SA’s green economy transforms bottom lines

South Africa’s fast emerging green economy is driven by factors such as radical cost savings, brand differentiation, sustainable futures, skills attraction and retention.

Driving its uptake is business, particularly multinational companies (MNCs), which – through its global nature and the interconnectedness of markets – is harnessing green principles to do good and boost bottom lines.

As this sector increasingly adds societal value, large business will emerge as one of the most influential social institutions of our time. So said Chris Whelan, CEO of Accelerate Cape Town, at the business think tank’s recent forum on the green economy.

Whelan, who warned that SA faces potentially crippling socio-economic challenges for which innovative solutions had to be found, explained:

“Eskom’s inability to guarantee energy supply is estimated to cost the country approximately R50 billion in lost revenue. Rampant unemployment and civil strife are also fuelled by an increasingly divided and exclusive economy. Our country needs business to lead the way in doing things differently. In the case of the green economy, it is encouraging to see the progress being made.”

Huge societal and cost savings

Justin Smith, head of the Woolworths’ Good Business Journey (GBJ), discussed the cost efficiencies – valued at R269.5 million – and societal benefits that its programme has achieved. Contributing to the savings were water and electricity cost recoveries, energy and water efficiency savings, paper and postage savings of R14 million (following a move to e-statements) and a R6 million saving in annual wrap and pack expenses. Smith stressed the large financial impact of what may seem like small ideas at first. In one example, the retailer changed the colour of its hangers to improve recyclability and realised a R3 million saving. The GBJ also extends to all areas of the business, including logistics and the supply chain.

“We now use more environmentally friendly technology in our trucks to save an estimated 600 000 litres of diesel fuel per year. The installation of automated lighting and environmentally friendly refrigeration units has resulted in a 38% reduction in energy usage on our 2004 benchmark.” he said.

Measurement and target setting are central to the GBJ’s success. Woolworths sets 5-year GBJ targets across its business units and is currently working to achieving 200 targets by 2015. “Weightings and prioritisations are critical and we evaluate progress twice a year. GBJ measures are included in balanced scorecards and sustainability is a key pillar of Woolworths’s overall business strategy,” Smith added.

In SA, green economy investments could restore land, increase water availability and advance the National Development Plan which aims to create 300,000 new green jobs by 2020. Whelan said: “Sustainability is a business imperative and it is predominantly an economic story. It is also a business strategy that fuels short and long-term profitability by including environmental and local issues in business practice. Managing and properly valuing our natural resources is as important as managing budgets and bottom lines.”

Quick ways to improve bottom line

Evan Rice, CEO of GreenCape, a sector development agency set up by the Western Cape Government and City of Cape Town to accelerate the green economy, agreed and said:

“Energy efficiency, embedded generation such as solar installations, and utilising waste as a resource are key ways in which companies can improve bottom lines in the short term. Energy efficiencies alone typically achieve 20 – 30% cost savings with payback in about three years. This is a rapidly growing industry with credible market leaders that deliver results fast. Within the first twelve months of a R2 million lighting retrofit, Atlantis Foundries had saved R1.2 million on its electricity bill. The Cape-based energy services company, Energy Partners, has already delivered R420 million in savings to its clients in just four years.”

GreenCape’s Western Cape Industrial Symbiosis Programme (WISP) facilitates resource exchanges between companies so that one company’s waste or under-utilised resources become another’s inputs. Since its launch in 2013, WISP has enabled the diversion of 114 tonnes of waste, R3.4 million in additional sales, savings of R4 million and additional employment. It is still a relatively nascent programme, but it holds enormous potential to help close the gap to a more inclusive and sustainable economic future for the city and region,” Rice explained.

Over 65 countries now pursuing green policies

Research by University of Stellenbosch agricultural economists has revealed that cities generate about 80% of global output and about 70% of global energy use. The City of Cape Town aims to source 10% of its electricity from renewable energy resources by 2020. Globally, public sector interest is reflected by United Nations Environment Programme findings which show that over 65 countries are now actively pursuing green policies while 48 are already taking steps to develop national green economy plans.

“Climate change, resource scarcity and the perennial search for sustainable growth is fuelling this interest,” Whelan said. “In SA, green economy investments could restore land, increase water availability, create jobs and propel us towards a more inclusive economy. It is encouraging to see to what extent transformation is underway and just how clearly the business case is being proven. The green economy makes sound commercial sense and soon the greater business community will join the first movers to help advance the inclusive, sustainable growth that SA needs.” he concluded.