fact that there is no better time for a debate about energy policy (from my perspective anyhow) than right on the heels of a great "un-natural" disaster that comes from our old ways of generating power.

Nobody predicted the spill to happen now... but it is not too late to put energy policy on the agenda. Just when our televisions are blaring why the old way is so bad is right in our face.

Hard Proof: Social Responsibility Adds to Bottom Line

Are you still stuck in the old paradigm that acting ethically might hurt your bottom line? Think again. "Between 1995 and 2007, socially responsible investmanet assets expanded by 324 percent, sharply outpacing growth in the broader universe of investments, which increase by less than 260 percent over the same period. Social Investing is thriving as never before"*

"Even during the bust of the great recession, investing in socially responsible funds grew at a higher rate than ever"**

If you are a business owner or executive decision maker at a larger organization, keep this in mind. Doing the right thing not only allows you to sleep better at night, it adds more to the bottom line!

Sources

* Report on Socially Responsible Investing Trends in the United States, Published by Social Investment Forum, March 2008

** Time, September 21, 2009; "The Responsibility Revolution"

Are we a giant tail trying to wag a bigger dog?

The cloud of ash that has crippled air travel over much of Europe has intrigued me for several days. It is a great example of a misnomer that all of us in the western world have been raised to believe. That our economic system is at the top and that the earth serves it. In reality, our economic system is the giant tail, and the dog is the earth and its atmosphere. Eventually, the dog always wins at the expense of the tail. Sometimes it just takes a long time for it to play out.

Over the last several hundred years we have looked at our economic systems as paramount, with the earths systems (and resources) as a subset of the economy. We take from the earth via extraction and pollution, and feed our economic systems. In essence we have used the earth and people to serve the economic system.

In reality we have it exactly backwards. The earth and atmosphere are the primary resource, and the economy serves under it. Without a healthy earth, there is no economy.

Any farmer that needs to keep his land producing for more than a few years knows that his or her farm can only yield so much. Sure, technical advancements can help, but over time, if the farmer overuses the fields, the farmers personal economy goes under. Our earth is one giant farm.

The cloud of ash is the great reminder that mother nature is bigger than us. As the planes have been grounded people are now screaming that the economy is getting hurt. We are the tail and she is the dog.

And I think she is getting tired of being pushed around.

The ash is not man made, but it is a reminder that she is boss and we can only work in a mutually beneficial partnership with her.

Recognition and adjustment to this paradigm would go a long way in creating sustainable economics. So that's my rant for today.