Green with profitability

By ANGELA McCARTHY

Everyone knows that making a profit is the bottom line for successful business, but more businesses are also looking at two other bottom-line indicators: social and environmental.

Chris Morrison's business, Phoenix Organics, started with a bug: a ginger beer bug. About 15 years ago he and his wife began making ginger beer in their flat. They would remove Steinlager bottles from pubs, clean and sterilise them at a neighbourhood restaurant, then hand-fill them and sell their ginger fizz to cafes and health food shops.

Now Phoenix Organics sells 20 varieties, and exports to Australia, Singapore and Hong Kong, with its sights firmly set on Japan.

But it does more than make organic drinks. Morrison believes business cannot survive with a profit-at-any-cost approach and must consider the impact on society and the environment. "It is not something that is going to go away," he says. "In fact with exporting it is going to become a huge issue."

Morrison advocates triple-bottom-line, or sustainability, reporting, which was first introduced in New Zealand in 1997.

"Sustainability reporting means expanding the traditional company reporting framework to take into account environmental and social performance as well as financial outcomes," explains Professor Mike Pratt, of Waikato Management School.

"It also provides a tool for maintaining accountability and transparency of company performance, and therefore public legitimacy."

And good environmental business practice need not be difficult - it can start with something as simple as getting staff to separate plastic from other waste, says Morrison.

"If you start by taking a couple of small steps you realise it isn't that hard and the benefits are huge long term."

Phoenix Organics separates all paper and cardboard waste and sends it to Paper Reclaim. It also recycles glass and plastic and is monitoring energy use closely, taking such action as lagging the boiler pipes.

This takes staff time, but Morrison says it is a good investment. "Our energy use has dropped 10 per cent while output is rising, so it is having a positive effect on the bottom line."

Phoenix Organics caters for its social bottom line in various ways: staff create organic gardens in schools, attend tree plantings and build houses with Habitat for Humanity.

Carbon emissions are a big environmental issue for the firm, so Morrison has been using the Sustainable Business Network GreenFleet three-step programme to cut them. This involves everything from making sure vehicles are well maintained and running efficiently, to avoiding rush hours in delivery schedules so vehicles don't sit idling in traffic. He has also started transporting product by ship container to the South Island because it is energy efficient.

Cutting carbon emissions is also a priority for Urgent Couriers managing director Steve Bonnici. It was, he says, "a no-brainer to realise that having 100 couriers pumping carbon dioxide into the atmosphere isn't good".

He's trying to get as many vehicles as possible running on LPG, which as well as producing 20 per cent fewer emissions is cheaper. "We arrange an equipment loan through Shell for contractors; we give them a $200 bonus if they change and we provide them with a vehicle to use while the conversion is being done."

He also is trying to increase the size of the pedal fleet.

Even minor changes make a difference, says Bonnici. Switching computers off each night saves $200 to $300 a month. "There is a perception that it will cost to be environmentally friendly, but it usually saves money."

When collating his first sustainability report in 2001, Bonnici realised that the company had a major problem with driver turnover because of dropping incomes.

"While Urgent Couriers was still making money, the little business units within it weren't, which threatened our sustainability."

Bonnici increased prices and courier income. In the past 12 months turnover has improved markedly, which has cut recruitment and training costs - again a plus for the financial bottom line.

The company meets its social responsibilities by supporting organisations such as the Auckland City Mission, James Family Trust and the Northern Region Rookie Lifeguard Service.

And a growing number of customers are choosing Urgent Couriers because of its commitment to triple-bottom-line reporting and sustainable business. "They're usually good customers too, because they're not focused on just money but the other things you do as well," says Bonnici.

While he doesn't see the triple bottom line as a quick fix, Bonnici says it can provide competitive advantage.

It's not just small businesses that are developing a social and environmental approach. Dairy co-operative Fonterra, a member of the New Zealand Business Council for Sustainable Development, is working towards its first sustainability report, which it sees as both pragmatic and socially responsible.

Fonterra technical services and environmental manager Shane Lodge says the recent dairying and clean streams accord between Fonterra and the Government makes good business sense. Customers in Europe, the United States and more recently Asia are starting to ask about the environmental effects of New Zealand's manufacturing and farming practices, he says.

And with many farmers already following sustainable good practice, the accord - which gives farmers nine years to meet minimum environmental standards - encourages others to work towards it.

But some business leaders are lukewarm. Business Roundtable executive director Roger Kerr endorses environmental concern, but only if it doesn't hurt the bottom line. And he questions what it actually means to business.

"Economic and environmental progress go together - richer is typically cleaner, and market-oriented approaches promote both."

Employers and Manufacturers Association (Northern) chief executive Alasdair Thompson questions if public companies have a right to divert shareholders' money into areas such as social activities.

"I wouldn't like a public company giving away my money and forgoing profit in order to be socially and environmentally responsible." He says triple-bottom-line reporting is "a bit obscure".

"The point is that most people's real bottom line is to make sufficient profit to pay employees, pay themselves, feed families. No businessperson is going to knowingly waste resources because to do so costs money and makes the business less efficient."

To Kerr, triple-bottom-line reporting is "mumbo jumbo".

"It is a slogan that has no meaningful accounting sense. It suggests these things can be measured and tallied in an accounting sense and that is complete nonsense."

But last year, in response to the debate about triple-bottom-line reporting, an Institute of Chartered Accountants taskforce investigated how the concept could work from an accounting perspective.

Its sustainable development reporting committee will soon publish research into the conceptual framework and issues of assurance and verification.

"We are adopting a research-based approach to provide the necessary guidance to preparers and verifiers who may wish to broaden the scope of external reporting," says committee chairwoman Wendy McGuinness. "It is critical to ensure members adopt standard terminology."

Taskforce chairman John Spencer says the concept is starting to gain momentum because investors and the public want more information on the economic, social and environmental impacts of organisations. However, he also sees evidence of a growing gap between what is expected and what is provided, and the information provided varies greatly in usefulness and reliability.

And, McGuinness points out, the triple bottom line is not a new concept - the institute has presented awards for excellence in environmental and sustainability reporting since 1995.

But this year's judges commented that the number of awards was at record levels and the quality of reports was higher than before. Which suggests that green business is good business to a great many firms.