How businesses can profit from 'going green'

Global leaders have been making commitments to tackling climate change since Kyoto Protocol in 1997 and the Paris Agreement in 2015.  This year, we are expecting The UN Climate Change Conference COP26 (Conference of the Parties), which is taking place in Glasgow, to urge further action from world leaders. For businesses, that might result in changes in legislation as the UK and other partners will be under pressure to step up their net-zero commitments. This means that businesses might have to define their carbon targets and adapt monitoring and reporting practices. There is, of course, much more businesses can do if they want to be serious about going “green”, including making considerations for how they use their resources, how they can improve their efficiency or how they dispose of their waste. It’s worth noting that sustainable business (in a financial sense) and sustainability in business do go together and research tell us that companies that embed an environmental agenda at their core are more profitable, and save money in the long run, offering a win-win for businesses and the environment.

How did we get here?

Despite misconceptions about whether the threat of the Climate Change is real, which becomes a discourse reminiscent to ‘the Earth is flat’ narrative, the issue has a clear consensus in the scientific community. The Industrial Revolution started an era of dynamic technological progress for humanity, that contributed to rapid population growth, further resulting in increased demands on natural resources. The issues we deal with today have a direct link to the time where our modern society and businesses was shaped around capitalistic principles. For example, deforestation is a result on our demands on land, be it for pastures or agriculture needs, but also for our habitats, which in turn negatively impacts on biodiversity. Fossil fuels, burning of which is the key contributor to carbon emissions, are nowadays critical for generating electricity and most of our on-land and air transportation. Oil is present in most of our daily items – from plastic packaging to clothing. Our troubled relationship with waste, plus unsustainable demand on limited resources of Earth and consumeristic culture are simply not sustainable for humanity in the long term.

How are we going to fix it?

The Paris Agreement is an international and legally binding treaty adopted in 2015 by 196 international parties. Its key objective is to limit global warming to 1.5 degrees Celsius in comparison to pre-industrial levels. Achieving net zero emissions by 2050 and cutting emissions in half by 2030 is its core ambition. 

However, it’s worth nothing that we are not on track with this international effort, and that even in the best-case scenario our actions will slow down, not prevent the disaster if we don’t make dramatic changes to our way of life.

The UN Climate Change Conference COP26 (Conference of the Parties), which is taking place in Glasgow this year, will seek to urge further action and accelerate efforts to meet the Paris Agreement goals. The location of this event will undoubtedly put the spotlight on UK and our action plans to tackle climate change. You might be already aware that the government has already banned the sales of new petrol and diesel cars from 2030, with some hybrid solutions available on the market only until 2035. It might seem like a long time away, but if business operations rely on transportation of goods and people, they might wish to plan for replacing their fleet and installing charger points at their premises now, while the grants (such as OZEV) are available. Although initially this move requires investment, it will bring financial benefits in the long run when comparing standard petrol usage to this alternative. Some estimates say that, for domestic use, the electric car charge is about £5 versus at least 10 times higher cost of a full tank of petrol and diesel. By doing this, they will also contribute to making this type of technology and infrastructure cheaper in the future. 

Sustainability is Profitable

It’s a common misconception that sustainably is a costly add-on to business, rather than something that should sit at the business foundations and generate profit. However, it is a fact that sustainable companies perform better financially.

When it comes to the P for Profit, the UN’s Sustainable Development Goals, (of which there are 17 with 169 related targets) have been estimated to generate $12 trillion worth of business opportunities a year by 2030, which is said to be a modest prediction. If you look at large global corporations you will see most have already adopted sustainable practices, and they do that because they know consumers demand the change, and the profit patterns follow that demand. For the B2B segment and their clients, the situation is just as important. All businesses will be fine-tuning their carbon targets, and many corporations are planning to report on the carbon emissions of their supply chain (so called Scope 3 emissions). This is something that the legislation will be looking at and it will have a tremendous effect on SMEs because this will require new practices on monitoring and reporting on emissions and other social impacts along the entire supply chain. (One can only hope this will be standardised across industry!)

