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January 7, 2016 | The Misconception that Sustainability Costs More
Just ten years ago, very few companies had a sustainability page on their website. Now, it is ubiquitous. The word "sustainability" has woven itself into marketing and branding strategy such that companies use it to market themselves. This is a matter of pride. While there are multiple meanings for the word "sustainability," the focus here is environmental consciousness.
I find myself questioning whether these companies practice what they preach on their sustainability pages. Do they stand by what they say or is it simply a buzzword they use because their competitors are using it? Furthermore, is it always true that sustainability costs more or is there a way to reconcile profit and sustainability such that they grow harmoniously together?
Unilever and Patagonia are two companies renowned for their sustainability efforts, and I had the distinct pleasure of listening to their CEOs speak at the New York Times Energy for Tomorrow Conference in Paris a few weeks ago during COP21. Paul Polman, the CEO of Unilever, has endeavored to show his shareholders that sustainability helps create jobs and reduce system-wide cost. He notably said that half of the Fortune 100 companies have saved 500 billion dollars through energy efficiency measures over the last year. These savings can then go towards better waste treatment and other environmentally friendly processes. This is what shareholders wish to see. For them, environmental sustainability and cost savings are a dream come true. Unilever is also currently working on getting all their electricity from renewable sources and has set it sights on becoming carbon neutral by 2030.
Patagonia is another example of a company that prides itself on sustainability. Its CEO, Rose Marcario, says that Patagonia is growing due to higher demand for environmentally friendly products, especially from the younger generation. In 1985, when they started a few major initiatives to be environmentally conscious, they were the first movers in that space. They began integrating sustainability into their daily activities rather than as a side project. This is the key difference between companies that act sustainably and those who only have a webpage on it. They are continuously innovating to reduce the impact of their supply chain and are blatantly transparent about it, using it as a marketing strategy. This marketing only contains sparse technical information as customers look at the big picture. They want to know that buying from Patagonia will reduce their impact; they don’t necessarily care what type of impact they are reducing. This type of marketing also keeps Patagonia accountable to its customers, who want to see constant reductions in environmental impact. Furthermore, 1% of their sales goes to grassroots organizations. Marcario also brought up the poignant point that fast fashion is not sustainable. The sheer scale and volume of the supply chain makes it impossible, which is why they do not subscribe to that business model.
There is no doubt that "sustainability" is simply a buzzword in a few cases. The aforementioned businesses, however, are leaders in the industry in terms of backing up their sustainability claims and are carving out a competitive advantage for themselves. Therefore, other companies must follow suit to close that advantage. As Paul Polman so eloquently put it, "Nobody wants a product that pollutes more." As a consumer, at the same price and quality point, we will obviously choose the product that pollutes less.
Both CEOs brought up the delicate balance between profit and sustainability. For example, Patagonia’s 1% policy creates tension between profit and eco-consciousness. While certain measures do cost more, overall, it can definitely be cost effective. Over the life cycle of the product, implementing sustainability measures could cost less. After all, sustainability in essence is simply balancing the triple bottom line, people, planet, and profit — otherwise known as social, environmental, and economic sustainability.
Historically, there are three ways that most companies have approached sustainability. One is using methods that are more expensive initially but generate savings and higher yield and quality in the long run. The second is small process changes that produce drastic reductions in cost so that they can use that money to purchase more expensive equipment that reduces their production impact. The third is that some have extended their sustainability efforts to the operations of their suppliers and customers thereby reducing their impact on the environment.
To implement these three, the entire life cycle of the product must be taken into account and the focus must be on increasing the efficiency of the system as a whole. Unilever employs many energy efficiency devices, such as more expensive sensors in offices that cost more in the short run, but generate electricity savings in the long run. A good example of the second way is that the dome on the bottom of a beverage can allows it to be designed with less aluminum raw material. Considering the volume of beverage cans sold, this is a huge sustainability benefit. The third is reflected in Patagonia’s operations itself, which allows customers to return used Patagonia clothing to be recycled. While the recycling process may cost more in the short run, it will save on both cost and environmental impact in the long run.
It is possible to reconcile sustainability and profit, but only if the entire system and lifespan are considered. Unilever and Patagonia have figured this out, which is one reason they are willing to implement many sustainable strategies, even though some components may be more expensive. Using and promoting sustainable measures has been a cornerstone of these two companies gaining them a competitive marketing advantage. Other companies that are simply using the buzzword are following in their footsteps to close that advantage. Unilever and Patagonia are both massive companies that are true leaders in sustainability that are seeing both profit and sustainability rising simultaneously.
Rohith Desikan is one of Conergy's Future Solar Leaders. Rohith is a first year Master's student studying Civil and Environmental Engineering with a concentration in Atmosphere/Energy at Stanford University.