My last post addressed a few things related to risks that a business faces if it doesn’t consider the environment in its processes and decision making. Reputation risk, for example, poses a serious threat to a company’s well-being when it is ‘called out’ publicly for poor ethics and irresponsible decision-making.
Highlight reel of recent memory: The Nike Slavery Nightmare of the early 2000’s, the Sleezy Subway Scandal of 2007, and the BP Catastrophe of 2010.
Aftermath of 2010 BP Oil Spill
More than 200 million gallons of crude oil was pumped into the Gulf of Mexico for a total of 87 days, making it the biggest oil spill in U.S. history.
These are all pretty obvious examples of companies shattering ethics guidelines with huge public consequences to the business, but what happens when the poor decision making happens on a much smaller scale? What about when businesses bend, instead of break obvious ethical guidelines? Or straight-up break them, but behind closed doors?
Businesses want to make money for shareholders and top-tier executives, fair enough. This often means cutting corners when it comes to ethical decision-making, particularly in terms of the environment. After-all, the earth can’t file formal complaints with HR or take shady behaviours public. Unfortunately, when a clothing factory or coal plant dumps its toxic waste into a nearby river, it is often cheaper to pay environmental fines than to find another way to safely dispose of the waste. This happens EVERY day around the world, polluting drinking water from India to the United States.
Asides from the fact that this is complete and utter bullshit and should enrage us all, it may also invite the question… HOW do we make companies care about the planet, especially when we’re talking about more regular decisions that may not invite public outrage?! How can we get a company to conserve water or reduce waste when most likely, nobody is looking over their shoulder?
My briefest answer… ($) prove that it’s worth their while ($)
Every business relies on a range of different types of capital that add value to the business. For example, a clothing factory would likely consider its financial capital (ie. funds in the bank), its human/worker capital (ie. the skills, health, and wellbeing of its workers and their productivity), and social capital in the community that they operate (ie. keeping the surrounding community satisfied so as not to invite protests or costly conflict).
Another critical source of value for each and every business that may be overlooked (believe it or not), is natural capital- the fuel for every single business on earth.
“Natural Capital: the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits to people.” (NCC)
Looking UP, as well as DOWN
The take-home message here is that, in order for a business to fully realize its potential and be as efficient and cost-effective as possible, it needs to look UP, (which resources do we rely on, and are we vulnerable to?), as well as DOWN, (where are we having environmental impacts?).
The Natural Capital Coaltion (NCC) is a “unique global multi-stakeholder collaboration that brings together leading global initiatives and organizations to harmonize approaches to natural capital.”
Basically, this boils down to a collection of people and businesses who are working together to preserve natural resources in business.
The actual protocol born from this organization (The Natural Capital Protocol) then, is the guideline by which companies can calculate the actual financial value of the natural resources they are using, wasting, and relying on.
What Does this Mean?
Basically, businesses now have a tool to measure the actual financial impact that their poor environmental efficiency is having, by looking up-stream, as well as down - recognizing your corporation’s vulnerabilities, in addition to impact.
Imagine you are a beer company, trying to grow your bottom line and expand your business as quickly as possible. Maybe you are interested in reducing the amount of chemical waste, or “efferent” that leaves your brewery and reaches local rivers, because you consider yourself to be a responsible global citizen. Or perhaps you don’t really pay much mind to environmental effects because let’s be realistic, you’re still starting out and need to put all of your time and energy into making and marketing your beer. You’ll care about the ‘green stuff’ when you start seeing your return.
Regardless of your altruistic tendencies, you as the brewery owner are faced with realities around the natural capital available to you.
What if there is a state or province-wide drought, and your available water sources to brew your beer suddenly is either compromised in quality, or slapped with a hefty fine? What if your hops supply becomes stressed due to a heatwave in the region, as hops require a relatively low temperature to grow?
Scenarios like these may be devastating to businesses who have not considered their vulnerability to natural capital, and do not have efficient operating systems in place. ‘Up-stream’ vulnerabilities exist in every single type of business, and may have a huge financial impact if corners are cut in planning and operations.
Taking measures to conserve water may help the brewery through a drought, while the broader impacts of climate change (ie. higher temperatures and frequent extreme weather events) should motivate businesses to decrease their impacts wherever possible, to help preserve the natural capital that they so intimately rely on, like hops to a brewmaster.
Here’s a couple other industry-specific examples from the NCC’s website that may help colour the picture i’m trying to paint here,
Clothing brand – The rising cost of new materials such as leather, caused a brand’s gross margins to decline contributing to a 36% decline in pre-tax profit.
Supermarket retailer – The identification of carcinogenic azo dyes within 37 product lines, meant recalling almost 208,000 items.
Denim processor – a four year drought impacted many Californian fashion companies, but a denim processor continued with a waterless ozone machine and reduced water use and bills by 50%, saving USD 1,300 per month
Protecting YOUR Business
Obviously, the best way to make sure that you’re protecting your business from natural resource risk is to establish a full sustainability protocol and implement the Natural Capital Protocol into your business decision making…
In recognizing that MOST start-up and smaller companies can’t afford to develop a comprehensive environmental plan or hire a consultant right off the bat, here’s a few resources that small business owners can start looking into if wanting to tighten up operations and reducing their financial risk.
It’s far easier to implement these green money-saving strategies into the DNA of your business from the beginning, rather than transitioning later on, but most of these changes are easy to make regardless, with a quick return on investment. Think of these as the ‘low hanging fruit’ changes to make without a big investment.
Background on the Natural Capital Protocol - HERE
10 Ways to Green Your Business and Save Money (I’ve written a whole post on this article, but here’s the quick-and-dirty) - HERE
20 Energy Saving Tips To Reduce Business Energy Costs - HERE