Harvard Business Review cites sustainability as a profit motive.

September 13, 2017

by 

Tensie Whelan, 

Bruno Zappa, 

Rodrigo Zeidan  and 

Greg Fishbein

...We chose Brazil’s beef industry (click here) as the location of our case study, both for the size and complexity of the industry and for its impact on the planet. We found that sustainable and deforestation-free practices created significant financial benefits for all players in the industry’s value chain.

Specifically, our analysis found that the net benefits to ranchers ranged from $18 million to $34 million (12% to 23% of revenues) in net present value projected over 10 years. For slaughterhouses and retailers (Brazilian operations), we also projected positive benefits: $20 million to $120 million (0.01% to 0.1% of revenues) and $13 million to $62 million (0.01% to 0.7% of revenues). These ranges were wide due to the relative size of the different players in the supply chain (for example, a company that has higher revenues will realize greater benefits than a smaller firm). Nonetheless, the case study demonstrates that measuring the value of sustainable business can be done, and that sustainable business itself can be cost-effective. We hope this will serve as a powerful motivator to improve leaders’ decision making and bring sustainable business practices further into the mainstream....

Sustainable agricultural practices can add cost, but, it is cost absorbed that results in an increase of profit.

...“McDonald’s standards in beef sourcing are among the highest in the world; even if our mass consumer is not willing to pay premiums for sustainability, we still have to maintain them,” says Daniel Boer, McDonald’s Director of Protein Supply for Latin America.

Retailers must be willing to pay for sustainability simply because the risk is too great not to — even if there’s a cost to their bottom line. “In 2009, after Greenpeace’s report on beef and Amazon deforestation, we had to reduce our supply base to as few as six different suppliers, which is not an ideal position to be in, in terms of price and volume negotiations,” Paulo Pianez, the Sustainability Director of Carrefour, told us.

Despite these strictures, the Brazilian operations of McDonald’s and Carrefour reaped similar types of benefits as the slaughterhouses — $12.5 to $62.1 million (0.01% to 0.6% of revenues) in expected net present value over 10 years, due to reduced risk and higher quality. According to our calculations, McDonald’s Brazil stands to gain between $5.7 million and $22.2 million net over 10 years — between 0.13% and 0.5% of its revenue. Carrefour Brazil stands to gain between $6.8 million and $39.9 million net over 10 years, between 0.01% and 0.05% of its revenue....

Why is that not good business? It is still a positive revenue stream while Earth receives its fair share of protection. That is morality. There is a reason why moral practices return profits.