Diamond Consultants' report: "Staying Green While the Global Economy Sees Red"

by Editor 4/21/2009 3:53:00 PM
The notion of cutting costs while investing in corporate environmental initiatives might sound counterintuitive, but one major U.S. manufacturer is doing just that—and will save $10 million in the first year alone as a result of the company’s energy efficiency program while bolstering the manufacturer’s environmental sustainability.

It’s not as simple as committing resources to “green” projects. Rather, it takes a coordinated effort across a company’s business operations to see results—and to add money to the bottom line, according to a new report from Diamond Management & Technology Consultants.

In the report, “Staying ‘Green’ While the Global Economy Sees Red,” Diamond makes the case for managing a company’s green initiatives as a singular program, not as a series of one-offs and unrelated projects that aren’t aligned with business objectives.

“Properly managed, green initiatives can help companies lower their overall expenses and edge out competitors as new regulations come into play,” says Darin Yug, co-author of the report and a partner in Diamond’s Enterprise Practice. “A successful green agenda will create synergies between sustainable business efficiencies and environmental compliance.”

As deep as the recession is, it has not changed the key tenets of “becoming green” in the corporate world. “We see two fundamental reasons why it remains relevant for companies to pursue green agendas: achieving high ROI with targeted initiatives, and the ability to meet—and exceed—new regulations,” says Yug.

To obtain a complete copy of Diamond’s report, send an email to GreenAgenda@diamondconsultants.com.

The Opportunities in Building a ‘Portfolio’

“Developing an effective green strategy will involve changes to a company’s business design, and management will have a new set of guidelines for developing strategic goals, policies, processes, and key metrics,” says Richard Findlay, co-author of the report and a partner in Diamond’s Healthcare Practice. “The starting point should be a quick, four-to-six-week assessment of the enterprise and, as we’ve seen, the end result can be tens of millions of dollars in annual savings.”

Shifting priorities away from sustainability projects may seem rational in the current environment, but treating a portfolio of green initiatives as an integral part of a company’s economic recovery strategy is not simply good corporate citizenship—it can be a key component of a broader growth strategy.

Companies that take the recession as an opportunity to put their green goals in line with business goals and make targeted green investments will stand the best chance of creating short- and long-term value, according to Diamond’s report.

Green initiatives that are managed through a singular “portfolio” can play an integral role in reducing expenses for raw materials, packaging, transportation costs, and other areas across the supply chain. Corporate initiatives of all types must fight for funding in today’s economy, and green initiatives that have high ROI should retain their support among senior executives.

In addition, company executives must be prepared to address the double-edged sword of public policy. Politicians across the globe are seeking ways to incorporate sustainability into economic recovery programs with large amounts of economic stimulus money being allocated to environmental-focused programs. Along those lines, the U.S. government and other global leaders who inject taxpayer funds into such initiatives will inevitably insist on new regulations.

“Each company must chart its own course, but many companies cannot afford to miss out on stimulus funding from a competitive standpoint,” says Findlay. In the United States, $37.9 billion will be devoted to energy efficiency projects, $27.8 billion for renewable energy, and $11.6 billion for public transit investments.

Measuring Green Maturity

Companies that remain ahead of the pack in terms of green maturity, by properly managing their green initiatives and maintaining flexibility in the face of new requirements will stand the best chance of increasing profitability through sustainable initiatives and gaining a competitive edge.

“If we look at it in terms of a ‘Green Maturity Scale,’ companies with budding sustainability programs might be on Level 1 or 2, focusing primarily on regulatory needs and one-off projects” says Yug. “But as companies advance toward a top tier of Level 5, they develop the program governance, portfolio management, and key metrics that are vital to gaining a competitive edge.”

Procter & Gamble provides a striking example of what a “mature” green organization can accomplish. The company noted in its 2008 sustainability report that it emitted nearly half a million fewer metrics tons of greenhouse gases in its most recent fiscal year than it did in 2002—a span of time in which the company’s global sales more than doubled, from $40 billion to $83 billion.

“Yes, the recession spells less capital to fund green projects, but we believe that companies can use green portfolios to their advantage during the economic crisis and emerge from the recession stronger and more nimble,” says Yug.

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