How to create a more sustainable business without negatively impacting on profits

- November 8, 2016 7 MIN READ

Anne Foster, the founder of Elkie and Ark, explains how you can make your business more sustainable while not negatively impacting on profits.

Social and environmental impact are of increasing importance to how we run business and how customers perceive our brand. It can even be the difference between customers (and employees) being a little blasé, or falling in love with a product, and feeling so good about their purchases they can’t wait to tell their friends.

There are some big name brands who have put sustainability and ethical responsibility as central parts of their businesses who are showing that it can lead to better customer loyalty, happier employees and even a positive impact on the company’s bottom line.

We often hear about tech disruption, however brands like IKEA are leading a different form of disruption – focused on sustainability – in a bid to run business better. IKEA focus on renewable and sustainably sourced materials and are even aiming to operate 100% off renewable energy by the year 2020.

IKEA has championed lower-polluting products for near 20 years – voluntarily producing low-tox furniture and removing harmful toxins from the environment and our homes. In recent years they have started trying to close the loop (accepting used furniture to be re-bought instore) as well as creating products that last longer and reducing waste. They are well ahead of the popular low-waste or de-cluttering trends and you would hardly say they are struggling to maintain a healthy profit in their more sustainable product lines!

For those of us starting out a small business, however, the idea of being sustainable can be a whole lot more daunting. We don’t have those big balance sheets to absorb any losses or invest in building our own renewable energy platforms and surely it will cost a lot more. Right?

Well, not necessarily.

Yes, running a business sustainably will probably take more time at first to set up. You will find yourself asking questions of suppliers that often are met with uncomfortable silence. When you start to delve into your supply chains – be it asking whether your cardboard boxes are made from sustainably sourced trees or where your chocolate or cotton comes from – more often than not, you will find people saying “we just don’t know”.

But once you start to look a bit harder, choose partners who do care and are transparent, you will find there are some key ways to achieve the sustainable business that you want. It could cost a little more in the early years, but time and again, studies have shown that over the longer term, being more sustainable can in fact help boost a business. It’s all about employee happiness and its longer term profits too.

So what does being sustainable mean? Well, it can mean a lot of things. I like to think it is the goal to have the least footprint or impact overall. Which can seem odd particularly if you are producing physical goods. Consumerism and sustainability don’t seem to go hand in hand!

So the first step as a business is to encourage people to consume less. Buy less! I know. It doesn’t seem very business savvy, right? To viably do this, you need to make sure you are creating a product that will last longer, be more appreciated and less disposable. If you can show customers the story behind your brand, the value and longevity of your product, they will often surprise you with being happy to pay a lot more. Recycling or upcycling old products and providing rewards programs for loyalty are also a great way to then keep customers returning to your store.

Look into and investigate all of your inputs. Every, single one of them right back to their origin, be it a farm, mine or other raw source. Where did they come from? How far have they travelled? What processes were involved in getting them to the end product and what did this entail? Did they cause pollution or other harm? What water or other waste was created?

These can be tough questions to get answers to, I won’t lie. You will probably even find that a lot of your suppliers can’t answer these questions because they simply don’t know. However, if you keep asking, you will eventually find partners who can answer these questions for you and it could well be worth your while to switch to partners who do care about sustainability and can mirror your own ethos, right back to the start of where your products began.

Now, being sustainable at this point may well cost you a bit more. Couple this with ethically sourcing your goods and you might be paying 3 or 4 times what you could otherwise make your goods for. But you may well find you can pass at least some of these costs on to your customers too.

What if you find you can’t pass costs on to customers? I hear you. We don’t pass additional costs on to customers in order to stay competitive. We found that you need to be creative with your business model and find a more direct or a different method of selling that perhaps cuts out middlemen or additional steps where costs can leak out. Over 50% of purchases are now estimated to happen online. It is easy to setup your own web presence at minimal cost. You are no longer roped in to additional sales teams or resellers to get your product out the door. There are other ways too, like automation and spreading the word on social media that can help you to reduce your costs.  This is a big win for sustainability. In fact, many ethical or sustainable brands find they simply can’t sell through wholesalers because they aren’t making the standard 50% margin that they need to give away. So new business models become critical to keeping business sustainable and viable over the long term.

