Profit

May 8, 2008 – 5:07 pm

Sustainability - management of resources to enable good performance today without compromising your ability to perform well in the future. The performance definition boils down to the triple bottom line: economic, social and environmental.  Some have bastardised this initial concept to be profit, people and planet.

There is plenty being written (me included) on people and planet, but rather less on the current favourite bottom line - profit.  Clearly this is a key element of the economic aspect of sustainability and top of the priority list of many stakeholders. So, does profit inevitably suffer to satisfy the people and planet aspects? I have been hunting for hard data but alas have been found wanting (any links gratefully received!). However consider what the following list have in common (source):

1. Dow Jones Sustainability World Index (1999)
2. Calvert Social Index in the United States (2000)
3. ECPI Index Family for European and global portfolios
4. Humanix Index for global portfolios (2001)
5. FTSE4Good Index for global portfolios (2001)
6. Ethibel Sustainability Index Global (2002).
7. KLD Global Sustainability Index (2007).

The names give them away, but yes, these are some of the indexes used by hundreds of ‘Socially Responsible Investment Funds’.  I imagine you don’t have to look too far back to find when there were considerably less than ‘hundreds’ of such funds.

So what? Well assuming people still have exit strategies in mind and need to make their businesses attractive to potential investors, it looks increasingly important to be scoring well in your economic, social and environmental impacts.  More of a trinity rather than triple - excelling in any aspect cannot compensate for failing in another, but getting them all right can make the trinity (business value) greater than the sum of it’s elements.

Getting down to the nitty gritty, how can managing your business for sustainability actually improve profitability?  Firstly, bottom line efficiency:  Less raw materials, Alternative raw materials, Less energy, Less transport, Less waste and better waste management, Minimised eco taxes, Minimised insurance, Avoided fines.

Secondly, turnover growth:  Attract the best new talent, Develop products / services to appeal to growing eco consumer market, Market what’s already sustainable about your products / services, Develop customer relationships, Attract third party endorsement of your efforts, More innovation.

Both options are just good business! Sustainability simply provides a focus and structure for your efforts, and formally adds two dimensions, which informally have always existed, to strategic considerations.  It is a process rather than a result, so reporting, feedback and learning are therefore critical.

“It is not only investors. Customers, too, appear to prefer to buy products from companies that are seen to be ethical and responsible”  Creating a Sustainable Future: A Global Study of Current Trends and Possibilities, 2007-2017