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Environmental Business

by Michael Evans 29 May 2011
Environmental Business

Environmental Business looks at ways in which businesses can operate in an eco-friendly way and still remain profitable.

Achieving a green economy involves transforming what we produce and how we produce it, responding to changes in both supply and demand. We need a balanced and environmentally sustainable economy that will support strong business investment and new opportunities in order to be able to meet long term challenges.

It is crucial for natural assets to be managed sustainably and used efficiently across all sectors of the economy. It is important to reflect their value in all production and consumption decisions.

In order for this transition to take place, business and consumers must take advantage of the benefits of resource efficiencies. The economy will need to grow, but this must be within the context of reduced environmental impact and a greater resilience to future environmental challenges, which will include climate change, material scarcity and any emergencies related to securing energy supplies and food security.

From a business point of view going green might not always appear to be economically efficient, but in many cases companies will have no option since government policy and subsequent legislation will compel them to follow certain lines of action.

There will obviously be costs involved. Buying eco-friendly equipment, packaging and materials can be expensive. Initial costs can be higher, even if the variable costs work out cheaper in the long run. Light bulbs are a good example. Environmentally friendly bulbs can cost three times as much as conventional bulbs, but they last much longer. The initial cost can be offset by long-term savings, provided the company stays in business for long enough to reap the benefit.

Most consumers claim to be really environmentally conscious, with a genuine belief in the need to reduce their carbon footprint, but product cost is often uppermost in their minds. If for instance, they have a choice of an organic all-natural bar of soap that costs twice as much as a standard bar, many will instinctively opt for the cheaper one.

Businesses must consider very carefully how much of their market research represents genuine consumer willingness and how much is simply lip service. Consumers can be very fickle, having different standards for different products. Someone who would only buy organic food might not be at all concerned that their car was not eco-friendly.

Effective marketing is very important if a company wishes to sell green products. Well informed sales staff are also necessary because customers are not always equipped to recognise what makes a product green.

The traditional manufacturing process never considered the disposal of products once they had come to the end of their useful lives. In this environmentally conscious age that is all changing. The simple dumping of unwanted goods and materials is no longer acceptable. Packaging is being made recyclable and many products are now being made in ways that make recycling very much easier.

It is also important to look at supply chains when considering environmental business issues. A garment made of organic cotton might appear to be very environmentally friendly, but this would definitely not be the case if it was made using child labour in a far eastern sweatshop.

On a much larger scale it is possible for major companies to save money by taking environmentally friendly action. The Chinese global shipping company COSCO cut the number of its distribution centres from 100 to 40. Service levels to clients remained the same, but costs were reduced by 23% and CO2 emissions fell by 15%, equating to 100,000 tonnes a year.

In another example, in 2000 IBM set targets for saving water in its various microelectronic manufacturing operations. Within eight years the company had achieved a 2.4% savings rate, equivalent to 1.2 million cubic metres of water.

Not only are these savings good for the environment, but they can make sound economic sense for a company. Organisations worldwide, from government agencies to retailers and financial institutions are now looking at the current and future impact of their activities.

Areas under consideration include:

  • energy management;

  • waste management;

  • carbon management;

  • water management;

  • sustainable procurement of raw materials;

  • ethical labour standards within the supply chain;

  • product composition

  • eventual disposal at the end of the lifecycle.

    Although the majority of companies might express enthusiasm for most of these areas, the reality is that for quite a number of them the balance sheet and the potential for profit and loss are still the overriding factors.

    In a highly competitive world, if savings can result from more efficient management of energy or waste, this is more likely to find favour than the procurement of raw materials from a sustainable, but more expensive source since that will simply lead to an increase in the cost of the finished product.

    Of course not all companies take that view and there are a great many who take their Corporate Social Responsibility (CRS) very seriously. In fact many companies take the view that promoting themselves as being socially responsible gives them a significant commercial advantage.

    Although consumers can be very fickle and the price of a product is often a major factor, when given a choice, many consumers will opt for a product that is environmentally friendly.

    As time moves on and the world gets more used to a greener lifestyle, consumers and producers alike will have to make adjustments. Many businesses have already adopted the environmental agenda with great enthusiasm, but there remain a significant number where progress has been slow. These businesses will need to review their policies if they are to survive.

    Government action can only do so much. It can produce policies, drive forward a ''zero waste'' agenda, support development to reduce environmental impact and pass laws, but the only way that businesses can remain viable is by meeting consumer demand.

    The combined effects of climate change and decreasing world resources are leading to an increase in environmental awareness. Customers are responding to this and businesses must take note and act accordingly.

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