The business of sustainability

CATHY BUSSEWITZ
THE PRESS DEMOCRAT

In an era when terms like "locavore" and "organic" are a regular part of consumers' vocabulary, businesses are taking notice.

And concepts of sustainability — operating and harvesting resources in a way that doesn't permanently damage the planet — are increasingly being adopted by corporations.

While these concepts are familiar to companies in Sonoma County that have taken a leadership role in developing sustainable business models, many mainstream companies also are adopting similar themes.

"It used to be that businesses thought, &‘I cannot be environmentally sustainable and profitable, I can't do both of those things simultaneously,'

" said Chris Yalonis, managing partner of Sustainametrics. The consulting firm specializes in helping organizations develop sustainable business models. "What we're finding is, that's a false choice," he said.The trend is the result of a confluence of factors. Consumers are demanding more information about where their products come from, and how the environment and employees are treated in the process. There's also a growing acceptance that the world has limited resources. And companies are finding they can save money by reducing energy and resources consumption.Signs of the blossoming are everywhere. The Sustainable Enterprise Conference, held every year in Sonoma County, this year drew 400 attendees, who hailed from academia, nonprofit organizations, government groups and businesses."Sustainability is a regular part of the conversation in every boardroom," said Oren Wool, an organizer of the conference and principal at 108 Technologies. "If you build a business model based on the idea that your company will have cheap water and power, you're missing the likelihood of our economic future."Having a plan to deal with the possibility of climate change also has become more important. The Securities and Exchange Commission in 2010 issued a ruling that public companies need to disclose to shareholders whether the business is at financial risk due to the possibility of climate change or regulations intended to curb emissions. And that plan is something investors pay attention to, Wool said."Nothing blew it open for me until I heard investment bankers saying that (companies) have to have a plan, they have to understand that there is a climate risk," Wool said. "I was like, oh my gosh, they get it."Consumer interest has been a huge driver in the change. In several national surveys, about 15 to 20 percent of consumers identified themselves as "deep green," or willing to go out of their way to buy environmentally sustainable products, and another 20 to 25 percent said they prefer green products, but won't pay more for them, Yalonis said.Before co-founding Sustainametrics, Yalonis worked with Clorox to develop a line of sustainable cleaning products, because the company felt its market share was being eaten away by competitors such as Seventh Generation. Within a couple of years, the product line was worth $150 million, he said.And companies like Wal-Mart and Procter & Gamble are saving millions by changing their packaging, and finding closer sources of product components to reduce fuel consumption and shipping costs."You find ways to save money, to lower the cost of goods, but it also enables you to find niche marketing opportunities that you never could find otherwise," Yolanis said.Displaying that commitment through certifications also has become popular. Environmentally constructed buildings can become "LEED" certified. Organic is a coveted label for farmed goods.And to stamp companies with the sustainability seal of approval, a nonprofit organization called B Labs has developed a certification called "B Corporation."One of the first companies in the nation to become certified as a B Corporation was Guayaki, a company based in Sebastopol that makes yerba mate drinks and products. Its goal is to restore 200,000 acres of rain forest by 2020 and to create 1,000 living-wage jobs. So far, the company has restored about 27,000 acres.Becoming certified as a B Corporation introduced Guayaki to new sustainable business practices, and created opportunities to collaborate with other B Corporations, CEO Chris Mann said. But having a sustainable business model doesn't save them money in the short run, because they pay two to three times the market price for yerba mate, and pay their employees abroad higher wages than competitors. But in the long run, it's going to get more expensive for any company to exploit natural resources or pay for labor."Our business model relies on customers who say, &‘We are voting with our dollars, we believe in what it means, and it's a higher quality product and we're willing to pay more,'

"What we're finding is, that's a false choice," he said.

The trend is the result of a confluence of factors. Consumers are demanding more information about where their products come from, and how the environment and employees are treated in the process. There's also a growing acceptance that the world has limited resources. And companies are finding they can save money by reducing energy and resources consumption.

Signs of the blossoming are everywhere. The Sustainable Enterprise Conference, held every year in Sonoma County, this year drew 400 attendees, who hailed from academia, nonprofit organizations, government groups and businesses.

"Sustainability is a regular part of the conversation in every boardroom," said Oren Wool, an organizer of the conference and principal at 108 Technologies. "If you build a business model based on the idea that your company will have cheap water and power, you're missing the likelihood of our economic future."

Having a plan to deal with the possibility of climate change also has become more important. The Securities and Exchange Commission in 2010 issued a ruling that public companies need to disclose to shareholders whether the business is at financial risk due to the possibility of climate change or regulations intended to curb emissions. And that plan is something investors pay attention to, Wool said.

"Nothing blew it open for me until I heard investment bankers saying that (companies) have to have a plan, they have to understand that there is a climate risk," Wool said. "I was like, oh my gosh, they get it."

