A Sustainable Business Model Pays Off

A Sustainable Business Model Pays OffPhotograph by William Moran/Gallery Stock

A commitment to being green, more and more companies are reporting, does improve the bottom line.

This flies in the face of conventional wisdom, which holds that uncaring corporate despoilers anxious to make a big buck at any cost have no interest in conservation, the environment, or any other “social good” promoted by pure-hearted politicians and enlightened do-gooders.

There’s a grain of truth to this. Corporate America often has stood athwart history, as William F. Buckley Jr. once put it, yelling “Stop!”

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There have been many disagreements, even monumental clashes, over the Clean Air ActClean Water Act, and the environmental Superfund legislation, among other initiatives. But most executives who fought these and other such proposals had no quarrel with the goals; their beef was with the cost of achieving those goals and the means by which Washington would insist they be achieved. Within the “command and control” framework of government, there was little room for experimentation and innovation. So many companies fought the regulations.

Overall, however, when you step back and view what’s been accomplished over the past 40 years or so, you have to concede that our national commitment to the environment, however costly, has been wildly successful. Nowhere in the United States do we face the kind of choking air and filthy water that plague other parts of the world.

Not only has “sustainability” become a popular buzzword among America’s young and among certain political activists, it has become a mainstream practice—even a specialty—in corporate America, where sustainability programs are producing cost savings, revenue growth, and competitive advantage, along with environmental benefits.

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In a recent sustainability survey that Boston Consulting Group conducted in cooperation with the MIT Sloan Management Review, 37 percent of the 2,600 managers and executives who responded identified sustainability efforts as a source of profit. Nearly half of the responding companies (48 percent) said they had even changed their business models as a result.

Sustainability efforts can be seen in virtually all company activities, from sourcing and product development to marketing and finance. The extent to which sustainability is incorporated into a company’s business model often correlates with an increase in profit.

As David Brodwin, co-founder of the American Sustainable Business Council, observed earlier this year, sustainability efforts take many forms: “Some companies succeed by targeting sophisticated consumers who prefer to pay more for a product that is organic, healthier, produced in [a] cleaner or safer way, or produced in a way that provides more benefit to the workers involved. … Other companies succeed by driving their costs down as a result of rethinking their product  and process design. … Still other companies succeed because the pursuit of sustainability leads to a higher quality product, with fewer defects and rejects.”

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In days past, many sustainability efforts would have been the result of government prodding or public pressure, or would have been undertaken for PR purposes.

Today’s executives know better. They realize that “green,” our convenient euphemism for sustainability, is the color of money.

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Hal_sirkin Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group (BCG), a professor at Northwestern University’s Kellogg School of Management, and co-author, most recently, of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback (Knowledge@Wharton, November 2012).

Source: Bloomberg Business Week

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