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Sunday, September 1, 2013

The Surprising Economics of Sustainability 09-01

The Surprising Economics of Sustainability


One finding in a recent Office Depot survey of small-and medium-sized businesses (SMBs) and environmental sustainability was strange: 66% of SMBs said they were not going greener, often due to concerns about costs, and 34% were actively going greener, often motivated by saving money.
How is it that the same action - going greener - could have opposite economic outcomes: higher costs for one set of SMBs and lower for another?
I believe the answer is due to perception versus reality.
The SMBs concerned about costs are allowing perception to stop them, and the SMBs going greener have uncovered the surprising economics of environmental sustainability. Which group are you in?
If you are in the first group, and have no plans to go greener due to concerns about cost, let's explore your perception. Your view may not be surprising as it is common to think everything green costs more. In fact, the marketing research world has a stock question, "How much more would you be willing to pay for a green product?"
I would argue that the question is ineffective because it reinforces a false perception based on some greener options that do cost more: organic products; solar panels; carbon offsets, hybrid cars, and recycled copy paper. These products are all more expensive than non-green alternatives, but are they the only options when going greener? The answer is no.
If you are in the second group, motivated by saving money, you've probably discovered what I call the "Three Saves of Green": save initial cost, save operating cost, and save repurchase cost. Some examples:
Save initial cost: Avoiding waste is greener because waste costs money and uses resources but provides no value. Refurbished technology, toner and furniture items are greener because they are reused, and almost always are less expensive. And many everyday items that SMBs use, such as office supplies, cleaning products and shipping materials, have greener options at lower initial cost than less green alternatives. Seek, and you shall find.
Save operating cost: If an item is inexpensive to buy but expensive to operate, it is not cheap. Smart SMBs save operating costs by considering the Total Cost of Ownership (TCO) of the choices they make. Lighting is a good example. Greener lights almost always cost more upfront but save money over time. Compact Fluorescent Lights (CFLs) have a payback period of less than three months, and the latest Light Emitting Diodes (LEDs) can pay for themselves in under a year. 
You can also avoid unnecessary lighting by installing reflectors above your lamps or motion detectors in low-traffic areas. Choosing efficient technology and appliances, or using the cloud instead of onsite servers, also delivers operating cost savings. In fact, nearly everything you do to improve operational efficiency will improve your environmental sustainability - and save you money.
Save repurchase cost: If an item is inexpensive to buy but needs to be purchased again and again, it is not cheap. Choosing durable, modular and reusable products can deliver SMBs economic benefits because your upfront investment in quality and durability will help avoid regular waste and cost associated with one-time-use. Simple things such as rechargeable batteries and reusable dishware typically deliver these types of savings; as do more complex options such as durable and modular furniture and workstations. If you're trying to build a business that lasts, it makes sense to buy products that last.
So going greener does not equate to paying more. The truth about the economic impact of environmental choices is that it depends on the specific choices you make.