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Sustainability and the Bottom Line

To many observers, “sus­tain­abil­ity” is a trendy buzz­word, evok­ing a lifestyle image of tree-hugging peo­ple wear­ing beads and san­dals. Detrac­tors per­ceive sus­tain­abil­ity and envi­ron­men­tal ini­tia­tives as an infringe­ment upon prop­erty rights and eco­nomic lib­erty in gen­eral. How­ever, forward-thinking busi­ness and pol­icy lead­ers per­ceive a dif­fer­ent mean­ing. In a hard-nosed busi­ness con­text, sus­tain­abil­ity has prac­ti­cal impli­ca­tions for the basic pil­lars of busi­ness per­for­mance: rev­enue growth, expense reduc­tion, and risk abate­ment. This alter­na­tive per­cep­tion sees sus­tain­abil­ity not as an eco­nomic restric­tion, but as a guid­ing prin­ci­ple for busi­ness growth and profit in spite of resource scarcity. In this con­text, sus­tain­abil­ity is wholly com­pat­i­ble with eco­nomic growth in the face of finite resources. This arti­cle explains why.

Regard­less of our polit­i­cal lean­ings, we all share uni­ver­sal eco­nomic con­straints: lim­ited time and resources. One of those resources, energy, is an ingre­di­ent of all busi­ness activ­i­ties. This is true with­out excep­tion. No con­tracts are ful­filled or oblig­a­tions met with­out some con­sump­tion of fuel or elec­tric­ity. As the vol­ume of eco­nomic activ­ity grows across the globe, so does the demand for lim­ited energy sup­plies. The most obvi­ous impli­ca­tion: ris­ing energy prices. Other commodities—including min­er­als, build­ing mate­ri­als, even food and water—are sub­ject to the same mar­ket forces.

Expense reduc­tion may be the most obvi­ous reward of applied sus­tain­abil­ity. Energy expenses can be reduced by effi­cient tech­nolo­gies as well as smart energy behav­ior. When energy waste is reduced through­out a sup­ply chain, the result is a lower cost of pro­duc­tion and higher profit mar­gin on final goods and ser­vices. The impact on finan­cial per­for­mance is dra­matic, espe­cially for busi­nesses with thin oper­at­ing mar­gins. For exam­ple, it’s not unusual for hos­pi­tals to achieve a four per­cent oper­at­ing mar­gin (rev­enue net of expenses but before debt and earn­ings dis­tri­b­u­tions). At a four per­cent mar­gin, $25 of rev­enue yields only one dol­lar of oper­at­ing income; con­versely, one dol­lar in energy sav­ings is one whole dol­lar of oper­at­ing income– the same impact as receiv­ing $25 in revenue!

Increas­ingly, sus­tain­abil­ity pro­vides oppor­tu­ni­ties to make rev­enue. In part, this is due to grow­ing con­sumer demand for goods and ser­vices that are pro­duced with a min­i­mum of envi­ron­men­tal dis­rup­tion. Gov­ern­ment con­tract­ing reg­u­la­tions as well as mar­ket alliances increas­ingly require sup­pli­ers to demon­strate waste and emis­sions reduc­tion in their busi­ness processes. In other words, sus­tain­able attrib­utes con­tribute to prod­uct mar­ketabil­ity. Sus­tain­abil­ity thus becomes an eco­nomic advantage.

Why not main­tain the busi­ness community’s sta­tus quo? This is a par­a­digm in which energy and other resources are sim­ply a cost of doing busi­ness and gen­er­ally ignored. Forward-thinking busi­ness lead­ers under­stand that resource sup­plies are not sta­tic. They are sub­ject to deple­tion as well as sub­sti­tu­tion. In either case, busi­ness decision-makers must adapt to chang­ing tech­nolo­gies and mar­ket con­di­tions. Sus­tain­abil­ity, through its poten­tial for waste reduc­tion, is a hedge against the busi­ness risk of scarce inputs. By reduc­ing the vol­ume of energy and other inputs needed to earn each dol­lar of rev­enue, busi­nesses are off­set­ting the risk of ris­ing input prices and pro­tect­ing their profit mar­gins. In addi­tion, the adop­tion of renew­able fuel and power sources pro­vides a mea­sure of resource flex­i­bil­ity and inde­pen­dence from energy sup­pli­ers. By adopt­ing these tech­nolo­gies now, busi­nesses gain valu­able expe­ri­ence to pre­pare them for tomorrow’s inevitable resource short­ages and shifts in tech­nol­ogy. Busi­nesses that fail to antic­i­pate these changes will be forced to scram­ble for solutions.

For the astute busi­ness leader, sus­tain­abil­ity is nei­ther fad nor fash­ion. Sus­tain­abil­ity sup­ports eco­nomic growth and earn­ing power in the face of change. A sus­tain­able busi­ness is one with the means to nav­i­gate tech­nol­ogy evo­lu­tion and chang­ing resource availability.

