The green folding stuff

Apr 26 2011 by Gareth Kane Print This Article

I have a number of killer questions for my clients, but undoubtedly the most unwelcome is "What's your budget for environmental projects?". It usually elicits a shuffling of feet and some muttering about "due consideration", "in the round" and "case by case basis".

I like to hold their feet to the fire on this one. If you claim to be committed to something, you have to allocate resources it or your claim is just hot air. Or to put it simply, no money = no commitment.

But budgeting for green projects isn't straightforward. If you have a budget for, say, buying new vehicles, you can set a simple Return on Investment (ROI) criteria like "the payback must be 5 years or less" and you can do the sums for each proposal or option. But it is very hard to determine a direct financial return for your public relations budget (unless you know something the rest of us don't), so investment decisions tend to be made on a qualitative basis.

Green projects are complicated as they often deliver both direct cost savings and qualitative branding benefits. I keep coming across really great green project proposals that have been strangled at birth because they don't meet an ROI criteria. Because they might give an ROI, that becomes the sole criteria, ignoring the potentially huge business benefits that can result from a green image.

To take an example, EAE Ltd is a small logistics firm based just outside Edinburgh. They specialise in distributing those leaflets for birds of prey centres or aquariums that you find in hotels and tourist information centres.

EAE's owner, Glen Bennett, is a passionate environmentalist so he invested in a wind turbine for his site. This was easier said than done a two year battle with bureaucrats had to be fought first - but now the turbine is pride of place outside the depot. He is very unlikely to get a strong financial return on the project, but it has become a potent symbol of his commitment.

In fact, it has become much more than just a symbol. EAE recently won a very large public sector contract and the feedback was that it was in the 'green procurement' section that he outgunned the competition. The others sent an environmental policy; Glen sent a picture of the turbine. If Glen had taken a short-sighted view that the turbine needed to pay for itself, he would have lost out on this much bigger prize.

So how do you manage this complexity? Some companies simply pump a huge amount of money into an environmental budget and don't worry about the financial return. Marks & Spencer's Plan A sustainability programme had an eye-watering 200m pot to get it started. Interestingly, although it wasn't expected to make a return, it paid for itself and made a surplus, although the company is a bit cagey about how much as they don't want to be seen to be mercenary.

The risk of this approach is that everyone will see the pot as a cash cow and try to submit every pet project to that budget on the basis of tenuous green credentials.

A neat variation was developed by a Belgian family business, BOSS Paints. They have a special 'People and Planet' fund for environmental and staff projects which do not have to make a return. The fund is topped up with a proportion of annual profits and has been used to pay for everything from solar panels to cycle maintenance classes and even a lady who irons employees' laundry while they work.

If a project with a strong environmental theme fails the company's standard ROI appraisal criteria, then it can be submitted to the fund. This two level process makes sure the projects are measured against both financial and non-financial criteria and is funded appropriately.

But, however you go about it, the original point still stands. If you are serious about being green, we need to see the colour of your money.


About The Author

Gareth Kane
Gareth Kane

Gareth Kane is a sustainability consultant, speaker, trainer, coach and author. He has worked with hundreds of organisations, from small local companies to trans-national corporations, to help them get the most from the sustainability agenda.