Are Environmental Responsibility and Profitability Mutually Exclusive?

Are Environmental Responsibility and Profitability Mutually Exclusive?

Historically, environmental responsibility and corporate profitability are two concepts which one could argue to sit on the opposite side of the scales, with efforts to sharpen environmental operations lowering profits, and often, visa versa; a sad fact, one might argue. This, however, is no longer the case.

Over the times, a multitude of industry developments have changed the landscape for environmental responsibility, both with respect to how environmental management standards can be met, but also in the importance of pursuing such measures. Key factors that have played a role in shaping the landscape have included the tightening of environmental regulation (and punishment for offences), a growing “responsibility first” culture within procurement, changes in the energy and utilities industries, and also the evolution of modern technology.

Sustainable Procurement

Firstly, an increased trend has been witnessed with regard to sustainable procurement. Whilst once upon a time, the primary focus of environmental practices would lie within only those works directly undertaken by an organisation, where a degree of direct control allows it more effectively, it is increasingly being seen that a lack of environmental and sustainable credentials can actually not see exclusion from projects and contracts.

Not solely limited to governmental contracts, even those organisations operating privately are not increasingly setting themselves environmental targets, and then integrating those contractors operating below them to ensure set standards. This is to a degree now that it can become increasingly difficult for organisations without the credentials to back up their practice, that it may become almost impossible for securing works on larger projects, contracts and developments – a primary source of revenue and associated profits.

But where and how is this managed? Whilst, from the outside looking in, it may seem like something impossible for the contractor to manage – after all, they can’t be looking over your shoulder all the time, right? Wrong. Moreso than ever, organisations are requiring for contractors and suppliers to take it upon themselves to report on environmental issues directly, then being held accountable for those reports. Including everything from environmental marks on products, through to base environmental qualifications and clear environmental management systems, all aspects of the process are seeing a great degree of scrutiny.

The fact of the matter is simple, with environmental credentials and proceedings becoming increasingly essential on a day-to-day basis, there really is nowhere for companies to run or hide. To ensure that profitable opportunities remain open, environmental management is essential. As to whether these opportunities can be maximised on, however, is an entirely other story.

Yet, the penalties for acting in a way that prioritises profitability above environmental concerns don’t solely come from other, private organisations. In fact, while being sidelined for certain envious jobs may indeed make revenue generation an increasingly difficult task, we are increasingly seeing governmental pressures emerge to ensure a level of environmental responsibility.

Regulation & Standards

As has been previously reported, larger organisations with considerable profit margins are no longer able to hide behind their finances in cases of corporate irresponsibility. This is certainly not to say that larger environmental proceedings; yet, for those who aren’t, the level of consequence is rapidly rising.

When offending on an environmental basis, fines are a given; yet, when one has profits in the hundreds of millions, or even billions, to what effect does a small fine have? One could argue very little at all, and perhaps, historically this may have been true, yet no longer. Adapting with the times, offences are increasingly being handled oh-so-very differently, with finances now actually playing a role in the sentencing process.

This is not to say that Party A may inherently be deserving of a fine larger than Party B due to profitability, but moreso the case that those organisations displaying a lack of drive to overcome environmental inconsiderations, and those perhaps offending on multiple occasion, may see their fines scaled in line with company finances – but why is this?

Effectively, the measures in place exist to debunk the very concept that a larger organisation can act irresponsibly on smaller-scale initiatives, and show no lack of concern for the repercussions. Fines for those operating in such manners may no longer remain as the low penalties they may be perceived as to organisations of such size – the entire point being, in fact, that the value pushed may be one worthy of encouraging an organisation to change it sways.

Though this isn’t to say that larger organisations often do act as such, with many of the industry’s largest actually displaying impeccable environmental credentials, yet, through a development in the accountability of larger organisations, and factoring in their own finances to justify any and all penalties, it is increasingly becoming an area of compulsory focus for those organisations wishing to maintain profitability.

Taking a step back from the direct penalties of not acting with environmental responsibility, others can also be found in a more flexible format through the sourcing of energy. As organisations expand, it is almost of inherent nature that so too do the costs associated with their business, specifically including energy usage. As such, monitoring energy costs is of great importance – but firstly, lets look at the energy industry.

Changes in the Energy Industry

As has been widely reported already, the non-renewable energy markets are not only ones under a degree of scrutiny due to the relative impacts on the environment, yet also the present economic state is increasingly highlighting a degree of instability in the markets which can’t simply be overlooked. And although new sources of energy are indeed located at times, thus providing brief buoyancy to the market, the fact of the matter remains quite simple, reserves are dwindling.

