The economic benefits of adopting sustainability are very obvious and include financial returns in the form of profits and cash flows.
To achieve sustainability it requires that the costs are controlled and that sales are maintained or improved by offering reputable products or service. Financial returns are improved from the overflow of a good product or service that is produced by a reputable company. From the good reputation, profitability increases resulting in the improvement of the stock price over spilling to the desire of every business executive, to improve stock dividends for the investors.
There are other costs that businesses are expected to manage besides the supply chain costs of prevention of waste, energy efficiency, sustainable supply chain and sustainable materials management. These include costs associated with productivity, costs associated with legal liability and cost of capital. Sustainability, therefore, requires that productivity, legal liability and capital costs are reduced at all costs.
Productivity costs can be increased by the manner in which the business manages its human resources. Employee relations determine the level of staff morale and that has a direct impact on productivity. Companies that have a good reputation achieve low staff turnover and that reduces the costs associated with the learning curve. High staff turnover increases productivity costs associated with training and reduced speed during the period a new employee familiarises and adapts to the new environment. This is because the company is expected to pay the learning employee emoluments due from date of engagement even though his productivity is reduced.
Companies that adopt sustainability are reputable and maintain high workplace safety. Costs associated with poor safety are enormous, they include huge fines for non-compliance from institutions such as National Social Security Authority and Environmental Management Agency that may result in down time from non-availability of productive workforce due to injury. In worst case scenarios, the company with poor workplace safety may face closure to facilitate investigations.
Sustainability requires energy efficient operations that reduce the total production costs. Production methods employed must be capable of reducing and preventing waste. It also requires adoption of risk management strategies by the organisations to minimise associated costs.
Companies that achieve cost management increase their reputation attracting new markets and retain the existing market. Productivity automatically translates to profitability and a healthy financial status that makes it easy for the company to meet its financial obligations. In event that the company with a good reputation intends to borrow, the costs of borrowing are less because it is appealing to lenders and investors as a result of good governance and risk management.
Legal compliance is a great cost to the organisation, where the costs of prevention of legal liability far outweigh the costs of non-compliance. Internationally, companies that comply with legal requirements are regarded as fair dealers. They are known for the production of safe and quality products and meeting their commitments.
Sustainability strategy requires that organisations manage those sets of costs that indirectly impact on productivity for the organisation to benefit from its reputation that impact on profitability.
lNyasha Chizu is a Fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: email@example.com, Skype: nyasha.chizu