In our previous article “What is the matter with the Business Case for Sustainability?” we informed you about different approaches and drivers for building your business case for sustainability. This article will help you to put these theories into practice by explaining the structure we created from our research and highlighting the benefits of the business case for sustainability. In the second part of the article, we have collected examples from various industries that emphasize the positive effects by not only showing benefits but also risks if you do not manage sustainability well.
Both of our articles are based on our White Paper about the Business Case for Sustainability, which is available for download now!
The structure leading the way to your Business Case for Sustainability
In the figure above, you find the structure that we believe works well to capture most of companies’ drivers for creating a sustainability business case. We also call it the “Wheel of Business Success for Sustainability”.
All six categories are linked to financial benefits for your company. To analyze these benefits, we have broken them down into three groups:
• Compliance & risk minimization –> avoid costs
• Cost savings & integrated operations –> save costs
• Brand & reputation enhancement and innovation & market development –> generate additional revenue
Cost avoidance may be slightly difficult to quantify. However, let us say you implement a strong RSL (Restricted Substances List) program or you strike up a partnership related to chemicals management. If you have ever experienced a product recall, you will know that it can be quite costly, not to mention the loss of trust among your customers. If you are communicating about your sustainability projects and especially about sustainability in relation to your products, then be careful that you make sound and defendable environmental claims. Bed Bath & Beyond, Nordstrom and JC Penney were all fined 1.3 million US$ for making unsubstantiated claims about bamboo (Federal Trade Commission 2015).
Keeping that in mind, saving costs is a great way to make a profit out of your sustainability efforts. Some easy wins are, for example, energy savings. Usually you can save 5-20 percent of energy without huge investments or efforts (Ekberg 2016, p.54). If your company has energy bills of a few million Euro annually, you might even save one million Euro, every year! Another saving falling into integrated operations is related to consolidation. This may be a business trend and may as a topic not be owned by a single department, but speaking to the designers, operations managers and purchasing managers, for example, you will see the potential your company has to consolidate. Consolidating suppliers can also be a win for your sustainable supply chain management program, as you will have an easier job when building a strong sustainability foundation in your supply chain.
The most exciting and future-looking area is the one to generate additional revenue. Creating a strong reputation and building a brand can be very rewarding financially. After reporting environmentally and socially positive events, stocks show an average alpha of 0.84 percent according to researchers at the University of Oxford (Flammer 2013 in Clark et al. 2014, p.38). Conversely, after negative events stocks underperform by -0.65 percent. Another way to generate additional revenue is to increase your market share with existing products or with more sustainable products. Patagonia is one example of a company that has succeeded in generating additional revenue in this way. They claim a revenue of US$500 million generated from environmentally friendly products (Ofek 2012 in Henderson 2015, p.8).
Now that we have explained the financial benefits, it is time to present the five steps to develop your business case for sustainability.
For a detailed explanation of those steps, please feel free to download our White Paper about the Business Case for Sustainability, which is now published and available for our clients here.
Business Case for Sustainability examples from various industries
In the following we present some other and more specific business case examples of different industries, based on our structure that we presented above.
And here are some more textile related examples:
If you are interested in many more examples, please download our White Paper here and watch the recording of our webinar “How to build the Business Case for Sustainability” which we held on 15th March 2018.
We hope that you enjoyed reading our series about the Business Case for Sustainability. If you have further questions or need help with the sustainability business case for your company, please contact us. We offer either a full support or a custom-tailored workshop! Just ask us for more information.
Adidas (2015): “How we create responsibility 2015”. Adidas Group Sustainability Progress Report. Available from: https://www.adidas-group.com/media/filer_public/9c/f3/9cf3db44-b703-4cd0-98c5-28413f272aac/2015_sustainability_progress_report.pdf
BITC (2011): “The Business Case for being a Responsible Business”. Available from: https://www.bitc.org.uk/sites/default/files/kcfinder/files/Business_case_final1.pdf.
Clark, G., Feiner, A. and Viehs, M. (2014): “From the Stockholder to the Stakeholder – How Sustainability can drive Financial Performance”. University of Oxford. Available from: https://arabesque.com/research/From_the_stockholder_to_the_stakeholder_ web.pdf.
Ekberg, K. (2016): “Making the corporate case for sustainability”. Ecotextile News, December 2016 / January 2017, pp. 54-55.
European Commission (2016): Facts and Figures. Available from: http://ec.europa.eu/environment/eussd/smgp/facts_and_figures_en.htm.
Federal Trade Commission (2015): “Nordstrom, Bed Bath & Beyond, Backcountry.com, and J.C. Penney to Pay Penalties Totaling $1.3 Million for Falsely Labeling Rayon Textiles as Made of “Bamboo””. Available from: https://www.ftc.gov/news-events/press-releases/2015/12/nordstrom-bed-bath-beyond-backcountrycom-jc-penney-pay-penalties.
H&M (2015): “H&M Conscious Actions: Sustainability Report 2015”. Available from: http://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/2015%20Sustainability%20report/HM_SustainabilityReport_2015_final_FullReport.pdf.
Henderson, R. (2015): “Making the Business Case for Environmental Sustainability”. Working paper 15-068. Harvard Business School.
M & S (2015): “Plan A Report 2015”. Available from: http://corporate.marksandspencer.com/documents/reports-results-and-publications/plan-a-reports/plan-a-report-2015.pdf.