Ethical Profit: A Guide to Increasing Profit Using Sustainable Business Practices210
Ethical Profit: A Guide to Increasing Profit Using Sustainable Business Practices210
How do you sort through the myriad of "green" advice available to find what works for you and your business? So many small businesses are paralyzed, without guidance on what to do, how decisions impact the environment, and where to even start. In Ethical Profit, Samantha Richardson has done the work for you. Outlining changes from small to large, she provides the “how to” that will break the paralysis and jump start you, and your business, into action. And she does it by destroying the myth that environmentalism is costly. Ethical Profit will revolutionize your business while increasing your profit.
Drawing on experiences, interviews, and case studies across industries and geographies, Ethical Profit contains something for everyone. Recognizing there isn't a one-size-fits-all solution, Richardson provides examples and solutions that can be mixed-and-matched to address your business's unique challenges. The time to change is now and Ethical Profit shows you how to do it.
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About the Author
After graduating from Queensland University of Technology with a Bachelor of Business, she followed family tradition and became a third generation accountant. She has worked in accounting for over 15 years across three continents. Her desire to have a greater impact on people and small businesses led her to open a small accounting office where she became the second accountant in Canada to be a certified B Corporation. Outside of accounting, Richardson is passionate about caring for the environment. She strives to reduce her carbon footprint through cycling, avoiding single-use plastics, and offering consulting to other small businesses on how to live and operate more sustainably.
Read an Excerpt
THE CURRENT STATE OF AFFAIRS. HOW DID WE GET HERE?
Our society is built on capitalism that, as said above, doesn't calculate the full cost of doing business. Fossil fuels enabled a capitalistic economy to soar to success, but without truly incorporating the real environmental cost, including the impact on vulnerable communities. To paraphrase the state of affairs, Paul Hawken said "Our economy by and large operates by stealing the future, selling it in the present and calling it GDP."
Anti-environment companies are at a tough stage: barely in compliance with current environmental statutes or complaining vehemently about the cost these compliance laws have on their business. It's an unfortunate attitude because these laws exist for a reason. These businesses are modelled on the past and are not building to serve the future. They are operating businesses that can barely keep up with the present. Those who are ready to do what is necessary right now — build a business in tandem with society and our environment — are at the base necessity of business. In order to future proof one's business, avoiding going the way of BlockBuster Video, we have to build environmental costs into our business while remaining profitable.
William McDonough and Michael Braungart accurately summed up our production outlook in their book, Cradle to Cradle.
Society has designed business production that:
Puts billions of toxic materials into the air, water, and soil every year.
Produces materials so dangerous that they will require constant vigilance by future generations.
Results in extensive waste.
Puts valuable materials in landfills where it is highly unlikely that they can ever be retrieved.
Requires thousands of complex regulations, not to keep people and natural systems safe, but, rather, to keep them from being poisoned too quickly.
Measures productivity by how few people are working.
Creates prosperity by destroying natural resources and not using them efficiently.
Erodes the diversity of species and cultural practices.
Of course, the industrialists, engineers, inventors, and other minds behind the Industrial Revolution never intended such consequences. In fact, the Industrial Revolution as a whole wasn't designed. It took shape gradually, as problems were identified and solutions were implemented to take advantage of opportunities in an unprecedented period of massive and rapid change.
So, how did we get here?
There is no denying it. This climate change mess is because industries focused their business making decisions only on one factor: the bottom line. And the other costs have been devastating. Concerns over businesses' impact on the environment reach as far back as the 1930s, but the sustainability movement that we know today was set into motion in the 1960s with Rachel Carson's ground-breaking book, Silent Spring. She presented shocking evidence that spraying poisons were bad for one's health, killed nearby plants and animals, and damaged the environment by poisoning waterways and seeping into our food. This fuelled what would later become the tree hugging hippie stereotype of someone who wanted to protect the environment was considered the enemy of business. They were the ones who were public about pushing businesses to change their practices. However, businesses only began adopting environmentally-friendly business models in the past thirty years.
