Article submitted by: Brett Dvoretz
For years, corporations have been looking at the concept of sustainability and shared responsibility as a philanthropic endeavor. After all NGOs and social development organizations have considered the corporations charitable donors rather than strategic partners, so it’s no wonder businesses have begun to regard themselves in the same way. With our dwindling natural resources and ever increasing energy prices, it might be time for both to rethink their approach to creating social wellbeing.
Take a moment to consider the implications of “business as usual” on your bottom line. In the last 12 years, as population has increased from 6 billion to 7 billion, the global material consumption has increased by 37% and energy consumption has increased by 33%. The result was a 500% price hike in energy costs, 360% swell in precious metal costs, and a 60% rise in non-energy commodities.
The world population is predicted to grow to 8 billion by 2020. If the global economy was to realize a similar increase in resource prices as the population increases by another billion, what kind of effects would that have on your bottom line? For most companies it would mean reduced or eliminated profits and higher operating costs.
If corporations don’t rethink their current way of doing business, the Earth’s natural resources will continue to dwindle while the dramatic rise in supply costs will persist. It’s time for corporations to refocus their attention on creating wealth and increasing profits through sustainability and shared values.
Putting Shared Values into Action
Social development is no longer just an area where businesses can make themselves “look good” by offering donations. For corporations on the cutting edge, applying shared values has become an arena to realize huge profits and reduce operating costs.
GE is an amazing example of applying shared values to improving corporate profitability while refocusing on a sustainable business model. In 2005 they launchedEcomagination. Their focal point is creating technology solutions to save money and reduce environmental impact. They have already generated $160 billion in revenue through the creation of eco-friendly products which allow their customers to save money. In addition, they have reduced greenhouse gas emissions by 32% and their freshwater demand by 45% resulting in $300 million in savings.
Nestlé is another company that has been extremely successful in making shared values the focal point of their business model. They worked extensively with their growers in developing nations to help improve farming techniques, guarantee bank loans, and secure farming resources. They also established facilities to gauge coffee quality at the point of purchase allowing them to pay farmers higher rates while ensuring their product’s superiority. Greater yield per hectare increased farmer income, lowered environmental impact, and grew Nestlé’s supply of premium coffee beans at the same time.
The Opportunity to Profit by Applying Shared Values to Your Business Model
There are three basic ways to put shared value into action improving the environment and conserving natural resources while creating massive boosts to your bottom line in the process.
- Innovate environmentally friendly products
- Reduce resource consumption
- Strategic partnerships with NGOs
While the “use less” strategy or creating eco-friendly products has been successful for a number of companies, strategic NGO partnerships are too often overlooked despite the fact that they can lead to numerous opportunities to lower operating costs and increase profits. Many corporations currently understand the value of transferring technology and product innovations to underdeveloped countries, but few realize the success that transferring institutional knowledge can have.
NGOs have an intimate understanding of local business systems and culture that is vital to economic prosperity in those regions. A strategic partnership can allow corporations to minimize risks, avoid mistakes or negative campaigns, and identify supplementary areas for profit. Additionally, their participation in local networks gives them access that would be nearly impossible for outsiders and multinational corporations to achieve.
Working together allows NGOs to further their goals and helps businesses improve their bottom line while having a beneficial impact on the environment and society of many developing countries. It’s not just about portrayed public image, but rather mutual benefit, hence the term shared values.
Resources to Help You Apply Shared Values to Your Business Model
This blog by Green Biz lists 10 amazing NGOs that partner with the corporate sector to help them reduce their environmental footprint and increase profits at the same time. Their methods range from consulting on transportation and infrastructure improvements to educating businesses on sustainable agricultural with everything in between.
The World Resource Institutes Project Directory and the Natural Resource Defense Council’s Smarter Business Page are also great sources which can show you how to realize profits while cutting back on resource use and environmental impact.
Profits and philanthropy are no longer mutually exclusive. By aligning your business model with improved social and environmental well being, you can realize increased profits, greater sustainability, and improved public image at the same time.