Taking stock of green business

The advent of sustainable strategy continues to have an unprecedented impact on the stock market. Today, the environmental policy of a business and future energy forecasts are a vital consideration for financiers in determining just how investable a company is. Schneider Electric's Richard Badham investigates how to ensure your sustainable strategy is aligned to profit potential.

Corporate Social Responsibility (CSR) was once regarded as a nice-to-have ‘tick in a box’, but bigger companies are now leading the way in aligning their activities to profitability and ensuring that their brand is viewed in the best light possible.

Here, the key driver is the fact that CSR, particularly in terms of going green, has become increasingly aligned to business success. In today’s transparent commercial world where the customer is much more ethically aware, effective energy management is imperative in terms of letting customers know that a company is part of the community and, in turn, cementing a company’s invest-ability.

Demonstrably, recent research by the European School of Management and Technology (ESMT) has shown that annual stock prices react positively to changes in CSR performance when reports were released in that year, suggesting a direct link between market share and CSR activity. However, incorporated into this is not just general good-doing, but a determinable shift towards businesses which are actively environmentally-friendly.

To place the issue into context, one need only look to Marks & Spencer’s iconic business u-turn. As a green business forerunner, Marks & Spencer’s high profile 2010 ‘Plan A’ sustainability strategy helped evoke a new public affiliation with the then-struggling retailer, resulting in direct profit generation of £50k. This ethical approach has effectively transformed the company image and, in turn, profitability; making it a much more enticing proposition for the stakeholder.

Sustainably-savvy consumers

Major players have also followed suit. Sainsbury’s continues to progress its £1bn-pound 20×20 sustainability plan, with many pioneering activities; from zero waste to landfill, to 100% fresh British pork, to flagship green stores. Nestlé has also recently announced its commitment to reduce its water consumption by an impressive 40% by 2020 in recognition of potential water shortages.

Aligned to this, recent years have seen the emergence of a much more sustainably-aware consumer. Statistics show that more than 50% of customers now prefer sustainable brands and 86% of consumers would be more likely to trust a company which reports corporate social responsibility results.

As such, it is no longer acceptable for corporations to behave in a purely capitalistic way, but instead there is growing pressure to give back to the community and have a genuine positive contribution. This represents a new, greener era, focused on creating shared value through a more environmentally minded industry.

Amid mounting green legislation and soaring energy prices, effective energy management is vital to let investors know that a company is future-proofed and thus a sound investment. After all, with the arrival of the Energy Efficiency Directive this June, companies must ensure they set up an extensive system which enables accurate and efficient measurement of energy, allowing reports to be pulled in little time and with changing specification; plus they are readily available for all to see. This means that, in addition to mandatory carbon reporting which is also in the public domain, stakeholders can easily access this information online to see how companies are performing against their counterparts.

Integrated process

So, where to begin for the business owner on the path to going greener? Well, the good news is that manufacturers have gone a long way to make easier work of the once extremely complex energy-management task.

Gone are the days when each of a business’s domains – namely power, building management, IT, process control and security – was operated in silos. While previously many businesses monitored their business processes via a series of spreadsheets and separate systems, all working disparately resulting in major time costs; today, there is simplicity in integration.

The key is connectivity of all systems to enable business owners to practice real-time management and run more efficient enterprise, allowing executives to put money back on their bottom lines – and effectively use this to create shared value within their communities. Bringing and connecting all systems together enables business owners to develop a true window into their world so they can visualise energy and sustainability, reflect and identify concerns in real-time, to act in-line with their corporate objectives.

At Schneider Electric, we have developed Resource Advisor, StruxureWare Energy Operation and Energy Performance Services – a series of software suites and services to enable users to automatically pull data from these domains, organise it into the relevant information for each function, and, more importantly, into actionable insight to allow management to make better business decisions, improve efficiencies, drive sustainability and reduce costs.

Shared value

However, of course, it’s not just about the tactics but rather the strategy, creating targets that include all of the business objectives and saving money that can be used for more positive and community based projects and adding value as a business. For example, Nestlé has recognised this need by recently entering into a stringent energy partnership with Schneider Electric to help it reach its carbon reduction goals by 2020.

With a goal to manufacturer healthier products that are better for the environment through its environmental efficiency, Nestlé was keen to enter into a strong collaborative partnership to allow it to focus on creating more shared value elsewhere in the UK, using its internal resources such as developing community centres. As a result, Nestle has effectively secured its position as a forerunner in environmental responsibility, increasing its share price and establishing its green credentials.

There’s no question about it – today, a robust CSR strategy with strong green credentials is paramount to business acumen. A sustainable business brand is worth more than is invested into to become so; becoming a holistically rounded entity of reduced energy costs, legislation conformity and employee and community pleasing – all of which have a direct impact on market share. For the business personnel not already doing so, surely it’s time to take stock of sustainable strategy.

Richard Badham is head of marketing for Energy & Sustainability Services at Schneider Electric.

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