If you are working in a service or tech based business, then look into your office sustainability and also the sustainability of key providers like data centres. Are they run off renewable energy? What are the waste policies and is this an area you can cut down on not just your footprint but also costs? What ratings are the buildings you work in? Can you find a green-rated office space for your next lease and switch to renewable energy? Little steps like this add up.

Most of all, no matter what business you are in, it is important to define what is most important to you and take little steps to achieve this. If you are a swimwear brand, perhaps ocean cleanliness is your central concern. Then work first on that. If you sell industrial paints, work first on cleaning out the pollutants and heavy metals from your products that impact homes and harm painters.

And if nothing else, get rid of coffee pods!! Give employees an excuse to get up, go for a walk and get out into the sunshine for a coffee more often!

For us it was important to make sure our heart is truly behind all we are doing and to make our plans public knowledge. This helps not just customer and employee loyalty, but more and more, you will find that it will impact the willingness of investors too if you are on the lookout. Sustainability risk (in particular water and emissions) is a big consideration for good reason. Not addressing these can potentially lead to major problems down the line.

One of the big things Elkie & Ark did that customers loved was, we publicly talk about where we want to improve over time. This makes people realise firstly, you are real, it improves trust and engages people in a critical conversation. It also reminds employees that you stand for something and time and again, employees have shown they prefer to work at a business that shows they care for the wider community.

Having a cause can have a wonderful impact on the vibe and culture of your business. Employee happiness and wellbeing is of critical importance to business today. Stressed employees are estimated to cost Australian businesses $10 billion each year and $190 billion in the US. We know that younger generations want to work for businesses who challenge the status quo, who provide meaning and connection to what they do.

Look beyond the products and into other areas. Be creative with where you can be more sustainable, and question the established norms. We setup our business to be sustainable in every single way we could. Across packaging, shipping partners, use of plastics or non-biodegradeable materials. We even looked into water use, land use, emissions, energy supply, toxicity, raw materials and pollutants. An example from our packaging, was that we initially wanted to use gift boxes. Customer feedback was that this wasn’t sustainable at all, and people would much rather we waived that cost and sent things beautifully wrapped but in a more sustainable way.

Again, it doesn’t cost us more, but it did just take a lot more planning and time searching around for the right products.

Speak to your logistics and shipping partners. Do they offer options for low emissions shipping? Can you replace air freight with sea or land transport at any stages?  These are such simple things but if every business does them, then the impact quickly adds up.

The key step is to market it right to get people’s attention. The big question is, is your brand going to be the Prius or the Tesla? While both strive to achieve similar objectives, one is undoubtedly… responsible… while the other is a brand that people obsess over, share widely across social media and truly covet. If you can do everything right while being the brand people want to talk about, then that certainly has to be the goal. What you will find, when you start to become sustainable, is the more diligent you become, the more you will find customers reward you.  People want to know that businesses genuinely want to do good and will support them as they strive to do it!

Keep remembering why you are doing it. This isn’t a marketing exercise at the end of the day. It needs to be real. Never be tempted to ‘greenwash’ as it will only harm your relationship with customers. It is to help the lives of our communities, ecosystems and the broader environment. We all know it is also critical to do our bit to protect the world the best we possibly can for the next generation and our kids.

For me, being sustainable wasn’t an option. I have always been in love with sustainable technologies and business, but it all really hit home when my own child was impacted by severe illness and I started to realize what impact toxic pollution was having on the lives of children all over the world. Worse, was I part of the cause due to my own spending habits? Toxins from textile production were getting into waterways, food chains, ocean animals, our own homes… not to mention our breastmilk. This is causing devastating issues to children all over the world. I had been through the pain myself and I couldn’t stand the thought of doing that to another mother due to the things I was buying every day.

We are all connected to the products we buy and the impact they have right back to the raw materials they are made from –  ‘sustainability’ is no longer a throw away word. It becomes integral to how we run our business and how it will impact not just the world today, but that of our children for so many years to come.

And yes. There are certainly times when you could drastically cut your costs by taking a less sustainable or ethical route. But you will find that customers will reward you and with a bit of creativity, you will find great ways to work around it and achieve a profitable, viable business over the longer term.

So do be patient. Stick first to the areas most important to you. And follow the lead of brands like Patagonia, Tesla or IKEA (and Elkie & Ark!) With these brands as role models I think we can see that sustainability, over the long term, truly can work out.