Increasingly, focus has been held on Germany, serving as a showcase of what can be achieved through effective plans for renewable power generation, with solar photovoltaics being seen as one of the primary ways forward in energy generation – but this, surprisingly, isn’t the point of this section. Taking a step back and, not looking wholly at the form of energy generation (there are many, with different levels of environmental impact or otherwise), key consideration to be made is instead in the nature of where energy can be generated, and how.

Solar photovoltaics inherently present a good case study in this arena. Able to generate energy just about anywhere that can safely play host to the panels themselves, solar photovoltaics can be integrated in buildings both old, and new, with a degree of support also offered for those wishing to generate power locally. And though the costs of installation aren’t exactly cheap, the long-term reduction in energy costs from the presently shaky market may be of appeal to businesses.

Yet, this is far from the only method of power generation to which cost savings and environmental benefits can actually be found. On the rise, specifically in commercial estates and educational complexes, are combined heat and power systems. Through the development of local energy network plans, increasingly both communities and large spaces are increasingly seeing a developed interest in own-power generation such as combined heat and power, which allows for certain areas and communities to operate on a great degree of their own power.

Not only does the maintenance of power generation in-house allow for key cost and environmental benefits, but also something oft craved in the modern age; control. Through the pursuit of power generation techniques on-site, a lot more can also be done to manage assets, scale up, or scale down power generation, and even sell excess energy in some cases, on-site power generation isn’t solely a way for businesses to minimise outgoings, but also one which can directly increase profits – if done right, that is.

Becoming another key area of environmental responsibility and profitability, even for those organisations pursuing a methodology of own-power generation, it would expectedly all be for naught without assurances on the management of such energy; effectively, how it is, or isn’t used on a day-to-day basis. As such, the importance of managing one’s energy assets in the same form as those deemed “physical assets”, is on the rise, and costs associated with not doing so too, are also on the rise.

Energy Usage

The benefits to one’s profitability, in this case, is one which we feel no real need to highlight. Reduced energy usage has clear and direct impacts on profitability – whether allowing for a reduction in energy bills, or increasing the amount spare. Yet, many organisations still don’t have a comprehensive policy for managing their usage, and perhaps also aren’t aware how this can be done.

Traditionally, this very concept sparks debate on lighting solutions, and also encouraging employee responsibility for their energy usage; turning machines, computers and the like off when no longer in use. And while these are definitely measures which should be pushed as quite a standard, and easy way to find some reductions in energy usage, it is key to note that this only makes up a very small fraction of energy usage for larger construction operations – often, the largest cost actually revolving around transportation and fleet management, where the transportation of product, materials and even the workforce can add worryingly large amounts to overall energy usage.

Yet, aside from transportation and logistic operations where their very service is intrinsically tied to transportation, many construction firms don’t yet acknowledge the primary importance of fleet management, or the costs associated with transportation. This, bluntly put, needs to change. Especially with increased availability and transportation for companies to access markets out of their geographic locality, the implications of long-distance operations without environmental concern can be severe.

But how can these costs be reduced? Within the supply chain, the notion remains quite simple: source locally; yet, within the operations of a company itself, this can be a far more difficult procedure. Areas such as fuel efficiencies, new fuel sources and even the improved capacities of differing vehicles are areas of key note, yet the topic itself remains one whereby constriction organisations are urged to look at their own use of fleet, assess the forms of cost apparent, and adjust naturally.

As such, within this realm, it is of the utmost importance that organisations don’t solely look for example elsewhere, but take a closer look at their day-to-day operations, where major energy costs are coming from, and working to effectively minimise such costs as best can be done.

Not every area of improvement for environmental responsibility, however, has a direct impact on costings or profitability at all. In the arena of employee engagement, training and qualification does indeed make up a large part of how progress can be made, and it is also true that costings do lie within these areas, yet improvements can be made above and beyond the mere training of skills.

The Responsibility Ethos

Though some understanding of environmental practices is essential to any form of ingrained responsibility, through encouraging a responsible approach to day-to-day activity, employees can make a real, meaningful difference on the environmental front with little-to-no need of investment.

As is seemingly understood by many of the UK’s largest construction firms, it is quite impossible for everyone to be an expert on the environment, and with regard to those who are, it is also seemingly impossible for them to be everywhere at once; yes, digital technology and smartphone application development have helped to bridge the gap somewhat, but not to the degree whereby one environmental manager can focus on the day-to-day activities of many sites, as effectively as he can of one. Additionally, the employment of enormous environmental surveying teams is also quite impossible for most employers, with the budgetary aspects of doing so being quite impossible indeed.

