CCES News For You

The explosive growth of climate change in recent years as an environmental issue is changing the business view of the environment. However, savvy business who have climbed onto the bandwagon early have seen that climate change offers opportunities beyond compliance, but those that represent core business values for any company. This article presents 8 non-regulatory reasons why a robust climate change program will benefit the bottom line of any company. By the way, these are not “theoretical” benefits; actual companies have reported these benefits after implementing a climate change, sustainability, or “green” program.
1. Making the Monetary Case
Climate change can become a catalyst for reducing significant expenses, and can make money for a company. This has been shown repeatedly. Reducing greenhouse gas (GHG) emissions most commonly occurs by reducing fossil fuel combustion and electricity usage. Given the high price of fuel and electricity these days, such reductions will also result in significant cost savings. A comprehensive energy audit will save your company long-term costs and reduce GHG emissions. The audit will identify “low hanging fruit” and determine different potential projects and their likely savings and payback times.

Let’s look at it from a different angle. If an energy audit saves your company $1 million annually (not that extraordinary, this is less than $100,000 per month), how much would that be equivalent to in sales? At 10% profit, that would be equivalent to $10 million in sales annually. How much effort and expense is necessary to make that much in sales (sales staff, marketing, etc.)? Is it easier to reduce energy usage by $1 million annually or to make the additional $10 million in sales? The answer will differ from company to company, but for most companies it is probably easier and cheaper to reduce energy expenses.

In addition, reducing GHG emissions can result in credits that your company can sell on the market for revenue. A number of firms realized significant revenues from selling credits under the Kyoto Protocol. In the U.S., there are both voluntary and regulatory markets (i.e., Regional Greenhouse Gas Initiative) that can become a reasonable source of revenue if played correctly.

2. Create New Products and Sell More

Like any new business opportunity, climate change offers possibilities to companies open to new ideas. The Toyota Prius and GE’s Ecoimagination are examples of firms using the recognition of and consumer interest in climate change to successfully market a product. Environment, Health & Safety (”EHS”) Departments can work with Product Development and Marketing to develop new or re-tool existing products to take advantage of the interest in climate change and contribute to the bottom line.

3. Impress Customers and Suppliers

There is a growing movement among the firms you deal with (mainly retailers) to understand the “carbon life cycle” of your products. Call this “the Wal-Mart effect,” as Wal-Mart as been prominent in requiring some of their suppliers to submit GHG emissions data upstream and downstream of its appearance in the store.

While Wal-Mart is just gathering information, some companies now require suppliers to implement minimum energy or other GHG policies as a condition to purchasing their products. Implementing a climate change program will show your customers and suppliers that you are aware of the situation and are already minimizing GHG emissions to put your product in a better position compared to your competitors.

4. Raise Employee Morale, Reduce Turnover

Companies are being challenged more and more these days to keep good employees from leaving and raise company morale. It is recognized that between finding and training a replacement and lost productivity the cost of replacing a valued employee is significant. In addition, how does a company motivate its employees to work hard and be loyal to the firm? Climate change can be one answer. Many firms have developed programs that involve employees and share successes through internal newsletters. Firms have reported that in some cases their employees have a new devotion to the workplace once they have invested in positive climate change and sustainability programs and believe that the company is dedicated to a greater good.

In addition, a company implementing building upgrades to meet Leadership in Energy and Environmental Design (LEED) standards will likely see an increase in productivity and reduction in sick days, which is good for both the bottom line and employee satisfaction.

5. Fast-tracking Future Projects

Company success is often associated with growth; growth in sales, product development, and manufacturing volume. However, environmental concerns are often used as reasons to block expansions and growth, forcing companies to look for alternatives, which has serious drawbacks for everyone.  Environmental and other citizen groups have become sophisticated in their ability to block growth. As was seen in the proposed buyout of TXU power plants, a climate change program was a major factor in a proposed expansion, including the construction of new coal-fired power plants. A number of environmental groups signed on because of the assurance (and metrics) that a robust climate change program would be in place with measurable goals. The climate change program enabled trust to build between the parties and eventual approval, potentially reducing the time necessary to approve the expansion, saving the company much money and time in permitting the proposed facilities and enabling them to build and operate sooner than otherwise, improving the revenue stream.

6. Improving Efficiency

The hallmark of reducing fuel and electricity use while maintaining and increasing manufacturing is to improve efficiency. A climate change program with GHG emission reduction targets can improve operational efficiency throughout a company’s business, spanning all aspects of company operation. Improving efficiency improves profit margins, as well as decrease emissions of other compounds, allowing growth without tripping major air permitting requirements and related onerous environmental regulations.

7. Evaluating Climate Change Risks

We are beginning to see the physical effects of climate change on Earth in recent years, such as the melting of polar ice caps and greater temperature extremes. Scientists have forecast many potential grave dangers, such as rising sea levels, more intense storms, increase in the spread of tropical diseases, water shortages due to greater salt water infiltration into freshwater stocks, and changes in agricultural patterns. Historically, companies have used EH&S to determine what impacts its operations have on the environment, such as air emissions and wastewater. With climate change, for the first time, we are concerned with the opposite – how the environment will impact your business should some of these effects become regular patterns on Earth.

A whole science has developed to model potential climate change effects on a business. For example, if your company operates a critical manufacturing plant on a Caribbean island, how would your bottom line be impacted by the greater risk of another “Katrina” knocking it out? What if you don’t even own that plant, but depend on a material it produces? What if a critical crop needed to make your product can no longer be grown at its existing locations? What would be the effects of hotter weather, more tropical diseases, a water shortage on people’s standards of living and, in the long term, consumer confidence in general and in your products? A climate change risk program can delve deeper into questions like this and allow your firm to be prepared early and make the proper investments to minimize risk and even turn these into opportunities.

8. Improving Your Image

Climate change is recognized by the public and governments worldwide as a potentially catastrophic problem. In the U.S., a small, but growing number of people use environmental image to in the decision making of the products they buy. Your company can use this approach to demonstrate that it is forward thinking. And unlike other social programs, Climate Change has a recognized metric—the reduction in GHG emissions.

There are several voluntary registries to demonstrate that your company has achieved certifiable GHG emission reductions both for the public record and to apply in advance to any future rules. Such a program can be a positive part of your annual or other reports and website. A number of proactive companies have already received positive recognition for verifiable GHG emission reductions.

And … Preparing for Regulation

And then comes the traditional role of environment—regulatory preparation. With the likelihood of federal legislation during the current presidential term, having a climate change program will put your firm in a better position to prepare for any new rule that may affect you. This will save your firm costs to prepare to comply and can be used as an opportunity to prosper over your competitors. In addition, with your own climate change program, your company will be in a better position to advocate for rules that reward your prior efforts in a greater way.

In summary, here are many business reasons that a climate change program will be beneficial to your company. Show this article to your CFO or other business leader and ask for support to put together a comprehensive, viable program. Be prepared for a bold new world of climate change affecting your business and by implementing an early, comprehensive program, you will be in position to turn this issue into a positive one for your company, as some have found out.

CCES can help you develop such a beneficial climate change program from scratch or help grow an existing, nascent program. See our website: www.CCESworld.com for examples of companies that we have helped set up programs from scratch.