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Opinion

How to Quantify Sustainability’s Impact on Your Bottom Line

By Tensie Whelan, Bruno Zappa, Rodrigo Zeidan and Greg Fishbein

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Humanity has an urgent need to fight climate change, and businesses can play a key role in doing so.

Humanity has an urgent need to fight climate change, and businesses can play a key role in doing so. But we recognize that, in many businesses, resources are often allocated according to short-term, bottom-line pressures. We thus wanted to figure out a way to help executives quantify the financial benefits of reducing their firm’s greenhouse gas (GHG) emissions.

We chose Brazil’s beef industry 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.

Read the full article as published by Harvard Business Review
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Tensie Whelan is a Clinical Professor of Business and Society and Director of the Center for Sustainable Business.