Environmental impact on business strategy


A great debate has taken place around the environment and what the challenges mean for all of us. Business has started to take more notice of environmental issues for some time - I sense with increasing urgency.

Is the environment an ethical issue for business?

For most businesses, the environment is not an ethical issue, but rather, a practical cost base driven imperative. If we take energy costs as an example, they have steadily risen over the past few years with all forecasts suggesting continued increases as the demand for energy increases. The UK forecast suggests that we will not be able to support our own energy requirements within the next 10 years, which is a bit of a concern.

Energy consumption gap

It is not only the dwindling levels of natural resources such as oil that are causing concern. Rather, concern also surrounds the dramatic increase in energy intensive activity. The developing economies of the world often are responsible for burning the highest level of inefficient energy, as their infrastructure is often older and less sophisticated than those in the developed communities. That said, the developed world has a high consumption of energy per head, which has come as a result of the wide range of domestic devices in use – many of which are extremely energy intensive.

Energy opportunity

It is interesting to note that during the recent global economic crisis, the major economy imposed environmental/energy saving conditions on organisations that required financial assistance (such as Ford). This included development of new technologies and products with the aim of saving energy and promoting a more sustainable, economic platform.

The next generation of competitive advantage

As the world will be forced to accelerate it’s energy efficiency measures, we may well see a new form of competitive advantage. The emerging economies may well find themselves starved of old energy sources (such as oil) with new energy efficient platforms having a higher development cost premium. The use of energy efficient infrastructures reduces direct cost of manufacturing and therefore makes the finished goods more competitive (provided the cost of the capital equipment is affordable).

Gaining environmental traction

The underlying trend of energy efficient, low-carbon manufacturing is not only driven through energy costs but a whole raft of measures - some resource driven (such as raw materials) and some from a legal perspective (i.e., lifecycle costs responsibility). These converging trends will force all aspects of our economy to respond to the environmental challenge.

Green opportunities

With the changing economy, a number of real opportunities exist for business. There are already a number of grants which are available to businesses that wish to setup or invest in green businesses. One of the fastest growing investment funds of 2010 was a green investment bond. Businesses should take the opportunity to radically change their business approach to take advantage of this undeniable strategic change.

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