Combining environmental sustainability and business is a procedure that has mystified companies for years. Obstacles like miscommunication between finance and sustainability teams have hindered many companies’ past efforts to comply with green practices. Tying together an effective business plan that incorporates the two requires a lot of planning. Here are a few ways that companies can keep their environmental footprint in check while still turning a fat profit.
Budget With The Environment In Mind
Back in 2004, Johnson and Johnson had a greenhouse gas reduction target that they were unable to meet. That’s when they decided to invest $40 million a year to cut down on emissions. The initial investment was massive, but eventually they cut away a huge chunk of their operating expenses by using solar photovoltaics instead of conventional energy. This also allowed them to predict the returns they would get from such an investment—while funds allocated to regular energy sources tended to fluctuate, solar energy didn’t require any additional investment once the panels were installed.
To date, they’ve reduced greenhouse gas emissions by 138,000 metric tons, saving the equivalent of the electricity consumed by 21,000 US households! And guess what? They still achieved a return of 19% on their investment!
Factoring sustainability costs into the yearly budget can help companies determine expenses and plan out their operations. That way, they won’t have to compromise on income.
Give The Sustainability Officer More Control
Akzo Nobel, a global paints and coating company, decided to give their Chief Sustainability Officer some power over the budget. So every budgetary request exceeding $5 million had to be run by him and the Finance Controller before approval. That way, he could check whether the request complied with the environmental rules laid down by the company. He was allowed to reject requests that lacked an explanation of why sustainability practices were not considered.
These sorts of tactics can be adopted by companies who wish to engage their sustainability teams early on in a new project. It also helps to prevent budget requests that don’t factor in environmental concerns.
Drop Hurdle Rates
Products that are designed to be more friendly to the environment are usually very expensive to create. To tackle this, USP, a company that transports cars and automobiles, eased the minimum return requirement on some of their cars. These machines consumed less fuel and, as a result, cut fuel costs. By doing this, USP stuck to their environmental plans and were able to factor the reduced revenue into their budgets.
By lowering the bar for minimum returns on eco-friendly products, companies can give more importance to their environmental performance, and still allocate funds appropriately.
Include External Processes
When companies draw up a plan for environmental sustainability, they need to take all their dealings into consideration. This means looking at the entire corporate value chain and making sure that it’s aligned with the goals of the firm. For example, Natura asks its suppliers for a sustainability report, to give them a better understanding of Natura’s work culture. This helps the suppliers comprehend how the business, economy, environment, and society are impacted by their actions. That way they can tweak their processes to optimise management systems. Natura checks the environmental impact of the suppliers before choosing one that’s fit for the job.
Host a fundraising event.
All cause-driven programs are excellent for your image and public relations. It feels good to support something that is meaningful and far reaching. Adopt a green cause and do an annual fundraising event. There are all sorts of campaigns you can participate in, from planting trees to raising funds for social causes, for education, for healthcare, Find one that’s close to your heart and involve your employees. Let this be part of employee engagement activity.
Recycle outside the box.
In addition to recycling everything that can be recycled, think green when buying or replacing items. Consider purchasing used or vintage office furniture instead of brand new pieces. You can find great deals on barely used office furniture at both online or off line stores. Need new computers, laptops? Think if a refurbished solution will suffice. Most computers, even older ones will do the job for most of us. Any it comes at a fraction of the cost.
A smooth flow between business and sustainability may seem like a daunting task, but it’s essential. Without it, companies will be unable to satisfy their environmental duties while still earning a sizeable income.
Because of the nature of the work, these relationships tend to be relatively more personal, which fosters a sense of trust between the parties involved.
This helps the decision-making process and ensures accountability. A relationship built on personal rapport and open dialogue is absolutely essential for an NGO to strengthen its operations.
Improvement of Techniques
Even if an NGO does not plan on expanding operations significantly, there is always a necessity to improve internal processes.
Growth gives donors and other stakeholders a reason to invest their money in the organisation.
Most donors choose to support NGOs that are working for a cause which aligns with their beliefs. If they notice that the organisation is growing, it’s sure to spark their interest and help the organisation secure a reliable source of money.
Figuring out a Source of Finance
The most important factor that determines the sustainability of an NGO is the source of its funds.
Gift-based
A vast majority of NGOs are gift-based, and receive their funds in a variety of ways, including one-off gifts, personal donations, and by hosting fundraising events.
While it’s difficult to obtain funds through this method, the main advantage is that the organisation receives what’s called ‘free money’ or unrestricted funds. This means that they’re free to use the funds in any way they please, for the development of the NGO and its projects.
If an NGO’s model is based on monetary gifts, it’ll need to take certain steps to ensure a steady supply of money to carry out their operations.
The foremost of these is building strong personal relationships with a variety of people. Promoting its name and brand to ensure that it has the widest public reach possible also helps. As a cautionary measure, excess funds should be set aside as reserve, in case the organisation encounters a dry spell.
Direct Official Aid
Some NGOs rely on direct official aid to fund their projects. The benefit here is that they’ve got a steady flow of income to rely on throughout the year. But there’s a drawback: most official donors specify the purpose for which their funds need to be used, and that may not always be in alignment with the NGO’s mission.
So, organisations looking for official financial aid need to strike a balance between procuring funds and sticking to their mission statement.
These are just a few steps that NGOs can use to bring about a more sustainable future. It’s essential that NGOs conduct their processes with a long-term vision in mind, because without a plan, the organisation will perish.
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In 2016, companies will be looking to tie up with governments to further their CSR efforts. Not only does this build rapport with the government, but it makes it a lot easier to find a social cause to work towards.
