Can you over-invest in green?

17
OCT
2011

Author: Maggie Slowik - Categories: CSR & Green, Risk

Last week my colleague Tom Seal and I ran a webinar discussing the forces that influence how organisations tackle sustainability, ranging from consumer demand to government legislations all the way to supplier behaviour. At the end of the session one of the participants posed the question: "Can you over-invest in green?". A valid question given that building the business case for a green(er) product, service or even business alternative continues to represent a challenge for most procurement organisations today.

The answer to the question depends on how businesses choose to deal with the price increases that are incurred somewhere in the supply chain as a result of going green. Some will find that they can invest more in green because they will be able to pass the cost on to their consumers while others will be more conservative about introducing green offerings, fearing that they will see little to no ROI in the short term.

Striking the right balance really depends on the sector you operate in. Recent analysis conducted by Newsweek's Green Ranking revealed that greener businesses financially outperform their non-green counterparts, especially in industries that are renowned for their particularly dirty footprints, including oil and gas, utilities and basic materials.

However, increasing evidence suggests that companies, regardless of the sector they operate in, may and should take advantage of the opportunities that are associated with green investments, such as risk mitigation. Consider the price that BP had to pay as a result of the Gulf of Mexico oil spill: over US$30 billion just for the resulting litigations. Surely not every company will suffer a reputational hit like BP did, but many will have to deal with reputational risk to some degree or other. And while reputational risk typically involves high costs, perhaps companies should make sure that that they don't under-invest in green either.

Comments

Richard Batterbee AHCIMA via LinkedIn

Wed 19 Oct 2011 08:43

It depends on the industry sector your engaged in? Renewables that are constrained by legislation we need to move away from fossil fuels and I believe the answer you would get is yes in over-investment, but in regards to our responsibility to CSR the answer has to be no,
In regards to service organisations not enough is being done. Organisations see CSR as an expensive excercise/function but it depends on how far you wish to progress it . Looking at the internal functions of an organisation their are many ways to reduce the impact on enviromental aspects, reducing wastage, internal power, company cars, chemicals to name a few and also seeing what we can put back through enviromental schemes which is media critical.
Maybe organisations need to look at giving a % of their budget to CSR/Green issues and then using their marketing to promote to customers their credentials to maximise benefit and gain.

Oliver Durand via LinkedIn

Wed 19 Oct 2011 14:44

It is not really an option anymore....having said that, it is neither an advantage, you just have no choice anymore, green is here to stay.

Martyn Young via LinkedIn

Thu 20 Oct 2011 09:13

I would say yes. There are a lot of products out there at the moment marketing under green labels and I am pretty sure you could find a supplier to sell you almost anything under a 'green' tag if you looked hard enough! Although energy reduction, and carbon reduction is highly desirable, it must be weighed against other calls on capital. It is no good being a failing, but very green business because other areas have been underinvested, or 'green' premiums have left you uncompetitive.