Investing in environmental policies is an opportunity to fundamentally address some of the issues that face our planet and future of generations to come. Humanity is at the brink of some major environmental challenges, including climate change, air and water pollution, systematic inequality, loss of biodiversity, and more. The way that we have been collectively living has prioritised unsustainable practices such as over-consumption and industrialisation over the health and wellbeing of people and the planet. A major shift is required to reduce damage and create a more sustainable society. There has been a groundswell of environmental activism and a growing realisation of the role that businesses can play in more prosperous future for our planet.
A green economy is a macro-economic approach to policies that focuses on human wellbeing, equity, and reducing environmental risks. It is important to note that the green economy is not a replacement for sustainable development, but rather a tangible pathway with goals, policies, and principles that eventually lead to sustainable development.
While the definition differs from region to region, according to the United Nations, the role of the green economy is as follows:
“Consumption and Production aims to improve production processes and consumption practices to reduce resource consumption, waste generation and emissions across the full life cycle of processes and products — while Resource Efficiency refers to the ways in which resources are used to deliver value to society and aims to reduce the amount of resources needed, and emissions and waste generated, per unit of product or service.”
While there are widely understood and publicised reasons why people should care and invest in a greener future, there is also compelling data that demonstrates the many economic and social advantages for businesses to invest in the green economy.
Here are 5 reasons why businesses should go green and invest in green economy in 2020:
1. The wellbeing of people and the environment
Over time more local and global brands are investing in green practices and there is one obvious benefit from this investment — increased wellbeing of people and the planet.
The World Health Organisation (WHO) has published reports saying that 9 out of 10 people now breathe polluted air, which kills 7 million people every year. In order to make this a global health priority WHO says the matter requires action by both the public and private sectors. Here in Australia, we face significant environmental and economic impacts from climate change, as summarised by the Department of Agriculture, Water, and the Environment. According to a report from Business for Social Responsibility, a company’s supply chain can “represent a critical source of greenhouse gas emissions and climate-related risks to companies, government agencies, and others”.
From a business perspective, with supply chains spread across the globe, many businesses are vulnerable to social and environmental risks due to climate change. Issues caused by natural disasters, poor labour conditions, water scarcity, and so on, can have monumental long-term effects on operations and revenue. The Profits for Purpose report from McKinsey says that the value at stake from sustainability issues can be as high as 70% of earnings before interest, taxes, depreciation, and amortisation. With these factors in mind, many pioneering global companies have made ambitious targets like Unilever’s commitment to reduce plastic or other big brands investing in the Rainforest Alliance certification to help make farmers lives better and supply chains more sustainable.
With this in mind, investing in green economies can have monumental effects and create a more equitable and liveable planet. Furthermore, the green economy is an investment in the ongoing success of your business.
2. Reduced operational costs
Aside from environmental gains, there are also monetary gains for businesses that invest in going green. When a company makes a concerted effort to reduce overall environmental impacts, reduce waste, and improve its supply chain management, it can significantly reduce operational costs.
Companies can save money by reducing energy consumption, reusing existing materials, and developing more efficient processes and protocols. While there might be some costs associated with setting up more sustainable practices, the long-term benefits of green policies are significant.
An example of a company that has improved the bottom line is Nike, who in 2018 reported that 75% of its shoes and apparel are created using recyclable materials. In a sector that is known for being a large industrial polluter, Nike has come along way and has made an effort to clean up its supply chains. The company is committed to a broad range of environmental and social initiatives aimed at sustainability. By reducing the amount of material wasted in manufacturing, creating more efficient production practices and thinking heavily about the location and technology of its new investments, Nike has proven that sustainability is one of the key components to its ongoing success.
3. Improved workplace culture
There are benefits from a workplace culture perspective too. Business leaders are always striving for ways to mobilise the workforce and increase employee productivity. Studies by Gallup have found workplace productivity to be low across the globe, which can have great impacts on a brand’s overall performance.
There are cultural benefits to adopting green policies. A research paper called ‘Go Green at Work: Environmental Organisational Culture’ defines green organisational culture as: “The extent to which the assumptions, values, symbols and artefacts of the organisation reflected a desire or need to operate in an environmentally sustainable manner.”
Emerging research about employees, sustainability and motivation suggests that employees are more engaged, and perceived their jobs as more meaningful when a business actively involves them in conversations about sustainability and corporate social responsibility. Engaged employees who feel like they are providing meaningful services are likely to be more motivated, creating a productive and thriving workplace culture. Many best in class organisations educate employees about environmental issues and create champions and advocates. An article with the Stanford Social Innovation Review, technology company IBM said that implementing environmentally sustainable practices was a driver of employee engagement, action, results and leadership.
Furthermore, companies who invest in green practices and policies will naturally be seen as appealing places to work and attractive to high-quality prospective employees.
4. Benefits and incentives for going green
When it comes to investing, studies have found that green companies are generating higher returns. A FTSE Russell report found that:
“The green economy represents 6% of the global stock market, or around US$4 trillion, coming from clean energy, energy efficiency, water, waste, and pollution services.” It also says that figure could increase to 10% of global market value by 2030 and stated that over the last five years, green companies generated higher returns than the broader stock market.
An article in the Financial Review says that sustainable investing is set to grow in 2020. Andrew McAuley, the Chief Investment Officer at Credit Suisse Private Bank Australia, is quoted in the article saying, “Sustainable investing is a long-term trend that every investor needs to consider.”
Depending on where a business is located, there are often also incentives, resources, and funding available to support businesses that are going green.
5. Build brand loyalty with consumers
By promoting an environmentally friendly approach, brands can distinguish themselves from competitors and attract new conscious consumers. When a company can demonstrate a clean and transparent supply chain it builds a stronger reputation in the minds of consumers.
A study from HP Australia and Planet Ark has found that while over 90% of Australian consumers and businesses are concerned about environmental sustainability, only half believe they are doing their fair share to protect the planet. A 2019 study by Nielsen revealed that the majority of Australian consumers are either highly or somewhat willing to pay more for products that are environmentally friendly or sustainable. In this sense, consumers want to align their values with the businesses that they purchase from.
Investing in a green economy is a marketing asset. A green campaign can connect with existing and new consumers and build better brand awareness. A great example of successful green marketing is outdoor clothing retailer Patagonia who has a strong social media and digital marketing presence that is centred on a strong green purpose and transparent communication about sustainability.
The green economy has noble aims to achieve sustainable development and better the wellbeing of the planet and humankind. After building awareness for decades, in 2020 businesses have now reached a critical moment for investing in the green economy: go green or go home. Organisations that embrace sustainable policies and invest in green economies will thrive in the long term and enjoy a range of benefits. And those who fail to realise the importance of this movement risk getting permanently left behind.