Yet still, we have many products with labels like this one, highlighted in William McDonough's TED Talk "Cradle to Cradle Design":
This is a rubber duck. It comes in California with a warning: "This product contains chemicals known by the State of California to cause cancer and birth defects or other reproductive harm." This is a bird. What kind of culture would produce a product of this kind and then label it and sell it to children? I think we have a design problem.CHAPTER 2
THE FIRST STEP: MYTH BUSTING
I hope to refute pervasive myths that prevent small businesses and entrepreneurs from focusing on environmentally and socially responsible business endeavours.
Myth One: It Will Cost Your Company More
There are several books showcasing the exact opposite, that environmentally responsible business actually outperforms the business-as-usual mentality. Bob Willard, author of The Sustainable Advantage, has studied environmentally-friendly business practices and found a 40% increase in profits among those who strengthen their commitments to environmental and social responsible business policies. This is compared to similar companies running their business without sustainability practices.
That's a huge advantage. Can you imagine having 40% more profit? If this is the case with large companies, imagine the gains in your small business. If you could increase profits by 40% tomorrow, how willing would you be to learn how to do it?
Myth Two: The Green Economy Is a Fad or Marketing Ploy
Environmental activism has been happening since the sixties but only gained traction with the younger generation coming into the workforce, who are concerned with their future. This myth is entwined with larger companies presenting themselves as eco-friendly only to be exposed as charlatans, pretending to have the world's best interest at heart. The deception of using products that are harmful to the environment, or manufactured in overseas plants with safety and human rights violations, is deplorable.
Myth Three: Eco-friendly Equates to Mediocre Products
Words of caution: There is a misconception in the North American mass market that eco-friendly equates to mediocre products. Eco-friendly products tend to do the same job, last longer, and not destroy our fragile world. Cleaning products, for example, may be slightly more expensive but create a healthier space and decrease costs on things like healthcare.
Myth Four: Corporate Social Responsibility (CSR) Is Only for Large Companies
Large companies have seemingly endless resources to dedicate to environmental and social improvements. You know, as a creative and dexterous entrepreneur, that you can't approach problems the same way as a large business. You have to approach the challenge differently, through innovation and adaption. But just like large companies can see a huge benefit from investing in greening their company, there can be significant gains to be made in smaller companies as well.
There are countless examples of good things coming from companies willingly investing in corporate social responsibility ... and many failures that arise from those who don't. Throughout this book, we are going to explore a few short stories you may or may not know to learn facets of success and failure from ethical companies and unethical practices.
First, I want to share an important story that illustrates the cost of multiple "doing business as usual" practices and mindsets — and what happens to those who stretch the rules.
Enron: Business Monstrosity? Excellent Case Study? Both?
Enron is now a synonym for fraud and corruption. It was a company that caused changes in business and accounting laws because it deceived its employees, shareholders, and customers until the truth caught up with them. Fake accounts, falsified documents, exploitation of accounting loopholes, executives stealing, insider trading ... this was an accounting drama that shook the world.
Before the scandal, Enron was hailed by Fortune magazine, won multiple prestigious business awards, and their stock price grew steadily. Their accountants, Arthur Andersen LLP, enabled the fraud and even advised them on the how. The collapse of Enron caused economic devastation for many people: employees, shareholders, and associates.
At the height of Enron's business, Arthur Andersen LLP was the fifth largest accounting firm in the world. It reported $9.3 million in revenue in 2001 prior to the scandal and, reasonably, was considered a successful business. And while most of the consultants and people who worked for Arthur Andersen LLP would have had strong ethics and would have been considered to be bright, capable, employable consultants, their reputation was tarnished following the collapse of Enron. Arthur Andersen LLP soon had the same fate. The association with Enron, including the terrible publicity, and public fallout, led to clients leaving Arthur Andersen LLP in droves. Within a year, their business was in shambles and, not long after, they dissolved the company. Unethical business practices that focused solely on bottom line profit, to the exclusion of all else, proved to be a terrible business decision. Had Arthur Anderson LLP acted in accordance with the interests of their other stakeholders, such as customers and the public, they would have exposed the fraud much sooner, saved the U.S. economy millions of dollars, and likely won the loyalty of their clients and trust of the public. Had they chosen differently, Arthur Andersen LLP had the potential to become the #1 accounting firm in the world. Would you not want to work with the company that prevented an economy catastrophe? Instead, their misconduct forced law makers to introduce policies to protect stakeholders, and the accounting profession to elevate its own standards of practice.
