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Maybe you’re interested in giving back to your community. Or maybe you’re trying to attract an environmentally conscious clientele. But when it comes to making your business more environmentally friendly, return on investment is the name of the game.
The surprising No. 1 reason businesses adopt green processes is cost savings, says Marcos Cordero, CEO of the Green Business Bureau which issues Green Business Certifications. “We work with thousands of businesses around the country, and by far the main driver—the one with the quickest and biggest return on investment—is cost reduction,” Cordero says.
Instead of overpaying for green products or systems, companies need to focus on the changes that will boost their bottom line. “Small businesses are struggling for every penny of profitability, and if profits are being spent on greening the company rather than growing it,” they stand little chance of survival, says Eric Lowitt, a Boston-based sustainability consultant and the author of The Future of Value, which advises on combining sustainability and competitive advantage.
And all those consumers clamoring for products branded as environmentally friendly? “If you’re trying to win the hearts and minds of customers who buy green, you’re going to be disappointed,” Lowitt says. “Thousands of surveys have found that customers want to buy sustainably produced products, but when it comes to actually making purchases, they tend not to actually buy green because those items tend to be more expensive.”
Experts suggest a few tips for getting the most out of your green investment:
- Research federal and local grants as well as tax breaks for investments in renewable energy that can take the edge off the capital investments related to solar, fuel cell and wind power.
- Encourage employees to generate ideas about improving processes and increasing sustainability, Cordero says. “The front-end employees who are making products, interacting with customers and throwing out raw materials are certainly the guys you want to engage with and empower,” he says. “Engagement is shown to be the No. 1 driver for success in sustainability.”
- “Start out with things that are quick wins and can provide the company with more cash flow that you can put into creating green products without a price premium,” Lowitt says.
- Think critically about every step of your process, from purchasing to production—energy consumption, running the office and disposing of waste. Where can you save money in a way that will also help the environment?
How can you translate these savings into a green marketing message? The goal should be not to offer your customers green products, but rather quality products that compete on price—and also have a sustainability message.
Some larger companies are requiring green practices from their vendors. Consider Walmart’s 2009 announcement of its Sustainability Index—15 questions that the retail giant uses to select vendors based on their carbon footprints, among other factors. “For business-to-business companies, sustainability is less about marketing and more about effectively communicating with clients and partners” about your company’s green practices, Lowitt says.
“The little undiscovered nugget of sustainability is that society is playing an ever greater role in how businesses are run and develop new ideas,” he adds, pointing to the crowdsourcing trend. “To become truly sustainable in every sense of that word, companies must change their view from looking at shareholder value to stakeholder value. What kind of return do they generate for not only consumers and investors, but local communities, NGOs [non-governmental organizations] and other partners? The more stakeholders you engage, the more agile your company is and the more quickly it can move to take advantage of stakeholder knowledge.”
Natale Servino, Owner
Company: Servino restaurant
Where: Tiburon, CA.
Green philosophy: Examine every aspect of the company under the green microscope.
Proof it works: The business is thriving despite higher food costs.
We first started greening our business by undergoing an energy audit and, as a result, sealed our refrigerators, freezers, doors and windows that face outside. Since we do have a lot of older equipment, we saw our energy costs drop by 15 to 30 percent right away. That was a strong incentive to continue to green the business.
We started to think about all of our equipment and products in terms of where they were coming from and how they were produced. We switched all of our to-go containers, menu paper and straws to recycled, compostable or green-certified materials. These products were more expensive when we started this process in 2009. But since then so many businesses in our area started buying them that the price is even more competitive than conventional products.
When we made these changes, we saw lots of resulting curiosity and engagement from our staff. They started to generate ideas on how we could recycle more efficiently and pointed out things like customers not using all the paper goods we included in to-go orders. Because we started to take care where our products came from, our employees started to be more conservative and thoughtful about how they used them. We believe everything is connected within our business.
Another byproduct of our emphasis on sustainability is it helps create a dialogue between our employees and customers. Of course people are interested in where their food comes from, how it is sourced and whether it is organic. But when our guests know that we use environmentally friendly cleaning products on the floors where their children are playing, it creates a commonality and builds community and loyalty.
Even though we have a sticker on the window stating that we are green-certified, it is hard to know which customers come in for that reason. However, our banquet business is thriving at least partly because of this reason. We have a lot of inquiries from businesses that hire us based on our green certification. There are a lot of green-certified businesses in our area, and we have entered into this new business network.
Nicholas Draper, President
Company: Granite Source, countertop manufacturer
Where: Chantilly, VA.
Green philosophy: Implement green ideas from employees.
Proof it works: The company saves hundreds of thousands of dollars each year from green initiatives.
Most of our greening ideas have come from our employees. Our philosophy is that we don’t say no to any decent idea.
One of these suggestions saves us as much as $5,000 per month. Three years ago, an employee found a way to reduce the expense of hauling away leftover granite, which cost $3,000 to $4,000 per month and meant lots of our garbage filling up a landfill. The employee found a company that will haul the granite away for free, grind it up into gravel and use it as roadbed. From there we examined the expense of all of our waste and replaced another $800 monthly fee for garbage with $75 to haul away our cardboard for recycling.
We learned from another employee how to repair hand grinders at a cost of $10 to $15 per tool, rather than replace them at $180 each. This saves us about $20,000 each year.
Not only do these efforts save us big money, but we now generate 25 percent of the trash we did just a few years ago.
We also made changes that drastically reduced our water consumption. In the old days, we’d have the faucet on all day long. Tens of thousands of gallons would run down the drain into the sewer. We invested in a new filtration process that recycles 100 percent of the water we use for production. This process reduced our water expenses from $10,000 to $600 per month.
Even though we do $10 million in business each year, we still pay attention to employees’ ideas to save smaller sums. A couple of years ago, an employee spent $400 at Target on ceramic dishes and metal knives and forks, so we no longer use paper cups or Styrofoam dishes. Almost every environmentally friendly change we’ve made has been cost-driven. But some decisions, like buying real dishes, are green-driven and illustrate commitment from our employees.
Chip Mims, Owner
Company: Mims Distributing, beer distributor
Where: Raleigh, N.C.
Green philosophy: Invest in green energy and partner with like-minded companies.
Proof it works: A new solar roof will not only save resources and offset energy costs but will pay for itself in seven years.
We started looking critically at greening our business several years ago. We invested in GPS software that optimized our routing, which reduced the amount of fuel we use by 10 to 15 percent. Since this investment also reduced the time our drivers are on the road, it increased the time they spend on selling and actually distributing beer by 8 to 10 percent. In that one move, we realized that greening our business could save money and increase sales.
We moved into a new facility in October. Throughout the building design process, we thought about how we impact our community and tried to be as environmentally friendly as possible. First we bought an existing facility and renovated it instead of tearing it down and starting over. This saved us $2 million but also drastically reduced the waste generated.
The things we’re really excited about are the solar panels we installed on the roof. We got state tax credits and a federal grant, which together cut the investment in half. But because that roof will offset about 30 percent of the building’s energy needs, we expect for it to pay for itself in seven years at today’s energy prices.
By setting up committees, we encourage our employees to come up with ways to green the company and save money. One example of an idea our workers came up with is only having recycling bins in the offices; there are just a few places in the facility to throw out trash. This encourages employees to think twice about waste.
One of the benefits of having a sustainable business is that it makes us attractive to potential partners who are also environmentally conscious. One example is Sierra Nevada, which generates its power through a solar field. It is natural for us to work with companies like that—not to mention profitable for both of us.