The Toronto Star

October 5, 2002 - Page H5 of the print edition
How business can profit from sustainability
By CAMERON SMITH

I suppose everyone in the business world knows by now that there's lots of money to be saved through environmental initiatives: using less electricity and fossil fuels; reducing waste; and replacing or cutting back on resource materials.

But I doubt many appreciate just how great the potential is for improving corporate profitability by adopting sustainability as a goal and adding profits from social initiatives to the environmental initiatives.

And that's where Bob Willard comes in.

In his new book, "The Sustainability Advantage" (New Society Publishers, $39.95), he adopts the definition of sustainability used in the 1987 Brundtland Report, commissioned by the U.N., as "meeting the needs of the present without compromising the ability of future generations to meet their own needs."

He describes sustainability as a stool with three legs, represented by economic prosperity, environmental stewardship and social responsibility. "If one of the legs is missing, the stool is not going to work," he says. "So we need to be sure all three legs are in good shape."

From that all-inclusive perspective, he details where companies can probe their operations for profit, and what they can expect to find. What his book offers that others in this field don't are spreadsheets that will allow individual companies to plug in their own numbers to see how they might benefit.

Willard is no academic peddling theories. He's a practical businessman who retired as a senior manager at IBM after 34 years with the company.

His book held two surprises for me. The first was how huge can be the profits from sustainability initiatives, even when the calculations are extremely conservative, as Willard's are.

He illustrates his points with a hypothetical company, SD Inc., to which he allocates 120,000 employees, of whom 108,000 are workers earning an average of $60,000 a year, and 12,000 are managers earning an average of $70,000 a year. He sets the company's revenues at $44 billion and its profit at $3 billion.

He calculates that by seizing sustainability opportunities, SD Inc. could improve its profits by $1.15 billion a year, a 38 percent increase over pre-existing profits.

The second surprise was how much profit improvement he found on the "soft" side of operations — in human resources, product differentiation, reduction of risk and consequently, insurance and financing costs and gaining market share by improving public perceptions of the company.

I found one of his scenarios to be telling. He quotes a study noting that, "In 15 years there will be 15 percent fewer Americans in the 35-to-45-year-old range." During this period, the economy is expected to expand, as will the demand for experienced employees in this age range. "That sets the stage for a talent war." The struggle to lure these employees away from their companies will be intense, he says.

What will keep employees loyal will be corporate objectives that give meaning to their work. A corporate commitment to sustainability will do just that, Willard says, citing all kinds of research that bolster this opinion. People stay when they feel they are doing something worthwhile, he says.

And if they stay, companies avoid the costs of losing steam as people leave, hiring and training replacements and then waiting for replacements to get up to speed.

Again citing research, he says a commitment to sustainability will significantly increase employee productivity. On these employee-centred items alone, he calculates a $794.1 million contribution to SD Inc.'s profits, the bulk of it attributable to productivity increases.

Willard will be speaking at a meeting sponsored by the Coalition for a Green Economy and Grassroots Environmental Products at City Hall on Monday, Oct. 21, at 7:30 p.m. It will be an opportunity to test his assertions. And given the large amounts of money he's talking about, they should be tested.

Cameron Smith is an author and environmentalist living in Lansdowne, Ont. The above review was copied with permission from The Toronto Star web site.