Does sustainability still make sense in the current economic environment?

Abstract

For any business to have longevity, its practices and operations must be ‘sustainable’ in that they support the long and short-term success of the organisation. Those practices and operations with a positive return on investment, usually above some internal hurdle rate determined by an organisation's cost of capital from both debt and equity, are perpetuated and those that do not are eliminated as ‘wasteful’. Never could this line of thinking be truer than for sustainable ‘greening’ strategies for real estate owners, operators and organisations. But when consider-ing greening efforts, the question: ‘how much does it cost’ always arises and more often than not in today's economic environment, the response is: ‘not sure we need to be spending money on sustainability efforts this year’. This question should focus not just on cost, because it concerns the full financial and strategic value proposition of improved sustainability, whether the operation is in owned, leased or managed real estate. Indeed, there are significant cost savings associated with sustainable improvements that drive returns well above traditional business hurdle rates. Becoming more efficient, by eliminating waste and improving indoor air quality, for example, should cost an organisation less — not more. As such, these are increasingly an indication of quality strategic thinking. This paper shares key concepts that have driven value and bottom-line results, making sense in any economy, particularly the toughest of ones.