Methods to Demonstrate a Financial Return on Investment in Product Sustainability
30 September 2016
by John Phillips
More and more companies are expressing a stronger public commitment to sustainable products and business practices.
The need for proactive, effective, and global product sustainability programs is growing due to changes in societal norms that are driving the demand for safer and more environmentally sound products. This trend is reflected in consumer purchasing decisions, evolving global policies (laws and regulations), and retailer sustainability programs such as the recent Sustainability Chemistry Policy at Walmart.
Companies that understand these dynamics incorporate them into their business practices in order to:
- Improve corporate reputation, which translates into sustained stock value and brand;
- Reduce business disruption and the potential for non-compliance penalties while increasing customer loyalty; and
- Drive the innovation of new, more sustainable products.
Companies that do not confront these realities face business risks such as a loss of market segments, noncompliance fines, government restrictions on product manufacturing and sales, increased litigation, and erosion of corporate reputation. Worst-case scenarios result in employee prosecution and imprisonment. Yet some companies decide to take such risks. Perhaps they’ve “never had such problems in the past”, or they will continue to “fly under the radar”. But we all know that luck doesn’t last. Sooner or later, business risks and consequences are realized.
In this paper, ERM explores how to demonstrate the value of a product sustainability program to senior management through calculating a financial Return on Investment (ROI). Methods that are discussed include integration of product sustainability: into new product development processes, into an evaluation of raw materials for existing products, with corporate portfolio management, and into enterprise risk management.
Download ERM's paper on demonstrating the value of a product sustainability program (303Kb PDF)
About the author
John Phillips is the Director of the North American Product Sustainability Services (PSS) practice at ERM. He is an expert in global chemical policy and product sustainability, which was developed over a successful 30 year career at The Dow Chemical Company, 15 years of which were spent leading the development of chemical industry sustainability programs and working with the United Nations Environmental Program (UNEP) and Organization for Economic Cooperation and Development (OECD) on the Strategic Approach to International Chemicals Management (SAICM).