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It is not only large companies, under pressure from investors, government and consumers, that are burnishing their environmental credentials. Many fast-growing, entrepreneurial businesses see competitive advantage, as well as responsibility, in going green.
The public can be sceptical about environmental claims made by established companies, suspecting them of seeking to “green wash” their reputations. Younger businesses have a chance to build sustainability into their growth model from the outset.
Companies that impressed the judges of this year’s FT Future 100 UK — which highlighted such efforts as part of the environmental, social and governance impact category — went beyond simply cutting down on printing and avoiding plastic cups. For some, it was a case not only of mitigating the environmental impact of their business, but of integrating sustainability into everything they do.
World of Books, based in West Sussex, sees itself as a “circular economy” company. It buys second-hand books, primarily from charities around Britain, and resells them via its own website and platforms, including Amazon and eBay.
The company sells about a fifth of the books it buys to customers in 90 countries and recycles the rest into card or cardboard instead of sending them to landfill. It is also opening a warehouse in Coventry to avoid unnecessary road miles.
“We see profit as a way of enabling the environmental work,” says Patrik Oqvist, chief marketing officer.
“If we don’t generate enough profit, we can’t put more books into circulation. Rather than being a bolt-on or additional strategy, it’s part of how we operate.”
The environmental aim dates back to 2002, when two of the company’s founders walked past a charity shop and saw how many books were being thrown out. Now, World of Books has almost 500 staff and has tapped into consumer enthusiasm for second-hand books. Mr Oqvist says the company is reducing its carbon footprint by improving its distribution network and introducing more efficient LED lighting. “By lowering the cost, we can make it viable for us to sell more books,” he adds.
Reducing energy consumption is a common target. CDL, an insurance technology company based in Stockport, used extra insulation and renewable energy technologies such as photovoltaic tiles to capture solar energy when expanding its site. It runs a shuttle bus to local transport links and a scheme enabling employees to buy a bike at a discounted rate.
It has also worked with environmental agencies to improve the cycleway and footpath used by staff, including resurfacing, lighting and planting to promote wildlife.
“There are some clear financial benefits from the energy efficiency that we have in operating the campus, but it’s more about ensuring that we have an engaged workforce that care about transportation,” says Nigel Phillips, commercial director. “All of those things score quite highly in the feedback that we garner and ultimately it leads to a happier workforce.”
A 2017 McKinsey survey of more than 2,000 companies found that almost half (46 per cent) said the main reason for addressing sustainability was that it aligned with their “goals, mission or values” — up from 30 per cent in 2012.
“As a society we are waking up to the fact that the impact of climate change and global warming is not something that’s going to happen in 50 years, we are already feeling it around the world, whether it is disruption to supply chains or plastic in the oceans,” says Ioannis Ioannou, associate professor of strategy and entrepreneurship at London Business School.
He adds: “We are getting to the point where it’s hard for a company to argue that they can afford not to adopt at least the bare minimum of environmental policies.”
A 2015 review of more than 2,000 empirical studies found a large majority showed ESG measures had a positive effect on financial performance.
Prof Ioannou says the benefits range from operational efficiency to helping to attract talented younger workers. For entrepreneurial start-ups, he adds, “the potential to disrupt the existing players may be a huge motivator”.
The energy industry, for example, is being disrupted by new players in renewables. In the motor industry, it is an open question whether traditional manufacturers or newcomers such as Tesla will succeed in the electric car market.
Another FT Future 100 UK company is Midstream, a maker of high-powered LED lighting for airports and marine terminals. Its floodlights typically reduce electricity use by 60 per cent compared with lights they replace, according to the company.
Some sectors leave a bigger environmental footprint than others. Shaylor Group, a building contractor, acknowledges that construction can be a “destructive activity”. The company employs anti-pollution controls on its sites, aims to recycle 100 per cent of non-hazardous waste by 2020 and has encouraged more than half of company car users to opt for hybrid electric vehicles.
“Things are moving in the right direction, but we need to pick up the pace quite considerably,” says Catherine Howarth, chief executive of ShareAction, a charity that promotes responsible investment. “I’m not sure we’re moving at a sufficient pace and intensity of change required to meet the challenge of staying beneath the 2C temperature rise” — the level considered critical by the Paris climate agreement.
She says there is “more than an element of tokenism” in some companies’ environmental activities but welcomes initiatives such as Science Based Targets, whereby almost 500 companies worldwide aim to reduce greenhouse gas emissions at the rate needed to keep the global temperature increase below 2C.
“I think we are moving in the right direction, but it’s going to take concrete steps and actions,” adds Prof Ioannou.
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