Doing Well by Doing Good: The $ value of green service management
Author: Israel Beniaminy
Everybody wants to contribute to protecting the environment, to be part of an organization that cares about sustainability, and to make to world a better place for ourselves and for the next generation. However, what if supporting these wonderful ideals would drive your company into the red or bankruptcy?
How can managers and corporate leaders resolve this conflict? The first step is to recognize that the conflict does not exist.
On May 9 2012, the Harvard Business School published a working paper titled “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance,” by Robert G. Eccles, Ioannis Ioannou and George Serafeim. Quoting from the paper:
“Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993 – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies.”
So far, not too surprising: a company that is really serious about sustainability would surely be different from a company that doesn’t, and the research quotes differences such as “they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of non-financial information”. But here’s the punch line:
“… we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.”
What does “outperform” mean? The authors find that if you invested in 1993 in a portfolio of High Sustainability companies, by 2010 your investment would have grown 50% higher compared to a similar investment that wasn’t sustainability-oriented.
You might object that successful companies can afford to adopt sustainable policies. In other words, could it be that success leads to sustainability rather than sustainability leading to success? The authors deal with this and other objections by careful analysis, and their conclusion still stands: companies that make the commitment to sustainability tend to do better.
Another comment could be that this may be true for some industries more than others. That’s surely true. The study tells us what kinds of companies benefit most from sustainability and good corporate citizenship:
“The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies’ products significantly depend upon extracting large amounts of natural resources.”
Readers of this blog: can you identify yourselves in this picture? You probably can. Most Field Service organizations serve individual consumers and compete on the basis of reputation; and many Asset Maintenance operations, especially in the Oil & Gas industry, are in the business of extracting natural resources.
Making a corporate commitment to sustainability is a large leap, involving just about everything the company does. Still, there’s a lot of opportunity to meeting this commitment within the scope of running a field service operation. This blog discussed such opportunities before, e.g. in “It’s Not Easy Bein’ Green,” “Managing field service sustainability” and “Service Sustainability: Let’s track and save.” After all, two of the best ways to reduce emissions are to drive less and to keep your assets fully maintained at all times – poorly maintained assets tend to pollute more.
Bottom line: a service operation committed to sustainability will not only do good. It will do well.