The Advantages Of Going Green

While the concept of sustainable development and sustainability was born almost 25 years ago with the Brundtland Commission,[1] the business world’s interest in sustainability did not peak until recent months. This interest has been sparked in part by the mounting scientific evidence, public interest and heated political debate revolving around climate change. In response to this interest, businesses across all sectors are taking notice, albeit few more actively than others. It is likely that those who have invested time and money developing and incorporating sustainability principles into their corporate philosophy, strategy plans and business operations have already benefited through reduced operating costs, minimized future risks, improved public image, and an overall competitive edge through differentiation.

The concept of sustainability is closely linked with “triple bottom line” decision making, which addresses economic, social and environmental issues. Businesses undertaking sustainability initiatives find that to effectively move forward and demonstrate progress is difficult as there are no easily established metrics and no visible “finish line.” Businesses need to focus on not only how “green” their products and services are but also on how they (and their supply chain) do business in communities across the globalized marketplace. As a result, sustainability efforts play an integral role in a vast number of environmental and social aspects of the business including reducing greenhouse gas (GHG) emissions, energy and water usage, and the amount of waste they generate as well as ensuring safe and humane work conditions, implementing charities and community outreach programs and offering equitable labor practices.

The insurance industry, more than any other, views sustainability (which encompasses climate change) from both an opportunity and risk perspective. As a member of the larger global business community, insurers benefit from incorporating sustainability principles into their business practices. They play a pivotal role in promoting sustainability both for themselves as well as their customers who rely on them for risk management. For example, some insurers have developed new insurance products to support the carbon trading market. Others have constructed environmentally friendly facilities that have been certified in the U.S. Environmental Protection Agency’s Energy Star program and the U.S. Green Building Counsel’s Leadership in Energy and Environmental Design (LEED) program. Certain insurance companies have even rewarded environmentally-friendly customers by offering auto insurance discounts for hybrid vehicles.

However, the industry also recognizes the massive potential risks associated with climate change and the uncalculated liabilities that its customers maybe facing. The challenge will be to continue to insure businesses and people while rewarding those who move toward a more sustainable and therefore low risk behavior.

The benefits of corporate sustainability initiatives are both tangible and intangible. Companies that have re-tooled their operations to reduce energy and water usage have realized direct cost savings from these efforts. Efforts to reduce the waste volume (particularly hazardous) generated by their facilities have not only saved on waste disposal costs but also reduced regulatory compliance costs. In addition to direct cost savings, intangible benefits such as an improved public image and increased employee retention and recruiting have been obtained.

While the above benefits often serve as the driver for “going green,” avoiding the business risks posed by future regulation of GHG emissions is becoming a major concern. While federal regulation of GHG emissions is looming, it is not yet clear how and when GHG emissions will be regulated. This uncertainty leaves many businesses vulnerable to increased operating costs and business constraints. Companies that take action now to reduce their GHG emissions and incorporate sustainability principles into their business models are more likely to gain an advantage over their “non-green” competitors. As Jack Welch, former CEO of GE, put it: “change before you have to.”

If you would like assistance in making your business more sustainable, please contact Alborz Wozniak at (925) 403-6200.

[1] The Brundtland Commission was convened in 1983 by the United Nations to address growing concern “about the accelerating deterioration of the human environment and natural resources and the consequences of that deterioration for economic and social development.” The commission defined sustainable development as that which “meets the needs of the present without compromising the ability of future generations to meet their own needs.”