Also, thanks to the combined effort from both parties, companies will be able to ensure that their technology, expertise, and monetary resources are put to good use.
Employees Will Have A Greater Say
2016 will see a rise in the number of companies that consult their employees about the issues they wish to tackle with CSR efforts, and with whom to partner up to deal with the problem.
Instead of the top management calling all the shots when it comes to CSR funding, employees will have a greater say in the matter.
Deloitte’s Millennial Survey 2015 revealed that millennials today want to work for a company that imbues them with a strong sense of purpose. They want to know that their employers are contributing to local communities and to society at large, and wish to be a part of the contribution.
The only way they can do this is if the management delegates some authority of their CSR functions to the employees. This way, everyone working in the organisation is content, which ultimately helps the organisation function better.
Increased Transparency
With CSR laws becoming more stringent, companies need to be more transparent in their dealings.
Since unethical sourcing isn’t acceptable to many consumers, the companies stand to lose out on revenue unless they make changes to their supply chain. This is already visible in the Garment Industry, Large Retailers etc.
Transparency helps reduce practices that may be detrimental to society and the environment. That’s why in 2016, most companies plan to be more transparent in their operations.
Better Quality of products & services
With Companies implementing CSR policies it is important for the company’s products & services to meet the consumer’s expectation on quality. Else it would be an oxymoron type of a situation where on the one hand the Company claims to be socially responsible and on the other hand provides inferior quality of products and services.
Stakeholder engagement
Companies, as they understand the concept of social responsibility and its benefits will look at the various stakeholders. This will reveal issues that could potentially adversely affect in the near future. Companies could then engage proactively through CSR programs to mitigate potential conflicts.
These are a few of the trends that will transform how CSR is approached by businesses. The importance of CSR is growing, and it’s only a matter of time before it becomes a greater part of a company’s responsibility to all its stakeholders
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One such program is the LivingValues movement (www.vset.org), where collaboration between various Non-profit organisations has helped increasing the reach of the program ten-fold within a short span of time. Global Action on Poverty (www.globalactiononpoverty.org) is another example where non-profit organisations are brought under one roof to share their experiences, learn / collaborate each other to improve the social impact.
Collaboration amongst the non-profit organisations is the need – It is bound to improve the efficacy of the sector, and make the whole greater than the sum of its parts.
Can we? 
Compared to 2013 and 2014, organisations have spent considerably more on CSR in the 2015 financial year. And whether this is voluntary or not, it’s actually happening.
At one point of time, most of the private sector wasn’t concerned about CSR. As for the companies that were, CSR didn’t really form a major part of their budget. But with the 2% rule, the Companies Act has ensured that any organisation liable to engage in CSR is spending enough money to make a tangible difference in society.
According to GayatriSubramaniam, convener and CPE at IICA, there has been a shift in the sands. From being an inconsequential part of anorganisation’s budget, CSR has become an important boardroom topic. With the regulations set by the government, the board needs to be actively involved in setting up CSR committees and approving the strategies conceived by them.
Another thing to note is that the Companies Act directs organisations to take any profits from their CSR activities and put them back into the CSR budget. This encourages businesses to engage in innovative CSR programs with high ROI, making it easier for them to meet the required CSR expenditure in the next financial year.
Most companies in India run their CSR activities through NGOs. This has has also managed to somewhat alleviate the funding problem faced by many of these institutions.
A majority of CSR expenditure in 2015 went towards education, skill development, and healthcare. The Bharti Group, for instance, has committed to spending close to INR 100 crore on building toilets in Punjab’s rural households.
Perhaps the most encouraging trend this year has been the exponential increase in the CSR budget of industry leaders. For example, Infosys has spent around 240 crores in 2015, compared to 9 crores in 2014. And Wipro has spent 132.7 crores, compared to 16 crores last year.
Another thing that’s worth mentioning is that even though there is no penalty for non-compliance of CSR rules, most SMEs and larger organisations have done their bit to meet the 2% requirement.
There’s still a lot of scope for innovation when it comes to CSR in India. However, it’s too early to gauge how companies will spend on CSR in the coming years. But one thing is for sure—CSR is no longer a vague corporate term. It’s a business priority, and it’s here to stay.
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Before 2013, many organisations in India were not sure exactly how and why they should go about a CSR strategy. Many were under the impression that CSR has little to no returns. However, major organisations like Tata, Infosys, and Coca Cola have run successful CSR programs, which not only helped to boost their brand image, but also generated sizeable returns. With the benefits clear for all to see, other companies have followed also suit.
With companies following the triple-bottom line method of decision making, environmental sustainability is no longer considered to be a passing fad. Waste management, energy conservation, and reducing paper and water usage have helped organisations improve stakeholder engagement and build their reputation, without compromising on the profits they make. A well executed sustainability strategy helps build a business ecosystem on multiple levels.
Let’s take a look at how your company can achieve significant ROIs through sustainability.
Even employees are more inclined to work in a company which does a little bit more than just meeting environmental regulations. This results in higher employee retention, which reduces the amount of money you spend to recruit and train new employees. Increased bottom line translates to a higher ROI.
For example, Staples has executed a number of sustainable projects that are directly tied to their operations. They replaced a lot of their existing products with those made out of at least 30% recycled content, completely phased out PVC from all their products, and started using paper made from 80% sugarcane waste in their offices. They’ve also reduced their energy usage by 15% square foot along with using green sources for 20% of their total power consumption.
How much capital do you think they’ve spent on all this? Zero.
Its not too difficult to see the higher ROI here.
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