Industry Insights · November 2011
By Susan Todd, CA
By now, many CAs in industry will have learned how environmental sustainability measures can improve cost performance, primarily through energy and waste reduction. Sustainability initiatives can also improve performance on the top line.
This article explores the experience of two BC businesses that have effectively linked sustainability to marketplace success: Hemlock Printers, a full-service commercial printer with 170 employees based in Burnaby and owned by the Kouwenhoven family; and Novex Delivery Solutions, one of the largest local same-day couriers in the Lower Mainland.
1. Smart environmental improvements attract attention, opportunity, and customers
When you achieve significant waste or energy reductions through environmental improvements, your business peers will want to know how you did it. This creates opportunities for you to tell your company’s story and expand your network.
Hemlock’s early efforts—especially its 2004 move to get Forest Stewardship Council (FSC) chain of custody certification for its largest input: paper—have been recognized with several awards, such as an Ethics in Action award in 2005, and the inaugural Heidelberg Eco Printing Award for Most Sustainable Printing Company in 2009. Dick Kouwenhoven, president and CEO of Hemlock, says the recognition has come in waves, with each wave motivating the company to reach further: “Each award got us more attention in the marketplace, which gave us the desire to become even more responsible. That way, it became internalized.”
Richard Kouwenhoven, vice-president of Client Services, explains further that as Hemlock’s story became known and they were asked to make presentations, it became easier to reach out to the business-to-business (B2B) market: “Being recognized as a business leader generates referrals and helps us win requests for proposals (RFPs). We won a significant contract with BC Hydro where environmental performance was a clear factor in the RFP.”
2. Sustainability is an effective differentiator in the marketplace
While consumers may sometimes pay more for green or eco-friendly attributes, businesses in the B2B market should not expect a premium for being environmentally friendly. But this doesn’t mean there’s no benefit to revenues.
Novex operates in an industry where only the most dependable couriers can command a premium. Competing at that level, CEO Robert Safrata says Novex’s carbon reduction programs still give the company an edge: “We’re not a green courier that delivers—we’re a dependable courier that happens to have a lower footprint.”
Novex went the extra step of surveying its customers to understand their buying decisions. Says Safrata: “We heard from 350 customers, and 35% of them said they cared or really cared about our environmental programs, so we know a third of them are factoring environmental performance into their buying decisions. We’ve also heard anecdotally from new customers that it was the reason they switched to us. It lowers client acquisition costs.”
3. Authentic leadership builds a loyal following
In tight economic times, holding on to customers can be as important as gaining new ones. Businesses that have built a solid reputation for sustainability give their customers one extra reason to stick with them. Robert Safrata points to customer loyalty as one of the chief benefits of Novex’s ongoing commitment to environmental responsibility: “We’ve experienced lower turnover of clients. They stick with us for our unique, strong stance. We’re authentic, consistent, and complete in our approach.”
As Safrata suggests, the key is authenticity. The sustainability market is becoming more sophisticated and better able to distinguish deeply embedded commitments from “green washing.”
Novex has been rewarded for its early and long-term commitment to reducing the carbon impact of the courier business. In an industry that is notoriously price-sensitive, Safrata knows the benefit of loyalty in customer relationships: “We can’t charge a premium for being green, but we’re less likely to get beaten down on price because our customers understand the full value we provide.”
Bob Willard, the author of The Sustainability Advantage, the essential primer on business benefits, has conservatively estimated that a business with a reputation for environmental and social responsibility can expect a 5% increase in revenues over 3-5 years, attributable to its reputation.
4. Sustainability spurs marketplace innovation
A widely referenced article from Harvard Business Review’s September 2009 edition proclaimed sustainability to be the new driver of innovation.
Hemlock’s innovation was to leverage the improvements it had made in its own operations, especially the reduction in carbon footprint, to offer a product to a market that was eager for carbon solutions. Through its “Zero” program, Hemlock tracks the lifecycle carbon impact of client projects and arranges for the net carbon footprint to be offset. This process works because Hemlock has already driven its operational carbon footprint to a very low level. Customers pay for the remaining required offsets so that their print job can be labelled as a Zero product. The program has exceeded early expectations, with more than 125 projects meeting the Zero standard. The Zero brand has, in turn, become a valued differentiator for clients in their own markets. A case in point: When Hemlock printed a mailer for the US outdoor brand Northface, the client asked to have the Zero logo printed as large as their own.
5. Sustainability opens the door to wider changes
Robert Safrata sees sustainability as “a powerful tool for change and a great opportunity to make system-wide changes. He points to Novex’s success in introducing email billing and automated payments, which reduce paper and transportation impacts while also reducing administration costs, saying: “Before we started our green program we couldn’t get customers to do it. Now, because our customers are aligned with us on sustainability, we can ask them to change their behaviour.”
The success of Zero has Hemlock’s management team closely attuned to other opportunities. Richard Kouwenhoven explains: “We’re looking for other opportunities where we can achieve multiple benefits by leveraging our processes and clients.” Chris White, CA, the company’s CFO, says it’s clear to him that Hemlock’s sustainability program is working: “The benefits exceed any costs there may be. We’re seeing growth and increased traction happening all the time.” White also notes that with sustainability now well entrenched at Hemlock, the company is well positioned for future marketplace changes. “If there is a change in buying habits—that might be a result of government action, for example—we’re ready to go there.”
How to get started
Novex and Hemlock executives offer the following tips to help you start realizing the benefits of sustainability:
- Do a sustainability audit. It will reveal any low-hanging fruit.
- Adopt a sustainability statement at the highest governance level so everyone in the company understands that their efforts are supported.
- Find out which issues your staff care about, and engage them in finding solutions.
- Work sustainability into everyone’s job description. This leverages everyone’s efforts.
- Identify the company’s greatest opportunity for impact, and work on that first.
The benefits of sustainability don’t end with lower energy and waste costs. Look for sustainability opportunities on the top line as well, by differentiating your product or service, keeping and attracting customers, and driving marketplace innovation.
Susan Todd, CA, is the principal of Solstice Sustainability Works Inc., an independent consulting practice based in Burnaby that focuses on sustainability strategy, management, reporting, and training. For more free information, visit www.solsticeworks.ca/resources.
- Sustainability is sometimes referred to as the “triple bottom line,” aligning economic, social, and environmental success. While this article focuses on environmental practices, social responsibility provides similar benefits.
- According to the FSC: “Chain of Custody (CoC) certification connects consumers to healthy forests by tracking products from forest to shelf.” Visit www.fsccanada.org/chainofcustody.htm for more information.
- Bob Willard, excerpt from The New Sustainability Advantage (New Society Publishers), forthcoming in June 2012. See www.sustainabilityadvantage.com for more information.
- Ram Nidomolu, C. K. Prahalad, and N. R. Rangaswami, “Why Sustainability is Now the Key Driver of Innovation,” Harvard Business Review, September 2009.