Sustainable Management in Finance

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Sustainable Management in Finance
Project 2

1. How can sustainable production or services be less expensive than traditional ones?

Traditionally sustainable production or services usually recognized as more expensive and it is hard for companies to retain immediate profit from the investment. Part of the reason is because companies have to fundamentally change the way they think about ‘lowering costs, taking a leap of faith’ that initial investments made in more-costly materials and methods will lead to greater saving down the road. The key to make sustainable production or services be less expensive than traditional ones is not by focusing on reducing the cost of each part but on increasing the efficiency of the system as whole. By taking a systems approach requires the willingness to buck the conventional financial wisdom, however in long run the return on investment is more profitable. Many companies who took this challenge strongly demonstrate that economic development and environmental consciousness is not a necessary trade-off. Instead, the purist of sustainability tends to be the competitive advantage for the organization when all business facing limits on their resources and their customers’ buying power.

According to the article “Making Sustainability Profitable”, commonly among the successful sustainable companies they share three main approaches.

1) Long view approach – Many companies spent more expensive methods of sustainable operation on the initial stage that eventually lead to dramatically lower costs and higher yields.

2) Bootstrap approach – Other companies started with small changes to the current process to generate substantial cost saving, which later has been used in finding advanced technologies that make the production more efficient.

3) Customer and supplier approach – lastly, some companies spent more effort on the operation method on the touch point with their consumer and suppliers. At the same time create a business model that can hardly copied by the competitors in the market.

It is clear from many cases especially business in developing countries, that in long-term perspective the sustainable production and services is more profitable and it brings the ‘uniqueness’ to the company. This can be seen as the initially investment or gradual cost saving on further R&D development. Nevertheless, the world we live in has limited amount of resources, in which companies will increasingly need to consider their total return not just profit and loss on the obvious balance sheet. Identify socio-environmental challenges is a way to turn obstacles to a new business opportunity. Companies should acknowledge the natural resource that they consume and also assume the payback it will get from them. Depending on the limited resource will cause price increase in raw material, volatility, stricter regulations and social pressure. Therefore, in order to be the winner of future business, it is important to take into consideration and start to carry out the sustainability development at current stage. Bibliography

Haanaes, K., Michael, D., Jurgens, J., & Rangan, S. (2013). Making Sustainability Profitable. The Globe

2. What characterize business organization whose sustainability practices are highly innovative, and scalable?

Research conducted by Prof. Robert Eccles, Prof. Ioannis Ioannou, and Prof.George Serafeim for the guardian professional network, analyzing over a 180 American companies has shown that high sustainable companies maintain profit growth over a longer period of time as compared to low sustainable companies. (Eccles, Ioannis , & Serafeim, 2012) In developing economies where the motives for adopting sustainable models are greatly different than those of the developed countries confirm similar results. On closer inspection we find that although the reasons for sustainability differ, the facets of all these (sustainable) organizations remain common....
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