Considering sustainability is good for investor and consumer appeal, those who are ready to truly embed its principles are likely to gain financially from this socio-economic transition. In summary – becoming sustainable is good for business. It’s a great way to futureproof, create a stronger USP for businesses and gain competitive advantage in the sector.

So, what can businesses do about this?

There is acknowledgement from the UN that when it comes to sustainability, we are great at making commitments but not so much on unpicking what actions are to be taken, yet the UK Business Climate Hub does provide some guidance on potential types of intervention that companies can apply to their business. These, at times, are very simple solutions:

• Adjusting heating and cooling system timings, temperature and introducing smart meters or installing renewable electricity or heating, or 
• Switching to renewable energy suppliers 
• Optimising business premises (e.g., buildings insulation) 
• Minimising waste from products and packaging 
• Switching lighting to LED bulbs 
• Introducing cycle to work schemes for employees to eliminate carbon costs related to travel
• Electrifying vehicle fleet

The leading businesses who have already signed up to the commitment include companies like Nestle, Ikea, Unilever, Tesco, Royal Mail and tech giants like Amazon and Google. The business case for SMEs is supported by a list of tangible business benefits and the changing market landscape rationale. This includes evidence that large corporations that have already embedded green procurement practices will be more attracted to businesses who also have made those climate commitments. 

What will happen if we do not meet our carbon targets?

Global warming means that our maximum and minimum average temperatures will be raising. In the long term, what this might mean is that we find ourselves competing for land, water and food. Famines, destruction of livelihoods and habitats, will be too common. This will mean that people from the most vulnerable regions will start mass migration. Lack of ability to produce enough food will add to pressures on existing communities, likely contributing to social or political unrest. Nature is likely to be impacted too, from disturbed ecosystems to further species extinction. We don’t often consider how the disappearance of one single pollinator (a bee) can threaten our food chain.  In summary, if we do not act collectively, the picture is bleak.

But I do not wish to leave you in exasperation with a feeling that nothing can be done, that it is too late. It is not yet too late. Although SMEs do seem to be lagging behind in this conversation, businesses can chose to conduct their business in a sustainable manner and create a meaningful and measurable change.  
If you run a business, I encourage you to take time out to think about your future strategy being centred around responsive business practice.

Consider, how do you fit into your local community? How do you encourage diverse talent into your sector? How do you optimise your business practices to save resources? Finally, be ambitious and set carbon natural goals for your business with a target date, to keep your business sustainable, profitable, and competitive in the future. 

Resources

For those who are interested in the topic, here are some resources you can use to inform your strategic decisions:  

• United Nations Sustainable Development Goals. Access here. Consider where your business can contribute to the planet, local community or planet. See if you can embed 3-5 of them into your long-term strategy. 
• SDG Framework: You can use this framework to help you identify and report on your ambitions: Integrating the SGGs into a practical guide. Access here.
• Carbon Trust website is great for updates on investments, corporate responsibility and public funding. Access site here.
• Learn more about Circular Economy: to find out what this term means and how it can help you rethink your business model click here on Ellen McArthur foundation.
• The Triple Bottom Line: What Is It and How Does It Work? Excellent article from Indiana Business Review.
• UK’s Environmental Bill always worth a look with some interesting factsheets. I expect more will come here after COP. 

On COP26 & why should we watch this space: 

• What is COP26 and why does it matter? The complete guide | Cop26 | The Guardian
• What is a COP? - UN Climate Change Conference (COP26) at the SEC – Glasgow 2021 (ukcop26.org)
• COP26 Goals - UN Climate Change Conference (COP26) at the SEC – Glasgow 2021 (ukcop26.org)
• Carbon emissions ‘will drop just 40% by 2050 with countries’ current pledges’ | Cop26 | The Guardian
• COP26 must not overshadow Kunming: we need joint climate and biodiversity goals | Ma Jun | The Guardian

On Biodiversity & Business Models: 

• The loss of biodiversity will affect us all. Reversing this will only be achieved if businesses embrace more regenerative business models. | LinkedIn
• Halt destruction of nature or risk ‘dead planet’, leading businesses warn | Biodiversity | The Guardian

If you would like some advice on how you can implement sustainable change for your business please feel free to contact me.