CMA Magazine

(The Canadian magazine for Certified Management Accountants)
May 2003, page 29
Book Review – "The Sustainable Advantage," by Bob Willard
By ANNE PAPMEHL

Now that Kyoto is a done deal, business practitioners are faced with tough questions of what sacrifices, what costs, and what payback. That’s why this Bob Willard book — "The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line" (New Society Publishers, $39.95 CAD, 201 pages) — couldn't have come at a better time.

Willard, a retired senior manager from IBM with over 35 years private sector experience, has written the first book on how to quantify the business case for sustainable development, as defined by the 1987 Brundtland Report: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." The triple bottom line Willard is referring to is the three facets of sustainable development: economic prosperity, environmental stewardship and social responsibility.

To test his assumptions, Willard uses a hypothetical computer company he calls "SD Inc.", a composite of the top five global computer companies, IBM, HP, Compaq, Dell and Xerox. SD Inc is assumed to have 1999 revenues of $44 billion, profits of $3 billion and 120,000 employees. (Willard conveniently provides detailed worksheets in the Appendix, which readers can use to plug in their own company specific figures.)

There is nothing hypothetical, however, about the untapped profit potential to be had by visionary companies, committing to sustainable development. Though many companies have applied the sustainability initiatives, they typically find that once all the energy and waste reduction targets have been reached, "the law of diminishing returns inhibits further savings from eco-efficiency programs," writes Willard. "A new phase must be entered."

That new phase needn't be costly, as Willard argues: "When creative, whole systems, ecologically based thinking is married with intelligent engineering and ecological design throughout the business, big savings can actually cost less up front than small or no savings."

At present, "corporations are squandering bottom line profits that could easily be achieved by adapting sustainable strategies." By integrating sustainability into their business model and thinking, corporations can realize the following seven bottom line benefits:

• Easier hiring of the best talent – Researchers estimate that the most important corporate resource over the next 20 years will be talented employees, many of which pay attention to corporate social and environmental behaviour. Willard shows how recruiting costs for SD Inc. could be reduced by 5% through a positive SD branding.
• Higher retention of top talent – Keeping your most talented employees in today's competitive environment is challenging, but studies show that talented employees tend to stay with a company when they have meaningful work. Willard shows how SD Inc., in embracing a sustainable framework, could avoid $38 million in costs, "which is like adding $38 million pure profit to the bottom line."
• Increasing employee productivity – Willard discusses the connection between meaningful work and productivity. Engage the entire organization in sustainable development goals like zero emissions, self-sufficient energy production, zero waste, helping restore the planet’s health, you get more back from your employees. SD Inc.'s productivity benefit translates into $756 million, the equivalent of 12,600 extra employees.
• Reduced expenses in manufacturing – If companies substituted 'waste' with 'squandered corporate asset,' "corporations would be pressured by their shareholders to pay more attention to this opportunity for cost savings." Here, Willard points out those savings opportunities through eliminating or recycling waste, redesigning processes to use less energy, water and materials in manufacturing — the low hanging fruits of eco-efficiency — and then identifies less obvious opportunities.
• Reduced expenses at commercial sites – A lot of unnecessary waste takes place at non-manufacturing sites. Through more judicious waste handling, energy efficiency, water conservation, naturalized landscaping, SD Inc. can add $26 million pure profit.
• Increased revenue/market share – By tapping into the trend of consumer preference for 'green' products, Willard shows how SD Inc. can increase its revenue by 5% a year (an extra $2.2 billion) and increased profits of $150 million.
• Reduced risk, easier financing – Companies that show environmental and social responsibility tend to be viewed as less risky and that can translate into cost avoidance, lower insurance premiums, reduced legal and regulatory costs, preferred rates on loans, greater investor appeal, and avoidance of lost revenue from consumer activist actions.

Willard's conservative numerical estimates and real life examples augment the credibility of his arguments. The book is meticulously researched and documented, complete with end-notes, bibliography and earlier-mentioned appendix with worksheets, which are also available separately as Excel spreadsheets from the publisher..

Willard's optimistic yet realistic handbook is perfect for any business practitioner looking to turn sustainability into competitive advantage. Though its primary reading audience is senior executives, the book will also interest consultants working with these executives, environmental affairs department directors, HR directors, management accountants, prospective employees, academics, government agencies, NGOs and shareholders looking for less 'emotional' reasons for companies to be environmentally and socially responsible.