If ever there was an argument for prioritizing ethical business practices in your business and your supply chain, this is it. With the state of the environment, a new ethical focus is on businesses that are truly green.
So let's do this.CHAPTER 3
WHAT IS BEING ENVIRONMENTALLY FRIENDLY?
William McDonough's Cradle to Cradle approach is that there is no waste when throwing something away. Everything goes somewhere and waste products can become another animal's food. Your waste is a dung beetle's feast. What we consider waste can actually be reused or recycled. Compost is used as fertilizer, old clothes and items can be donated to thrift stores, etc. Also, waste doesn't just disappear because we no longer see it. Ensuring that material doesn't go to landfills, which is not conducive to decomposition, is the objective. Keeping an object as is, being used to its fullest capacity, is the objective. So, ensuring that your car is running and in tip top condition, using your reusable coffee mug every morning for as long as possible, and wearing clothes until they wear out are all part of decreasing your waste.
Recycling, while it is not the solution, is a tool to decrease waste. When a plastic bottle no longer has a use, it is recycled. It can have a second life as a park bench, decks, playground equipment or even become another plastic bottle. However, this takes energy so using an object for as long as possible is the best solution to decreasing waste. Back to Cradle to Cradle, "Waste is a product that companies create through spending resources and money, yet adds no value to the business. Then businesses often have to spend money to dispose or treat this waste. Waste is a huge cost to business in North America. The ratio for the U.S. economy as a whole is 6 percent product and 94 percent non-product." They continue to explain the following:
1. Reduce waste: Process efficiency is imperative. Whether through pollution prevention, waste minimization, business process reengineering, design for environment, for example, through redesign and re-specification of products, processes, and equipment.
2. Waste as feedstock: Consider this both internally and externally. Turning the "waste" of one process into the inputs of another can increase net yields. Internally this can look like cycling scraps back into the product stream (wood pulp turned into recycled paper), or using waste heat from electrical generation to heat water. Externally start with recycling and compost efforts.
3. Compostable waste: Design your waste to be more digestible by the food chain, and it becomes a product. At least design your waste to be safely compostable.
4. Break the addiction to stuff: Produce more value with less physical throughput. Find ways to get more done with less, or find ways to allow customers to buy more services from you and less product.
5. Measure what matters: Use key performance indicators to measure your progress toward your holistic business goals.
The tremendous amount of energy and resources it takes to make stuff — even green, environmentally-responsible stuff — is not reflected in our rapid consumption and discard of material goods. Fast fashion is a great example; we produce a cheap product at the expense of workers overseas, the environment, and the raw cotton and agriculture, only for it to end up in a landfill a year later. In the "Municipal Solid Waste Generation, Recycling, and Disposal in the U.S.: Facts and Figures for 2008", The Environmental Protection Agency says on average 250 million tons of trash per year is generated, roughly 814 pounds per person. This is only personal waste and doesn't include the waste produced by small business and industrial waste.
As businesses, we contribute to 70-75% of the waste chain. Diverting waste, reducing our consumption, and reusing instead of buying new are easy ways to better manage the waste our society produces.
