The Business Case for Sustainability: Why it Pays off to be Clean and Green

Why it Pays off to be Clean and Green and to Follow Sustainable Business Practices

In recent years, there has been a growing body of research and evidence which indicates that it is profitable for corporates and firms to be clean and green or in other words, there is a business case for running an environmentally and socially responsible business.

The experts who make a case for sustainability often point to the cost reductions, the enhanced profitability, and the increasing returns to scale from following sustainable modes of operations.

For instance,energy conservation is often cited as a key benefit for businesses that can reduce costs significantly by adopting energy that is drawn from so-called “Clean” sources.

These include power from solar, renewable energy sources such as hydro and wind included, and composting waste to produce energy from biomass.

As all these sources of energy and power are much cheaper than the “dirty” sources such as Coal and Oil, there is clear evidence that business can benefit through the associated cost reductions.

Indeed, the advancements in the development of Photovoltaic Cells for Solar, the attractiveness of wind power, and the efficiencies from internal composting for biomass, all have resulted in the per unit cost of energy from these sources being cheaper than the nonrenewable sources.

Why the Business of Business is also to be Sustainable

Not long ago in the conventional sense (though nearly four decades is pre-historical in these 24/7 times), Milton Friedman, the late legendary proponent of Neoliberalism, proclaimed that the “Responsibility of Business is Business” or to mean that corporates must be more concerned about their bottom-lines than engage in fancy CSR or Corporate Social Responsibility.

With these words, entire generations of business leaders were weaned on the premise that sustainability is for others and the green movement activists and hence, they resisted any attempts at forcing them to adopt cleaner and greener business practices.

Though in the 1990s, for a brief period, it seemed as though sustainability was back in focus, the election of President Trump in 2016 and the subsequent actions by his administration in withdrawing from the Climate Change Accord or the Paris Agreement and other such moves have resulted in a fresh wave of panic among activists and even many leading business leaders and thinkers about the future of Planet Earth.

In the last week or so, such worries have come to the fore again as the United Nations sounded an alarm on the rising temperatures worldwide and their effect on our species.

Activists, Investors, and Judicial Action Worldwide

Thus, we have come to a point where action on sustainability is no longer a luxury or even a necessity and instead, is our only shot at sheer survival.

Having said that, given the recalcitrant attitude of many corporates, it is worth noting that world over, there are other businesses that are following sustainable practices and benefiting in the process.

Moreover, sustainability is something that is also forced upon many corporates due to concerted action by activists and governmental and judicial action and bodies such as the NGT or the National Green Tribunal in India.

Indeed, if not anything, the actions of concerned activist investors or the body of shareholders who are increasingly being vocal about making businesses sustainable are the latest pressure points for corporates to act.

Apart from this, improvements in technology have meant that some hitherto dirty business practices have the chance to use technological innovations to not only ensure sustainability but also reduce costs in the bargain.

For instance, the advent of Electric Automobiles, Self Driving Cars, Hyper loop, and App based Aggregator Firms have the potential to reduce Carbon Dioxide Emissions and at the same time be profitable.

Extreme Climate Events, Disaster Capitalism, and Prevention better than Cure

A clear evidence for Climate Change is the ever increasing ferocity of Hurricanes in the United States and Cyclones and Tornadoes world over.

These “extreme” climatic events that also result in Severe Droughts, Bone Chilling Winters, and Oppressive Summers, contribute to losses for industries and corporates in terms of lost person hours due to illnesses, destruction of infrastructure due to the weather events that run into losses in the Tens and Hundreds of Billions of Dollars, and the disruptions to the Global Supply Chains that similarly result in more losses.

Given the fact that action on climate change can mitigate these losses, what can be a more persuasive case for sustainability than investing in Clean and Green practices?

Of course, there are some who point to such events offering businesses the chance to profit from Disasters or the rise of Disaster Capitalism where the chance to rebuild infrastructure and communities after such events is indeed a lucrative proposition.

On the other hand, prevention is more profitable than cure and with research showing that the accumulated losses from Climatic Events tends to outrun any gains, the answer for sustainability is a No Brainer.

Point of No Return

Lastly, as mentioned earlier, some weather and climate change models suggest that we are past the Point of No Return and hence, all we can do is to limit the damage. This by itself should spurt businesses towards sustainability and to the direction that they must take.

Before we sign off, we would like to remind readers about the saying that, We Have Not Inherited the Earth from our Parents, But, Have Merely borrowed it from Our Children. Thus, business leaders owe it to the future generations to make the Earth livable and Hospitable and with sustainability being profitable as well, the choice is ours to make.


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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


Corporate Social Responsibility