Yet as a way in which organisations can get around this, is through an ingrained responsibility philosophy throughout the entirety of the workforce. Much like traditional health and safety ethos encouragement, the same can be achieved in the field of environmental awareness. By inspiring the workforce, even those with a basic understanding of environmental concepts can then lend a hand in supporting group environmental teams in monitoring day-to-day activities on-site.

Whilst as aforementioned, not every employee can be an expert, the combination of an environmental responsibility ethos, with that of support from emerging technologies and a team of environmental experts, a single pair of eyes can branch out through the lenses of a further thousand, with each and every employee embracing their role in the environmental agenda, maintaining a close level of communication with environmental expects, and resolving issues before they ever even arise.

Of course, whilst many of the environmental responsibility areas focused upon thus far have been somewhat standalone in nature, with regard to the evolution of technology, it is the combination of a number of different previous areas of focus that come under the spotlight. The primary areas of focus, however, relate to that of facilities and building materials.

The Evolution of Industry Technologies

With regard to facilities most specifically, what may once have been historically the cheapest method of performing a task, with the example of such a scenario being a machine, yet more damaging to the environment, has now had the tables very-much turned on it.

In fact, with the evolution of modern technology, and a keen industry-eye on sustainability and environmental standards, it is often the case that newer, modern machines, vehicles and all manner of technology have been adapted as part of the global environmental agenda. As such, older, formerly more “cost-effective” tools are often now filtered out not solely because of the environmental standards, but have also seen less of a focus from keen industry innovators and have also become increasingly hard to maintain.

Take the industry of electric vehicles, for example. At present, general affordability might lean more towards the traditional car (though far from always the case), and, as such, the majority of the population does indeed maintain such a vehicle. But why? As a technology that is still in its relatively early stages, electric, and hybrid vehicles are still an emerging trend, maintaining considerable awareness, but not yet an equal level of affordability and accessibility.

Yet, should the nation pursue a focus upon improved infrastructure (with regard to home, or local charging stations, mass production of vehicles etc…) then this may not be the case for all that much longer. With improved infrastructure may come improved accessibility; with improved degrees of production, may also come reduced pricing and stronger values for vehicle performance; and should measures ever be introduced that would allow for older vehicles to be traded in for modern electric or hybrid ones, a complete shift of focus could see the entire industry for transportation flipped on its head, with cost-effectiveness and environmental standards sitting hand-in-hand.

Of course, this is all a matter of conjecture, yet this is something that the industry has experienced time over and over, with growing environmental ambitions, products once expensive and environmentally friendly, may no longer be as such, and those once cheaper and environmentally unfriendly, may indeed become the opposite.

Many of the topics looked at thus-far incorporate more short-term benefits or consequences aligned with the industry and environmental responsibility, yet, it is of increasing importance that businesses keep an eye on the big picture and act accordingly. One of these key areas incorporates the matter of supply, demand and how recycling figures into the equation.

Thinking Big – Resource Efficiency and Recycling

Sustainability and the recycling of products and materials are quite the hot topics, and while these two operations do have intrinsic benefits to them which have either been outlined already, or are evident by very nature, the big picture of utilising materials which can be wholly, or mostly recycled and re-used is one which we simply cannot ignore.

Landfill; one might think, is the main concept that springs to mind when considering the use of materials which cannot be reused in any way shape, or form. And while this does provide a simple solution for the management of materials for which there can be no further use, it is key to recognise the role of recyclable materials in the supple and demand process.

With non-reusable materials, the material supply industry will always be prey to the gradual reduction in available resources, as well as the increasing costs associated with being able to dispose of such materials. While, with recyclable materials and reusable sources, businesses thinking in the long-term, are able to predict far more stable markets for the supply of product and can also rest assured in the stability, if not growth, within the market of how these materials are then handled after use.

As such, businesses may find the use of recyclable materials not only better for the long-term costs of supply, but also the ease of handling the material after use. Core materials such as steel and wood sit at the fore of this, with steel being increasingly used from a structural, framing and roofing perspective, not solely from a stability angle, but also from the way in which steel offers a long service life and remains 100% recyclable at the end of its life.

To a degree, it has historically been seen that the key stakeholders in need of impressing for the procurement of works, are traditionally those able to offer the works to begin with. Yet, increasingly, all stakeholders are seeing a degree of integration into who may be rewarded with works of a specific nature; most specifically, local communities who often do care about levels of environmental responsibility.

Environmental Responsibility and Industry Relations

Whilst, ultimately local communities are not as directly involved in any given project than the contractors themselves, it is key to note than the reputation of an organisation within local communities rises in importance with every given day. Most regularly, this applies to the notion of creating social value in communities, yet, in areas of environmental concerns, it’s a very important point to maintain in consideration.

