Single Blog Title

This is a single blog caption

Top Companies Turning Sustainability into Profit

The overriding aim of business has always been the maximisation of profit. With the advent of the industrial revolution and the wonders of mass production, profit at any cost has always been the ultimate goal. This was never more evident between the early 1800’s and the early 1900’s, when the labourers who produced the products were treated as merely another expense on the balance sheet, the cost of which had to be minimised as much as possible.

This paradigm has persisted into the 20th century. As late as 1970, economist Milton Friedman is reported to have said, in his essay, “The Social Responsibility of Business Is to Increase Its Profits” that any business with a “social conscience” was “unadulterated socialism”. Sustainability and social conscience was viewed, if at all, as an add-on department that was very much part of the bottom line.

With the gradual worldwide growth of middle class consumers a new paradigm has emerged. This shift in paradigm has been driven by a growing awareness amongst consumers that we cannot make profits at the expense of sustainability. However, it has become apparent that sustainable business practices can actually improve profits.

Nine “green giants” have emerged who have boldly taken a leap into the future and have returned astounding results.

Who are These Green Giants?

To qualify as a green giant, the company must make its turnover from products that are environmentally sound, using labour in a socially responsible manner. In a 2nd January 2016 article in the Guardian, Freya Williams, author of “Green Giants: How Smart Companies Turn Sustainability into Billion-Dollar Businesses” spells out in fascinating detail how these large corporations have managed to turn sustainability into a billion dollar turnover; in many instances being extremely disruptive in their particular sectors.

According to Ms Williams, the green giants are, in no particular order, Nike, Tesla, GE, Natura, Chipotle, Ikea, Whole Foods, Unilever and Toyota. The retailer, Target, has announced that it might be joined this exclusive club in the near future. Target has sales of just under a billion.

So What Makes These Corporations So Successful?

·        Managing Changing Consumer Expectations: Chief amongst many attributes of these firms appears to have been the ability to perceive the shift in paradigm of their customers. The proliferation of the internet, with its instant dissemination of huge amounts of information, has, over the last two decades, bred much more savvy and concerned consumers. They do care how the products are made and they do care about how the people who make those products are treated.

·        Products and Processes That Really Do make a Difference: A perfect example of this is Tesla’s introduction of the world’s first commercially successful, all electric luxury car. This was within a decade of the documentary “Who Killed the Electric Car”. This prophetic piece of cinema had declared the technology unsustainable. Another notable success has been the realisation of GE’s Ecomagination. The programme has produced a whole slew of services and products that have regard for the environment and social responsibility at their core.

·        Holistic Changes: None of these corporations has approached the question of sustainability with merely lip service. It is not just a partial change of how they manufacture their standard products; or a 10% saving on the energy bill. The whole issue of sustainability has been taken from the bottom line and has become an integral part of the top line. Innovative services and products have been developed from the ground up, and this has caught the imagination of consumers. These consumers have responded by pushing sales of these products to over a billion dollars in annual turnover.

·        Innovative Leaders: Seven out of the nine companies have had the good fortune of having extremely innovative leadership. These people, it seems, has almost singlehandedly been responsible for each company’s journey to increased profitability through innovative products and a commitment to sustainability. Elon Musk springs to mind. Born and educated in South Africa, his arrival in America saw a revolution in the motor manufacturing industry. His dream of commercial space flight is another example of how this exceptional man has caught the public’s imagination, and it has shown his willingness to think out of the box. This will surely translate into increased profitability in the future.

The Future

The historical prevalence of “maximum profit at any cost”, both to the environment and the labour force, has had its death knell sounded. The Green Giants are showing leading the way, showing that sustainability can lead to increased profitability and to a new paradigm for a new century.

A smart young investor today would do well to look to the future and consider the investment potential in these innovative companies. Where these few lead, others will surely follow. You would not be doing yourself justice as an investor if you ignored the potential of these and other companies. They are turning huge profits while making the world a better place at the same time.