It is smart business sense to be green

The Star

By THEAN LEE CHENG and ELAINE ANG


starbiz@thestar.com.my

According to an expert on corporate responsibility (CR) and sustainable development, Paul Hohnen of Amsterdam, it is a general belief that breaching environmental laws does not affect a company’s stock market price. Well, not yet.


He gave palm oil prices as an example. The prices of palm oil are not affected by accusations of deforestation. It is the same with petroleum prices, which have shown no concern about global warming.

Concerns for the environment have now become a trend with governments willing to enact laws and regulations towards greening the environment. Therefore as a result more and more businesses are changing the way business is done. Unilever, a major user of palm oil, has been cutting ties with suppliers that are associated with illegal deforestation and is now committed to double the amount of certified sustainable palm oil it uses.

It was quoted that big retailers such as Tesco, Metro and Wal-Mart are also actively setting higher environmental and human rights standards for their suppliers. They’re doing it because they understand there is no future in being seen as unsustainable and because it makes good business sense now. They are creating a new business model where sustainability is being integrated into the product.

“Companies that aren’t green, or who can’t measure and report their impacts, risk losing out on global supply chain access,” says Hohnen.

“Going green is smart management,” says Hohnen.

By going green, a company achieves several things at the same time.

• First, it reduces the time wasted on brand management. In a world increasingly more sensitive about the impacts of climate change, air pollution and environmental damage, companies with poor performance can expect to spend more time defending themselves to regulators, investors and the media. Consider Exxon, which is still dealing with the consequences of the Exxon Valdez oil spill.

• Second, smarter use of raw materials and energy, leads to producing less wastage which often lead to quick improvements to net profits. The motto “make more by using less” has been adopted successfully by big chemical companies like BASF, Bayer and Dow.

• Third is the market share. For many specialists, “green industry” is seen as the next IT revolution in terms of market growth and opportunities. Some assessments show that the global market for green products and services is more than 500 billion Euros a year and growing.

Many of the world’s biggest companies, like Siemens, Philips and GE, are busy positioning themselves for the “green industrial revolution”.

• Last but not least adopting green technology leads to innovation. Making things with less or making them in different ways stimulates companies with rethink through their business model. This stimulates technological competitiveness.

In turn, this appeals to young graduates, investors and regulators. In the energy sector, it’s been notable that most of the new energy innovations are coming from non-traditional players.

Manufacturers of solar panels and wind turbines have enjoyed some of the fastest growth rates in the sector, helped by subsidies and positive profile. Chinese companies have been quick to exploit the potential of innovation for growing new markets.