As many companies know, going green is good for a business' reputation--but some are just figuring out that it's a boon to bottom lines, too. According to a recent report from the World Wildlife Fund and Calvert Research and Management, nearly 80,000 emission reductions projects undertaken by 190 Fortune 500 companies have resulted in nearly $3.7 billion in savings in 2016.
With more research being done on the financial benefits of sustainability, an increasing number of companies are undergoing green transformations. "We've seen more companies committing to becoming more efficient, buying renewable energy, and cutting greenhouse gas emissions," says David Gardiner, CEO of David Gardiner and Associates, a Washington D.C.-based advisory firm.
There are several ways that companies can become more sustainable, from improving human resource practices in foreign countries to using more efficient LED lighting in their office spaces. One big way that businesses are reducing costs, though, is by using renewable energy, such as wind, solar, and geothermal, to power their operations.
Over the last few years, solar and wind costs have declined dramatically, making it far more affordable to pay for different kinds of electricity, Gardiner says. Renewable energy is also cheaper than coal, with investment firm Lazard finding that the cost of wind on a megawatt per hour basis is $45, while solar is $49.50. Coal's price is $101.50. "You're saving money on the energy costs because once you have a windmill and solar panels, the wind and solar power come for free," Gardiner says.
Putting renewables to work
There are several ways companies can take advantage of renewable energy. Companies can put solar panels on their roofs for starters, and with a recent Google report finding that nearly 80 percent of all rooftops in the U.S. get enough sun to generate power, that may be a viable option for many businesses, big and small. But numerous companies are partnering with third-party businesses, either utilities or solar and wind manufacturing operations, to either set up wind and solar farms or to buy renewable energy directly from the business.
This is an ideal scenario for companies worried about spending upfront dollars on paneling their roof or creating a wind farm on their own. Instead, they pay the company, which builds the infrastructure, a monthly cost--just like they would to use traditional energy sources--until the project is paid off. "Someone else pays the upfront cost, and the business negotiates a contract to pay them back over a period of time," Gardiner says. "It's like what's being done now. Companies aren't buying power plants--they leave that to the utilities."
Gardiner says smaller businesses, which are behind bigger operations in renewable energy usage, might consider partnering with other smaller operations when doing a renewable energy deal. "There's still an issue on figuring out how to make this easy for smaller companies to do," he says. "But we have seen some businesses work on deals together."
Once the investment is paid off, companies should start seeing overall margins improve--and other financial benefits--as energy costs decrease. "Numerous studies have proven that there is a positive, tangible, quantitative impact on businesses who approach being more environmentally friendly as a business goal," says Kostya Polyakov, CPA, CA, and leader of KPMG's technology, media and telecommunications practice in Vancouver, British Columbia. "Be it growing revenue, cutting costs, reducing waste, or improving overall operational efficiency, operating in a more environmentally friendly way is absolutely good for business."
At this point, most companies that use renewable energy are generating power through rooftop panels or taking wind power from nearby farms, but others are harnessing energy in other ways. Leor Rotchild, executive director of Toronto's Canadian Business for Social Responsibility, knows of agriculture companies that are using geothermal energy--heat that's stored in the earth--to not only power operations, but to heat buildings and greenhouses, too.
In the future, green algae, which contains energy-rich oils, could be used to power buildings, while much smaller wind turbines could allow companies themselves to set up a small windfarm on a patch of land. "There are numerous ways in which companies can incorporate more green and renewable energy practices into their operations," Polyakov says. "It always starts with creating a business objective, and then following it through all of the companies' processes."
Green is good--for business
Going green doesn't just make sense from a cost savings point either. As many companies have learned, it's also just good for business. More consumers want to buy goods from sustainable operations, while an increasing number of people want to invest in sustainable companies, as well. When Rotchild introduced green initiatives at a former oil company he worked for, and it ended up on a list of sustainable companies, investors gathered around. "An investment bank phoned and said they were getting calls from investors about the business," he says.
While many executives and entrepreneurs have yet to introduce sustainable practices into their operations, it's only a matter of time until the business case for going green becomes impossible to ignore. "Renewable energy has gone from nothing a decade ago to being a sizable portion of the energy market," Gardiner says. "Soon this will become attractive to an even broader group of companies."