I’m regularly surprised by questions about how to justify a sustainability program. It’s an easy answer. It takes time and money to run a sustainability initiative and you justify it in the same way you justify ANY company expense.
Business “value” is quantified in just a few ways. Revenue and current cost savings are considered hard value. Productivity gains and cost avoidance are soft value. Goodwill and reputation value are even softer still.
Hard Value. Discussions of hard value are easy. Every CFO in the world will be happy to hear about your hard value offerings. If you are supporting a corporate sustainability initiative, you will be MUCH more successful internally if you can quantify results in those terms. Are we gaining any new sources of revenue because of the sustainability program? New customers or markets that will turn into revenue within the next 90 days? What about hard cost savings associated with green technologies being put in place? Is the energy bill going to be 25% lower next month?
Soft Value. Soft value is good too, but it won’t automatically make eyes sparkle in the C-Suite. Find ways to quantify and substantiate these savings. Did sustainability activities help speed process time and increase productivity? By undertaking green initiatives, will we be able to head off any potential expenses in the future? Will we be better able to comply with environmental and safety regulations? Will we help to limit product liability?
Reputation Value. There’s no denying the real value in brand reputation, quality, and general goodwill. But defining it is tricky. Is the company perceived as more valuable because of our sustainability play? How can we tell? More total customers, an increase in new customers, more repeat business? Are we getting more, or more favorable, press coverage or social media engagement as a result?
The trick with a sustainability initiative is that much of the benefit is hidden in soft and reputation value. The key here is to illustrate the path to hard value, drawing the picture of how these improvements lead to hard savings or increased revenue. Very few people can do this effectively, but it’s critical to ongoing success. For example, it’s not enough to say, “We think customers will love it.” It’s much better to be able to say, “Historically, we gain three new customers every time our sustainability program is covered in the Wall Street Journal. Each new customer is worth an average of $3.2 million during the first few years of a business engagement. Therefore, we expect the program to increase revenue by $9.6 million over the course of the next three years.”
Or something like that…
Look, these are not easy questions. Finding the answers for your sustainability program is no different from any other business justification. When you recommend an allocation of resources, it’s still your responsibility to explain why it’s important to the company. That’s always true, regardless of whether it is for a new factory, or new enterprise software, or a sustainability program.
I do this kind of thing for a living, so I can tell you that it’s not impossible to make your case for sustainability. It’s really just good business, knowing how your actions will affect the bottom line. By simply thinking it through, you will be much more able to embark on that remarkable initiative you have in mind.
photo credit: https://www.flickr.com/photos/sookie/156954114/