Return on investment for sustainable initiatives

For small business, keeping costs to a minimum is key to profitability. Subsequently, return on investment (ROI) calculations are essential when initiatives are being considered.
For businesses located in the Lake Simcoe watershed, economic viability is often tightly linked to the health of the lake and the surrounding natural environment. Visitors come to the area to enjoy activities like fishing, boating, hiking, skiing, biking, and getting out into nature. These activities support many local businesses. For example, in the Barrie area up to 5,000 jobs can be linked to the tourism sector.
ROI calculations for sustainable business initiatives usually consider the following:
Efficiencies due to waste reduction and resource conservation 
Waste reduction and resource conservation efforts both benefit the environment and the bottom line. Savings can be achieved a number of ways, but businesses are making inroads in relation to water conservation, energy conservation, waste reduction, reuse and sharing of raw materials.
Consider some of the following examples:
-a delivery business re-evaluates routes to maximize fuel efficiency and reduce wasted fuel and time
-a hotel accesses government incentives to upgrade to more efficient technology (heating, cooling, lighting, appliances)
-a restaurant conducts a waste audit to identify common areas of waste and then trains staff to eliminate unnecessary waste (estimates out of the UK suggest that losses per meal served due to unnecessary food waste can be the equivalent of .85 cents).
Employee engagement 
A business that communicates and demonstrates a commitment to environmental sustainability attracts workers who hold the same values. In that regard, employee “fit” leads to increased engagement, higher productivity, and more effective recruiting and hiring (which in turn reduces turnover).  Since current estimates suggest it costs about one fifth of a worker’s annual salary to replace that worker (including advertising, interviewing, training), lower turnover saves money. More engaged employees can be significantly more productive than employees who are not engaged- contributing to the business bottom line.

Market differentiation and competitive advantage 
Businesses who communicate their sustainable practices allow those consumers who go out of their way to support sustainable businesses to make informed decisions. As a growing number of consumers are concerned about their environmental impact, businesses who are ahead of the curve offer a product that is differentiated. In particular, research shows that consumers between 18-34 years of age are more interested in sustainability. New markets can open up for a business that offers products and services targeting this group of potential customers.
Preservation of the natural environment 
As already highlighted, for businesses located around the Lake Simcoe watershed that rely on a healthy lake and environment– an investment in preserving the natural environment is an investment in the future. Traditional ROI calculations may not consider all elements of the triple bottom line (economic, environmental, social). Yet, recent studies to quantify the economic value of the natural environment exist. Examples include: TD Economics study on the value of Toronto’s urban forests  and  The David Suzuki Foundation, Friends of the Greenbelt Foundation &  Lake Simcoe Region Conservation Authority study on the value of natural capital in the Lake Simcoe Basin.
Risk management 
A proactive response to potential legal risks is a driver behind many sustainable practices. Fines and legal liabilities can be costly.

 

So, what can the implementation of sustainable practices mean for your business?
-reduced energy costs
-reduced water costs
-higher productivity on behalf of employees
-higher percentage of top performers on staff
-lower recruitment, hiring, and training costs
-reduced risk
-ability to attract new customers and reach a previously inaccessible market
To find out more about resources available to support your business to incorporate more sustainable practices, contact the Explore Lake Simcoe Sustainable Tourism Coordinator at info@explorelakesimcoe.com

About The AuthorAileen MacMillan holds an Honours Bachelor of Environmental Studies degree from the University of Waterloo, and has worked as an independent consultant on environmental projects related to waste management, water quality protection, and environmental education. She has many years of experience working in small business and working collaboratively with teams and individual stakeholders.

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