Why Environmental Responsibility Is Good for Your Bottom Line
"Greening" your company, via any number of means, obviously brings multiple benefits to the physical environment. But while going green may be the responsible thing to do, many companies shy away from these sustainability measures. The reason is their (common) misconception that the costs will outweigh any benefit, that there is no bottom-line value in environmentally responsible business practices.
In fact, this belief may be false, because setting a green path can often improve your bottom line.
So, why set a green path for your own company?
"Sustainability" is a catch-all phrase that refers to the science, or practice, of acting so as not to harm the environment, protecting (rather than depleting) natural resources and supporting long-term ecological balance.
In business, sustainability may refer to any number of operational, technological or product efforts that support environmental protection. For example, some companies set a green path by utilizing environmentally-friendly materials and/or locally sourcing those materials for the manufacture of their products.
Other activities include: producing products that may be recycled at the end of their lifespan for material reuse; reducing energy consumption in operations; or even re-engineering distribution methods as a means of reducing long-distance travel during product delivery, ultimately reducing fossil fuel consumption (and the disease-causing air pollution that is its byproduct).
These represent just a handful of ways to improve sustainability in business. There are many additional ones that will help ensure the protection of the environment. Some of these green measures also have the power to meet customer demands, representing a positive image for the business as well as a positive move for the environment.
Keep in mind something else: Very few businesses can claim no competition. When done well, innovation in environmental sustainability can create market differentiation as well as opportunity. And most entrepreneurs understand that you are either leading or following. Thus, innovation may be a matter of survival. And, what's more, not all sustainable innovation needs to be profound, or novel. It is more important that the effort deliver value, perceived or otherwise, to your customers.
Where to start
When determining how your organization may best employ sustainability measures, keep in mind that research and development cannot dictate your customers’ needs; your customers do that. Start by analyzing your market to determine what your customers’ needs truly are, then develop a plan to provide a solution to meet them.
The challenge will be finding ways to effectively incorporate meaningful “green value” to the solutions you aim to provide, whether they lie in technology, operations, end product for sale, etc. Ideally, the green value will carry not only the marketable perception among customers that your company is being green, but should also yield a potential net value, such as cost savings or efficiency.
One benefit of setting a green path is the likely belief among customers, business partners, employees and others stakeholders in your company's goodwill. Some customers will even pay more for eco-friendly products. Unfortunately, scale in business is critical and the potential consumers interested in goodwill or sustainable products only may not be sufficient in number to justify the expense of the innovation.
So, instead, focus on net cost savings to your company, market differentiation or savings to the consumer to help ensure ultimate success.
In 2014, the company I lead -- Lapolla Industries -- decided to forge a path ahead of our competition by re-engineering the chemistry of our core product line. This innovation in materials technology aimed to mitigate two negative environmental impacts common to all competing products in our space: ozone depletion and global warming impact.
Essentially, the innovation allowed us to bring to market a “next-generation” product line of spray polyurethane foam for insulation and roofing that represented a much more environmentally friendly solution for homes, commercial structures and consumers at-large.
While many of our competitors hesitated to make similar product sustainability improvements (presumably for cost reasons), it was important for us to complete this move ahead of them or any future regulation. Not only was it the right thing to do, but we also recognized the power it gave us to set ourselves apart from the group, as well as to positively impact our bottom line.
Innovation for bottom-line value
Many business leaders today refuse to employ sustainability measures, as they believe the cost will outweigh the benefit. However, viewing sustainability measures simply from a cost perspective may be shortsighted. Focus, instead, on the innovation fundamentals that will deliver both consumer and bottom-line value.
Because bottom-line value can be defined in two ways -- as an increase in market share or as a reduction in costs -- different avenues exist for linking your environmental responsibility to such growth. As long as your efforts grow your financial stability, it doesn’t matter which direction that growth comes from.
When our company sought to make our spray foam products more eco-conscious, we collaborated with raw material suppliers to innovate through technology. This allowed us to achieve the new thresholds while also achieving a net cost savings for our customers. Although the technology cost was 10 percent more than our previous generation of products, the net savings to our customers was approximately 10 percent, achieved through a pick-up of 20 percent in added efficiency.
This resulted in a market interpretation of innovation, market leadership and goodwill, as well as consumer cost savings -- a true win-win all around. We believe success of this kind is achievable by businesses of many types, and that if more leaders jump on board, our planet will be much better off.
Doug Kramer is president and CEO of Lapolla industries, a Texas-based building products company. In 2014, Kramer pushed the company to be the first globally in his sector to eliminate ozone depletion and reduce global warming potential (two issues faced by all competitors in the space) from the Lapolla’s product line via an aggressive reengineering of the chemistry of those products.