Many companies do not see the value of moving towards more environmentally friendly practices. However, what has been considered an ethical and then legal issue for years, is now also considered a societal requirement . It is in the interest of South African companies to comply, according to Jako Volschenk, Environmental Finance lecturer at the University of Stellenbosch Business School.
‘When employees and consumers start to expect proactive behaviour from companies, it creates one of the strongest push factors. And once we require our pension funds (i.e. institutional shareholders) to be truly concerned about the world of our old age, we should see decision making in companies include environmental issues as a societal requirement rather than legal requirement,’ he says.
However, when companies move beyond what is expected, an interesting phenomenon emerges.
‘Consumers start buying their products because it is good and it’s green. AfriSam, the South African cement producer was the first cement company in the world to introduce a CO2 rating on all its cement products. The company drove its total emissions down by 34% in a time that its production increased by 54%. Not only do low emissions foretell of lower energy bills for AfriSam, but the company charges a premium on its product to environmentally conscious consumers. The numerous awards that AfriSam has won are worth more than any marketing campaign it could hope for. But while the market for expensive green products is often small, most consumers would opt for greener options if it does not involve paying a price premium or a reduction in comfort or functionality.’
Similarly, research increasingly confirms that today’s graduates aspire to work for companies they can trust to do the right things, and they are even willing to accept a lower salary in doing so. Ipsos Mori conducted a survey in fifteen countries (including China and Brazil) in 2007 and found that eighty per cent of the respondents indicated a preference to work for an environmentally responsible company.
There is a similar trend among South African students. A strong environmental ethos in a business has the power to align people to a much greater extent than any vision can.
innovative solutions dissolve problems
Volschenk states that the list of value creators is extensive. The future belongs to those companies that innovate. Innovative solutions dissolve rather than solve problems, meaning that the big innovations lie not in the incremental space, but make the original dilemma irrelevant.
‘Environmental responsibility is a moral requirement that companies should not be allowed to exist without. An American hospital recently decided to source all its energy from renewable sources. Its logic was that if their mission was to care for the long term health of people, it could not justify its contribution to climate change by relying on fossil fuels for its energy needs. The irony is that this hospital now enjoys unprecedented success, confirming that people want to see authentic signs from companies that they care for the greater good.South African companies that seem to understand this are Woolworths and Pick ‘n Pay,’ says Volschenk.
Volschenk says that while we should expect environmental action as a moral obligation from companies, few would argue that movement would happen faster if it made financial sense to do so. Push and pull actions both have a place in encouraging companies to be greener. If this is done right, we should find that environmental actions and solutions are matched with what is required.