Spring 2020 Issue
By the second year after the announcement, though, their operating performance was about the same as that of the control companies. By contrast, companies that collaborated on ecoactivities underperformed both the control group and the independent actors in the year before the announcement. In the two years following it, though, their performance improved substantially, surpassing both the control group and the companies that pursued eco-activities independently. Chopra notes that collaborative efforts are often more costly to set up than activities that can be pursued independently. “If you’re just doing something like changing the light bulbs, that’s simple and has an immediate benefit,” he says. “But collaborations often involve other parts of the supply chain. They’re more complex, and they require an initial investment. But they do seem to pay off.” And certified eco-activities had an even more powerful impact on operating performance. Companies that obtained a certification had substantially better operating income, gross profit, and revenue than the control companies they were compared against—more than compensating for the higher costs they faced. Overall, these companies fared best of all relative to their controls who undertook no environmental initiatives. THE GREEN ADVANTAGE Eco-friendly practices are often framed as money-saving measures: consider the way energy efficient light bulbs are marketed, with the “annual cost savings” printed right on the packaging. But Chopra found that operating performance improved even though companies realised few, if any, cost savings from their eco-activities. So where did the benefit come from then? One theory is that complex eco-activities—the kind that involve collaboration and certification—often impose steep up-front costs, but over the long run can become a competitive advantage and generate more business. “Certification sets you apart,” says Chopra. “This can go down to the consumer level. If I’m going to buy coffee, I might buy coffee that’s certified by a certain alliance. But certainly, at the business-to-business level, certifications help in that regard. If not, everybody is able to get certified, you become part of the subset of suppliers or manufacturers that are certified. So you’re likely to be able to grow your market and grow your revenues.” That reality underscores the truth that eco-friendly practices should be approached as a long-term investment. They’re good for the environment, and the evidence suggests that they’re good for the bottom line— but perhaps not right away. Patience is required. “You might not see the benefits for a while,” Chopra says, “so it’s important for top management to have a strong commitment to them.” i
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