Sustainable Business Practices Can Impact the Bottom Line, Say This Quartet of Researchers -- Lessons Here for Busy Execs
G&A's SustainabilityHighlights (21.9.2017)
You can read our Top Story this week first and then you can forward this important commentary to your C-Suite if the execs there have been wondering how corporate sustainability may be impacting a company's bottom line, in positive ways.
A quartet of experts writing in the Harvard Business Review has responded to the short-term, bottom-line pressures that we hear so much about throughout much of Corporate America.
To develop their case, the authors (three academics and a consultant) looked at Brazil's giant beef industry, a challenge for studying considering the size and complexity of the industry and its long-term impact on the planet. (Brazil is the world's largest beef exporter and second largest consumer market for beef products.)
Key finding: "sustainable" and "deforestation-free" industry practices created significant financial benefits for all players in the industry value chain. Quantifying this, the authors found net benefits to ranchers ranging from 12% to 23% of revenues. Sustainable agricultural practices provided the most financial benefits, while the uptake of deforestation-free commitments over time reduced risk to the industry and company components.
Their approach demonstrated (they write) that measuring the value chain of sustainable business can be done and the sustainable business itself can be cost-effective. Brazil's beef industry impact on the plant has been intense (with de-forestation and GHG emissions) and there have been significant steps taken to address the issues involved.
One industry participant explained that while there is no price premium for sustainability alone, there is for quality, and the company's quality immediately increased with the adoption of sustainable practices. Today, 70% of their beef products are sold with a quality premium, from "zero" two years ago. That resulted in increased revenues and greater customer satisfaction.
While the focus is on the Brazil beef industry (and the value chain from grower through the processor to retail) we think there's some good material here to help executives understand "the possible" bottom line impacts through sustainable business practices.
The authors are Tensie Whelan of NYU Stern School of Business, Center for Sustainable Business; Bruno Zappa, A. Kearney strategy consultant; Rodrigo Zeidan, of NYU-Shanghai and Fundacao Dom Cabril/Brazil; and Greg Fishbein at The Nature Conservancy / Collaboration for Forests & Agriculture.