The best part is, when you are able to minimize your waste, you save money!CHAPTER 4
THE CASE FOR ECOFYING YOUR BUSINESS
The biggest challenge in ecofying your business is that half the time, you don't even know where to start. The upfront costs and multiple behavioural changes of being environmentally friendly can seem daunting and turn people away. For example, organic food is considered more expensive, albeit sometimes only marginally, than non-organic food. For price-conscious consumers, a few cents can make the difference of what to buy. In recent years, companies have developed sustainable products at a price point that is competitive with quality that is as good or better than conventional products. This is part of why there has been more traction in eco-friendly products. But in the end, eco-friendly products are less expensive because of the reduced impact on the planet.
Being financially savvy is not always part of the entrepreneur skill set so it can be difficult to calculate the difference in financial expenditure between the high upfront costs of buying a hybrid car versus a jeep that is cheaper upfront but has higher maintenance in the long term. Sure you may like a jeep, the image it creates, but is it really worth an extra $1,000 out of your pocket? Especially when your business has so many other expenses, choosing the best option for the long term can impact your success. Buying a new or used vehicle is a similar consideration. Are the savings on the used car worth the additional maintenance costs?
All companies should have hybrid company cars if they need to own a car. Let's break down the savings to show why it makes business sense:
Smart car: Best for companies operating out of urban centres, have minimal long distance travel, and have a small staff of contractors or employees.
Hybrid car: Most economic and practical. It includes mileage, financial options similar to a typical company car, and allows for long distance trips in a business as usual fashion until electric cars are more common and practical.
Conventional car: Long-term costs are higher with rising gas costs including pollution that increase personal taxes for clean-up, although it isn't as expense on the books.
As you can see, the cost savings from using a hybrid in an average business scenario will save money. That's not including any rise in gas prices, which is likely given historical trends and dwindling supply. Plus, this also saves in carbon emissions.
This is just one example and there are many more.
Often, the short sightedness of the business world is the greatest downfall to lasting and significant change. Environmental changes may not cause cash to immediately flow in and it can be hard for businesses to invest in large expenditures for the greater good. But it can help stop cash from flowing out. To be environmentally conscious is to implement a long-term vision that could create short-term cash problems or slower initial growth, which is at odds with how business is expected to work these days, but is better in the long run.
This could be said for our personal actions as well. Unfortunately, business often continues in an inefficient, environmentally destructive way simply because it has always been done that way. New environmental initiatives are incorrectly perceived as costly or inconvenient, and because the problem, such as dwindling fossil fuel supplies, isn't immediately obvious these initiatives don't get the attention they deserve. Repressing one's ethics or morals, or not questioning it at all, seems easier and contributes to the problem.
Does change seem too inconvenient? Well, doing nothing has far greater negative ramifications than the immediate pain and inconvenience of transition. Obscurity, fall from grace, and bankruptcy can become the fate of rigid businesses. This is the new age where business is driven by consumer demand; the labour market, pushed by millennials, demands more meaningful and social consciousness from their jobs. Companies who make corporate social responsibility (CSR) a priority, and walk the talk by infusing B Corporation values, which are outlined later, into their business are more likely to attract and retain the new worker.(Continues…)
Excerpted from "Ethical Profit"
Copyright © 2019 Samantha Richardson.
Excerpted by permission of Samantha Richardson.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Introduction: The Urgency for Change
SECTION I: WHY YOU SHOULD CARE
1. The Current State of Affairs. How Did We Get Here?
2. The First Step: Myth Busting
3. What is Sustainability?
4. The Case for Making Your Business Sustainable
5. Above and Beyond the Physical Environment
SECTION II: I’M ON BOARD. WHERE DO I START?
6. “But What Can I Do?” The Chapter of Hope
7. Environmental Business Successes
8. By the Numbers
9. Collaborating with Stakeholders
10. Efficiency and the True Cost of Waste
SECTION III: SUSTAINABILITY DRIVING FINANCIAL CHANGE
11. Carbon Footprints and Environmental Audits
12. Where Do You Invest Your Money?
13. How Technology Can Help Your Company Be More Sustainable and Efficient
14. Bigger Steps
15. The Conclusion but Not the End
Appendix A: Checklists
Appendix B: Resources