Find Value by Integrating Sustainability

Written By: Shauna Trainor, Covenant Group

Sustainability and green initiatives are common in business plans at larger corporations, but many entrepreneurs may believe such projects won’t pay off or provide a significant benefit at their smaller companies. However, this line of thinking needs to change, as such measures can prove to be a business builder for organizations of all sizes. Implementing sustainability measures can result in both short- and long-term savings for enterprises of all sizes, as well as an enhanced reputation with consumers.

This doesn’t mean an entrepreneur can haphazardly decide on a few green projects and assume they’ll lead the company to success. In order to integrate environmental values into an enterprise, business owners need to do some planning, have a strong understanding of how their growth plan could benefit from various options, as well as how they’ll finance any projects.

Major players recognize sustainability plans are often beneficial

More businesses are interested in making the environment a priority in their everyday operations, thanks to the potential benefits. While the possibility for cost savings is well known, many entrepreneurs don’t realize the other advantages such programs can have in regard to consumer reaction, risk management and the investor approval. An Ernst & Young study from late 2012 revealed 61% of companies have increased their efforts to be green after feeling pressure from consumers. Many were also concerned about the availability of resources in the future and cited potential material shortages as a reason for starting a sustainability program.

Receiving capital was another factor that drove green business plans. Investors may be increasingly concerned with the environment and future potential of a company that doesn’t make an attempt to engage in sustainable practices. Because lenders have been increasingly skittish about funding companies since the economic downturn, many entrepreneurs may find they need to adjust their business plans and address environmental concerns to sway these investors. In fact, half of the organizations polled by Ernst & Young reported an increase in the number of investor inquiries in regard to sustainability plans.

Weigh costs and benefits carefully

Like any business project, the advantages of sustainability measures need to be seriously considered before being put into action. A plan that is enacted without much thought may not lead to the desired long-term performance.

In order to determine how effective any environmental option will be and if it will lead to long-term cost savings, a company owner must know the details of the projects they are considering. Some of these initiatives will require more planning and thorough research; while purchasing more recycled products may be an easy decision to make, investing in a geothermal HVAC system will require additional considerations. There are a few basic concerns to address:

• What are the upfront costs associated with green initiatives? Some plans, especially larger and more complex eco-friendly measures can initially be extremely costly. However, some of these expenses can be overlooked. Some business owners, for instance, may consider the cost of solar panels, but fail to realize the advertised price doesn’t include installation. Know exactly what you’ll receive and how much it will set your business back before making any decisions.
• How much are long-term cost savings? While a project may initially be expensive, it could pay off in the long run. Research the average savings enjoyed by other businesses that have implemented the sustainability options you’re considering, and determine how long it will take to recoup the upfront price. Don’t forget to factor in unexpected costs like maintenance.
• Are there other ways to cut costs without making this investment? Some business owners want to increase their sustainability focus, but others may feel as though they’re being pressured to launch such plans. Leaders concerned about the initial expense or viability associated with going green should consider all the options before making an investment. Start with small steps. Rather than installing geothermal HVAC systems, a firm may see how it can cut costs by using less heat in the winter. Instead of purchasing electric vehicles, it may replace older fleet vehicles with newer, fuel efficient models. Before investing in solar electricity, an entrepreneur may want to test the amount saved by turning off all lights and electronics in the building whenever possible. Simple solutions like this can lead to cost savings and potentially serve to be more beneficial than major green investments.
• How investors and consumers will react. A business exists to make money, and if it’s not pleasing consumers, it isn’t doing its job. Entrepreneurs should consider how investing in sustainability will help their firm when it comes to bringing in new clients and investments. For some companies, going green may help attract more sustainably minded consumers or even contribute to its investment appeal, but this won’t be the case for all. Think of how marketing a firm as environmentally conscious will help it grow or connect with consumers.