Return on Environment (REO) should be a critical factor in determining the sustainability and long-term success of your business. But what exactly is it, and why does it matter? Here is what you need to know about ROE, and how it can set your organisation apart.
Over the past decade there has been a patent shift in the corporate agenda towards sustainable business. Today’s stakeholders – investors, employees, consumers and the industry at large – expect environmental issues to be top of mind priorities that shape the company culture and way of doing business.
ROI (Return on Investment) is still the kingpin factor in your company’s success equation, but the equation itself has changed. Success is now measured largely by the degree to which environmental and social purposes are embedded into the business strategy, namely your ROE (Return on Environment). Here is why ROE should be a vital consideration when it comes to the future of your business and its long-term impact on society and the planet.
What is ROE?
In finance we understand that for an investment to be worth its salt, the net profit must exceed the capital invested. The same goes for a company’s Return on Environment. The ecological benefits of any business activity need to outweigh its operating costs to the environment. To determine an ROE, you need to qualify every aspect of your operations, in order then to quantify the short and long-term financial impact of your activities on the environment, and their subsequent effect on your company’s health and longevity.
The new ‘non-negotiable’
Civic stakeholders today demand a higher level of sustainability leadership and vision – one that requires accountable action and inspired commitment amongst team members. Millennials, in particular, expect your business to be climate-change conscious, and to conduct your business with a sense of purpose and environmental responsibility. A new Morgan Stanley report, in fact, found that millennials are three times more likely to seek out employment with a sustainably minded company.
Failure to raise the green bar means that your organisation could not only lose top talent, but customer loyalty and credibility in the public eye. That’s why it’s not surprising that a 2017 Global Shapers Survey found a company’s carbon footprint to be the no 1 factor to deter or retain the average millennial’s customer loyalty. So with the bar of business practice raised higher than ever, counting your carbon costs is absolutely essential to your organisation’s future.
The bottom line benefits of responsible Waste Management
Companies that commit to sustainable investing are also finding that it builds their bottom line. Even the biggest retail companies like Walmart are seeing real payoffs to carbon cutting, and proving that sustainability is achievable at scale. Since partnering with the Environmental Defense Fund in 2005, Walmart has managed to rid close to 90,000 consumer products of potentially harmful chemicals, and reduce 36 million metric tons of greenhouse gas emissions from its supply chain – all in the short span of six years. The latest plan is a “moon-shot” goal – to eliminate a gigaton of greenhouse gas emissions from their global supply chain by 2030.
And they are not the only big company to pave the way to their low carbon future. Major players of virtually every industry are finding that, with rigorous, science-based and trackable sustainable goals in place, sustainability grows your bottom line.
The invitation for innovation
And this reality makes sense when you consider the process required to unlock sustainability. To commit to a better ROE, you start by identifying the potential pitfalls in your business. A healthy diagnostic of your operational inefficiencies will help you eliminate the excess and streamline your processes to work cleaner, faster and more effectively. Through that effort, you open up new possibilities for innovative partnerships and ventures, which helps differentiate your brand and diversify your industry expertise.
Take the Fortune 500 farmer-owned cooperative, Land O’ Lakes, for example. Named to Forbes 2019 America’s Best Employers List, their latest ‘Sustainable’ initiative is a tremendous partnership within their networks, to drive a more connected, productive, and accountable way of farming across 20 million acres of US agricultural land. Their goal is to spearhead sustainable agriculture, which has set them apart as an industry leader, and as a pioneer for positive change and innovation in their field.
The reality: your responsibility
Bottom line benefits aside, the reality is that we are all responsible to own our environmental actions and leave a lighter footprint behind. Climate change, an unstable global economy, and disruption, have our future in a fragile state. Our only response as citizens and business leaders is to build our legacy with the end in mind, and to consider how we can pave a more sustainable way that can buffer the times ahead.
Those organisations who take this responsibility seriously, and continually work to improve their ROE ,will keep growing their competitive advantage and embedding business with purpose and measurable rewards.
Would you like to know more about how you can measure and improve your ROE? Contact us today, so we can start walking this sustainability road together.