April 24, 2014

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Why Your Company Should Not Account for Sustainability

Sustainability, taken full circle, means that a business will make more money.

Laura_musikanski

By Laura Musikanski

The short answer is: because you do not want to make more money.

Doing business today is not the same as 50 years ago - there are just not as many cheap resources.  In recent years, the cost of everything from raw materials to transportation – even labor - takes a big bite out of gross revenues. And we can expect that bite to get bigger. Scarcity is the symptom, and our own actions on this planet are the cause.

Accounting for sustainability is measuring and managing all the impacts of a business, and all the costs. In other words, sustainability is a core issue for every business, whether they like it or not. And businesses that are not accounting for sustainability are like ostriches with their heads in the ground. 

Why Do We Rely on Business? 

Most of us rely upon businesses to help us meet our basic needs: food, shelter, jobs… We also need business to help us meet our “higher needs:” art supplies, sports gear, reading materials… 

If we define sustainability as meeting the “needs of the present without compromising the ability of future generations to meet their own needs,” businesses are in a pickle. The world’s populations are increasing; our planet’s natural resources are in decline, and the need for businesses to meet our Accounting for Sustainabilityneeds without further compromising future generations is gaining urgency everyday. It behooves us to lift up to the light those businesses with their heads in the ground.

Needs vs. Money: The Conflict of Sustainability

The sad truth about sustainability is that businesses don’t really care unless it makes money. Only a few businesses understand that their function as a business is not “making money” but helping people meet their needs. If they did, they would see the connection between the bottom line and sustainability, and, ironically, make more money.

KPMG, in its 2011 International Survey of Corporate Responsibility Reports, found that 95 percent of the world’s largest 250 (G250) companies are issuing sustainability reports, with 83 percent of U.S. companies in the G250 accounting for sustainability.  The larger the company, the more likely it is to issue a report.

This does not mean that these companies are all taking sustainability seriously. About half of the G250 companies accounting for sustainability have seen financial gain from their reporting. Cost savings and increased revenues are the chief drivers, with ethics, innovation, reputation and employee motivation following. 

Tata Steel: The Motivation Behind Sustainability

Tata Steel, headquartered in India, is one of the largest steel companies in the world.  It provides steel to markets in 26 countries and employs over 81,000 people. Revenue topped $26 billion in 2011.  The founder felt that wealth was a ‘means by which a company could make a positive contribution to the communities it served.' 

The company had long been measuring and managing areas of sustainability, including environmental, social and labor, before it started issuing sustainability reports. A few of the activities they include in their 2011 Corporate Citizenship Report, for example:  

  • Operations Efficiency and Performance Improvement teams
  • A brownfield expansion project to increase production
  • A zero water discharge expansion project
  • Fewer carbon emissions than allotted under the EU Emissions Trading Scheme
  • Production of improved products for the auto manufacturing industry to increase fuel-efficiency in cars.
  • Zero Harm initiatives
  • A sustainable livelihood program in India that includes literacy aid, medical help, safe water supply and agricultural productivity support
  • Creation of the Tata Steel Academy

Tata Steel sustainability reportSome of the indicators they are using include:

  • Fatalities
  • Number of employees and contractors
  • Carbon dioxide emissions and other emissions
  • Waste
  • By-products

Tata continues to see cost savings and increased revenue from its sustainability efforts, but the motivation for sustainability is not just money. I submit that is the reason the company gains so much financially, and the reason the company can honestly put that the innovation of a new product – a lighter steel for the car industry that will result in more energy efficient cars – in its sustainability report without appearing insincere. 

Tata provides a great example for companies that are seeking to make money from sustainability and those seeking to deeply integrate it for ethical or brand reasons.

The truth about profit as a motivator for sustainability is that it is not so sad.

Sustainability, taken full circle, means that a business will make more money. There is nothing wrong with this. And the fact is that in a world driven primarily by money, wealth and growth, it is necessary that a business increase its bottom line when accounting or sustainability.

This is the first step towards pulling businesses with their head in the ground and all of us into an economic and social system where businesses operate to meet our needs without compromising future generations ability to meet their own needs.

_________________________

Laura Musikanski is the author of the new DōShort Accounting for Sustainability: A Business Guide to Measuring and Managing. Laura is also co-Founder of The Happiness Initiative, was Executive Director of Sustainable Seattle, Sustainability Director for a consulting firm and an entrepreneur and small business owner for 18 years.  Laura is a lawyer with an MBA and certificates in Environmental Management and Environmental Law and Regulations, and has taught MBA and professional training programs. She is a member of the Balaton Group.

Laura's book is part of Dō Sustainability's new DōShort series of concise, sustainable business ebooks for professionals. These practical ebooks support professionals in the vanguard of sustainable business -- who are often forging new paths in their organizations -- by giving them the confidence, information and tactics they need at every stage of their career.

CSRwire Discount: For 15% off the RRP of any DōShort title, use code CSR15. Currencies will be converted, and orders can be fulfilled immediately, anywhere in the world.

Subscriptions: You can also get access to the entire DōShorts collection via individual or corporate subscription. Read more about subscriptions here.

Queries? If you would like to contact Laura Musikanski or find out more about the DōShorts series, email gudrun@dosustainability.com or visit www.dosustainability.com.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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