Consumer interest has been a huge driver in the change. In several national surveys, about 15 to 20 percent of consumers identified themselves as "deep green," or willing to go out of their way to buy environmentally sustainable products, and another 20 to 25 percent said they prefer green products, but won't pay more for them, Yalonis said.

Before co-founding Sustainametrics, Yalonis worked with Clorox to develop a line of sustainable cleaning products, because the company felt its market share was being eaten away by competitors such as Seventh Generation. Within a couple of years, the product line was worth $150 million, he said.

And companies like Wal-Mart and Procter & Gamble are saving millions by changing their packaging, and finding closer sources of product components to reduce fuel consumption and shipping costs.

"You find ways to save money, to lower the cost of goods, but it also enables you to find niche marketing opportunities that you never could find otherwise," Yolanis said.

Displaying that commitment through certifications also has become popular. Environmentally constructed buildings can become "LEED" certified. Organic is a coveted label for farmed goods.

And to stamp companies with the sustainability seal of approval, a nonprofit organization called B Labs has developed a certification called "B Corporation."

One of the first companies in the nation to become certified as a B Corporation was Guayaki, a company based in Sebastopol that makes yerba mate drinks and products. Its goal is to restore 200,000 acres of rain forest by 2020 and to create 1,000 living-wage jobs. So far, the company has restored about 27,000 acres.

Becoming certified as a B Corporation introduced Guayaki to new sustainable business practices, and created opportunities to collaborate with other B Corporations, CEO Chris Mann said. But having a sustainable business model doesn't save them money in the short run, because they pay two to three times the market price for yerba mate, and pay their employees abroad higher wages than competitors. But in the long run, it's going to get more expensive for any company to exploit natural resources or pay for labor.

"Our business model relies on customers who say, &‘We are voting with our dollars, we believe in what it means, and it's a higher quality product and we're willing to pay more,'

" Mann said. B Corporation certification is one of many the business has: Guayaki also is certified as organic, fair trade, non-genetically modified and kosher."We barely have enough room on our label," Mann said.They're not alone. There are about 350 types of certifications related to environmentalism, Yalonis said. And many major corporations are adapting, such as NASCAR, which is using about 15 percent ethanol in its fleet, Yalonis said.In March, a group of major corporations including Adidas, J.C. Penney, H&M and Patagonia formed the Sustainable Apparel Coalition with the goal of reducing their companies' environmental and social impacts.Santa Rosa-based Indigenous Designs has long incorporated fair trade and organic principles in its business, and also is a B Corporation."A lot of this has to do with companies that are doing the right thing being scored on a system that's fair, that allows investors and the public to take a look at that certification and know that there's not "greenwashing" going on," said CEO Scott Leonard.Financial companies also are in the mix. Another local B Corporation is MJ Everson Financial. Matt Everson, founding general partner, said the certification probably adds to his profitability, because waste-reducing principles save money and help attract customers with similar values.Everson is hoping the California Legislature will pass a bill, introduced by Assemblyman Jared Huffman, D-San Rafael, which would create a new class of companies in California, to enable corporations to pursue environmental values without fear of lawsuits from shareholders."Smart investors are looking at sustainability as not just a fad strategy," Yolanis said. "It is a bona fide embedded strategy for competitiveness going forward."You can reach Staff Writer Cathy Bussewitz at 521-5276 or cathy.bussewitz@pressdemocrat.com.

B Corporation certification is one of many the business has: Guayaki also is certified as organic, fair trade, non-genetically modified and kosher.

"We barely have enough room on our label," Mann said.

They're not alone. There are about 350 types of certifications related to environmentalism, Yalonis said. And many major corporations are adapting, such as NASCAR, which is using about 15 percent ethanol in its fleet, Yalonis said.

In March, a group of major corporations including Adidas, J.C. Penney, H&M and Patagonia formed the Sustainable Apparel Coalition with the goal of reducing their companies' environmental and social impacts.

Santa Rosa-based Indigenous Designs has long incorporated fair trade and organic principles in its business, and also is a B Corporation.

"A lot of this has to do with companies that are doing the right thing being scored on a system that's fair, that allows investors and the public to take a look at that certification and know that there's not "greenwashing" going on," said CEO Scott Leonard.

Financial companies also are in the mix. Another local B Corporation is MJ Everson Financial. Matt Everson, founding general partner, said the certification probably adds to his profitability, because waste-reducing principles save money and help attract customers with similar values.

Everson is hoping the California Legislature will pass a bill, introduced by Assemblyman Jared Huffman, D-San Rafael, which would create a new class of companies in California, to enable corporations to pursue environmental values without fear of lawsuits from shareholders.

"Smart investors are looking at sustainability as not just a fad strategy," Yolanis said. "It is a bona fide embedded strategy for competitiveness going forward."

You can reach Staff Writer Cathy Bussewitz at 521-5276 or cathy.bussewitz@pressdemocrat.com.

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