Christo­pher Russell
Energy Man­ager
Feb­ru­ary 2011

Pushing the Green Economy

Green jobs, Green econ­omy, triple bot­tom line – on some level these have become empty buzz­words in the quest to “go green”. Jobs, of course, can be a jus­ti­fi­ca­tion for many pol­icy deci­sions. The cre­ation of envi­ron­men­tally friendly poli­cies cer­tainly can cre­ate jobs and help sup­port a green sec­tor of busi­nesses. The real­ity is that truly sus­tain­ing (pun intended) this sec­tor takes a delib­er­ate approach that incor­po­rates more than just policy.

Many juris­dic­tions, Howard County included, are mak­ing real efforts to jump start and sup­port this fledg­ling sec­tor of the busi­ness world. Before I get into Howard County’s efforts in this arena though, let me give some def­i­n­i­tions and history.

Green Sec­tor Busi­ness – a green sec­tor busi­ness is a com­pany that pro­vides a good or ser­vice that helps, in some way, to pro­tect our nat­ural resources. As opposed to a “reg­u­lar” busi­ness that has made a con­certed effort to go green. So, a solar instal­la­tion com­pany is a green sec­tor busi­ness regard­less of their inter­nal sus­tain­abil­ity prac­tices while a Dr.’s office is not, regard­less of how much they recy­cle and use high effi­ciency lighting.

Stan­dard eco­nomic devel­op­ment has some basic, time-tested for­mu­las and approaches for exist­ing and thriv­ing sec­tors. The for­mula is sig­nif­i­cantly trick­ier for a fledg­ling sec­tor like this one. The com­mon debate about how to sup­port the green sec­tor often boils down to strategy/approach. More often that not, while the dis­cus­sion pur­ports to be about the green sec­tor gen­er­ally, it tends to revolve around energy specif­i­cally, and while Howard County’s ini­tia­tive is broader, the strate­gic options remain the same. In my mind, the two com­pet­ing approaches boil down to “Apollo project” vs. “Sil­i­con Valley.”

Apollo Project – Based on the after­math of Pres­i­dent Kennedy’s famous speech: “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to orga­nize and mea­sure the best of our ener­gies and skills…” We all know what hap­pened after­wards. With abun­dant fed­eral sup­port, the best of Amer­i­can inge­nu­ity and sci­ence cre­ated the infra­struc­ture and tech­nol­ogy needed to achieve the goal. As a happy by-product, a broad based indus­try was given the means to thrive and thou­sands of jobs were cre­ated. Of course, this is an over-simplification, but bear with me as this is a blog and I only have about 1,000 words.

Sil­i­con Val­ley – Sil­i­con Val­ley has been a tech­nol­ogy cen­ter since early in the 20th cen­tury. The area has been on the cut­ting edge from radio, to TV, sil­i­con tran­sis­tors, through to soft­ware advances and inter­net tech­nolo­gies. As opposed to the Apollo model, Sil­i­con Val­ley was never fueled by a cen­tral­ized force. Instead, with the assis­tance of a nearby major research insti­tu­tion (Stan­ford) Sil­i­con Valley’s engines for progress were small start-ups in incu­ba­tors and even garages. Gov­ern­ment played an, at best minor role in the con­tin­ued suc­cess of Sil­i­con Val­ley, though the local, state, and fed­eral gov­ern­ments did play some role in fund­ing and sup­port­ing these start-ups. Again, this is a gross over­sim­pli­fi­ca­tion but will do for the pur­poses of strate­gic think­ing.
With all of that back­ground, you might think I would now unveil the clear path Howard County is pur­su­ing to cre­ate a thriv­ing green sec­tor. Well … you are wrong, because at the end of the day, the role of a local gov­ern­ment is likely lim­ited AND we already have the foun­da­tions of the sec­tor. While a model in this case is prob­a­bly some com­bi­na­tion of the two strate­gies, we in gov­ern­ment decided to ask the folks who know far bet­ter than us. Two years ago, the County formed the Howard County Green Build­ing Coun­cil (HoCo GBC) www.livegreenhoward.com/gbc. This coun­cil is made up of the true lead­ers of Howard County’s green sec­tor. The HoCo GBC is now an IRS rec­og­nized 501©6 and has a Board with every facet of our green sec­tor rep­re­sented – from renew­able energy to energy effi­ciency, from elec­tron­ics recy­cling to bio­log­i­cal ser­vice con­sult­ing, archi­tects, lawyers, and green retail. This group is plot­ting the course for their own suc­cess and instruct­ing us in gov­ern­ment in the role we can and should play.

If you are a green sec­tor busi­ness, I highly encour­age you to inquire with them as to how you can help. If you are another Howard County busi­ness or a cit­i­zen inter­ested in see­ing a vibrant green sec­tor, you too have a role to play. Check in on the website.Attend their events. I encour­age you to sup­port them, and even become an indi­vid­ual mem­ber of the Coun­cil to show your sup­port for what they are try­ing to do. There it is — the pitch you all knew was com­ing – and thus my post is complete.

Jd Feld­mark

Green Tip

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