Whilst it would be a rare, yet commendable sight for a contractor to be cheered or congratulated for minimising environmental impacts, the opposite is most certainly not true. Should works undertaken have considerable environmental impacts, or even perceived impacts which are seen to have a negative effect on the community, not only is the reputation of the company damaged, but so too is the reputation of the industry.

In the short term, the damaging of relationships with local communities as a result of environmental consequence has a direct effect on the business’s success – not solely within that community, but across the industry. Contractors can expect to see improved difficult and resistance in being able to secure works, especially those working in close proximity to like-communities. Yet, surprisingly, this isn’t the only concern.

Historically the building sector has not enjoyed as positive reputation as perhaps it should. To allow greater fluidity and trust in the industry (thus breaking down some of the boundaries in achieving planning consent and minimising the number of complaints), organisations are increasingly having to bear the impacts of works on local communities, on their shoulders. This is no longer just of import to the company itself, but the wider industry, with clear recognition of a need to improve the image of the entire construction industry been nodded to by my a key industry player.

And now, as we’ve looked at many of the core areas where ground can be made (with regard to environmental responsibility) on sustainability, and where this may affect profitability, it’s also key to briefly cover one of the core areas where costs may historically have been seen, but has since seen considerable devolution and ease in simplicity.

Research, Support and Advice

Traditionally, working out exactly how refine operations from an environmental perspective has always been something of great difficulty to your average contractor or supplier. There are specialist consultancies and advisories who have always been around to advise, but this has always been considered something of a costly process for a measure which wouldn’t have brought in any direct income or returns. This landscape, however, has changed quite drastically over the last few years.

Increasingly organisations can seek support from two prime channels of information and advice, of which the most obvious is through industry associations. Not limited solely to any given sector, or even the concept of environmental responsibility alone, there are numerous trade associations which have embraced the concept of inspiring corporate and e environmental responsibility throughout both their member base and the wider industry.

Not all associations are free, of course, yet even in cases where subscription fees are required, the costs of receiving support in the field of environmental responsibility are then tied to other areas which undoubtedly do lead into revenue and profit generation – core areas naturally being business networking, training, lobbying, and advice on more traditional business opportunities. AS most organisations have already realised, membership with one, or more trade body can prove essential to a company’s success, but also provides a great deal of support in the topic of this piece – environmental responsibility.

In addition to this, however, as aforementioned, many leading contractors now look to work only to work with those who display a level of environmental responsibility which matches their own. Yet, this isn’t to say that these same contractors will simply shun contractors who do not. Increasingly, there is a trend that contractors will offer members of their supply chain the opportunity to cover areas of environmental responsibility that are currently being missed – something which, indeed, they are traditionally all too happy to assist with.

This effectively means that main contractors can often be a key source of advice, support and guidance for achieving environmental responsibility. In cases such as these, showing willingness to “play ball” so to speak, allows organisations to both benefit from major contracts with such key industry players, but also to refine their own operations from a best-practice perspective at the very same time – and at the same time, entirely free of charge.

Conclusion: Are Environmental Responsibility and Profitability Mutually Exclusive?

With this series of short pieces, what we’ve been trying to highlight isn’t simply that organisations should pursue an environmentally responsible policy from the perspective of best-practice, but also encouraging organisations to do so from the perspective of achieving commercial success. Especially for those more longstanding organisations of smaller scale, it can sometimes be difficult to keep up to date with how technology and social changes have reshaped the landscape of environmental responsibility, which is why it’s ever-so important to take a step back and reassess the landscape periodically.

Though traditionally seen to be opposing concepts, it is surely fair to say that environmental responsibility and profitability are most definitely not mutually exclusive any more. In fact, there is a growing notion that environmental irresponsibility and profitability may be becoming increasingly mutually exclusive instead – a very strange turn of events which may have caught many industry contractors off guard.

For those organisations wishing to maintain wide horizons, opportunities both public and private sector, and also to improve the position of the industry as a whole, maintaining a core focus on environmental responsibility is all but essential. It could be argued that this is why many leading organisations now maintain a very comprehensive environmental management system, and it is also a very positive industry note to see this also, with those same contractors acting as role models to the wider construction sector.

Is the traditional SME able to simply follow suit and mimic £bn turnover companies? Perhaps not, yet they are also not expected to do so. But by seeking support from such organisations, as well as trade bodies, and making a clear, conscious effort to maintain environmental responsibility, these smaller practices can expect considerable doors to be opened to them, opportunities to be made available, and also may find themselves sat on a highly refined, efficient, cost-minimised and successful business.

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Are Environmental Responsibility and Profitability Mutually Exclusive?
BDC July 2022 issue - 294

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