BU6019 Sustainable Entrepreneurship Session 16 Costs – do they deter “Sustainable” entrepreneurship?

First of all… Please ensure you have completed your NSS! Share your views and maybe win £150 worth of High Street shopping vouchers or an i-pad!

Consider: Financial costs Social costs ENVIRONMENTAL COSTS! Experts at “The Nature Conservancy” predict that in 100 years, natural land and water resources will become scarce! (Life forms could be lost forever, if you believe the experts) This organisation’s mission is “To protect the future of our natural world”! – nature.org

Re-thinking! Reducing – Recycling – Reusing – RETHINKING! If consumers now want the best quality, at the best price, AND a good level of service AND environmental concerns to be addressed, then can entrepreneurs/managers afford to ignore their wants? Policies, procedures and systems may need to be changed accordingly! (Self study: Examine the Environmental Policies of at least two organisations!)

ACTIVITY Working in small groups, discuss how the following types of costs can be reduced through sustainable activity: Capital costs Standard costs (i.e. overheads, labour and materials) Fixed costs Variable costs Opportunity costs Be prepared to share your responses with everyone else!

Remember! Every square metre of your business premises whether a micro business such as A&M clothing or a TNC such as Tesco plc, is a cost! How floor space (and indeed cubic metres of space) is used, really matters and “Green Buildings” are proving to be beneficial and cost–effective! It is estimated that in Western Europe, a typical “green” office can result in cost-savings of 895 Euros, per square meter, per year! -EC Harris Consultancy

Benefits of introducing sustainable practices (i.e. reducing costs) Consider; Reduced energy/utility costs Efficient use of machinery and operations (less breakdowns/replacements/ disposal/emissions) Customer satisfaction (investigating complaints costs money!) Maximising ROCE and reducing costs associated with fixed assets (e.g. Green offices) Less obsolescence (e.g. JIT/ 5 performance objectives/supplier relationships) Staying within relevant legislation (i.e no lawyers fees/fines and court fees/bad reputation) Improved health, morale and motivation of employees (staff retention and less recruitment costs) Reduced absenteeism and cost of staff “sick days”! Increased productivity and output Competitive advantage

It’s good to think! Don’t forget the use of a Cost/Benefit analysis and a Balanced Score Card! (Customer Perception/Financial/Learning and Growth/Internal Business Processes) Think TBL!

Is it best to… Consider what the “returns” of sustainable actions might be rather than the financial costs? What are your views? (e.g. To obtain ISO 14000 to improve environmental performance costs money! Accreditation, training, alterations to processes etc. are costs)

Remember: “Stakeholders are watching you!” French officials have banned a pesticide which is still widely used by British farmers on crops! It is suggested there is a link between this pesticide and the decline of Bees, threatening international food security (ie social costs!)

Some things we already know… Chester Zoo uses “intelligent Control” and has reduced energy consumption by 30%. It saves £10,000 per year in its Elephant House alone! European farmers will lose 30% of subsidies if they don’t comply with “green” requirements! (But at what cost of implementing these!) UPS has saved 10 million gallons of fuel (since 2004) through route planning technology. By reducing driver delivery stops by 6.5 minutes per day, the organisations saves up to $70 million per year! Airbus/Boeing use a “Genx” engine that burns 15% less fuel and emits 30% less Nitrous oxide

“The more green, the less competitive an organisation will be!” What do you think? “The more green, the less competitive an organisation will be!” Blanco, Rey-Maquieira & Lozano (2009) “Sustainability is now about profit and is an opportunity for the 21st century” - Ben Clarke (Kraft foods)

And finally… Entrepreneurs and Intrapreneurs may consider “opportunity costs” in terms of: Legal obligations – only employs sustainable activity when it has to! Social responsibilities – Is willing to go beyond legal requirements! Social responsiveness – will promote a responsible attitude! Self study: Conduct some research into an organisation of your choice and investigate whether costs deter it from becoming a “sustainable enterprise”!