Sustainability is a buzzword that is used in many different ways. In the context of this article, it refers to the Triple Bottom Line of People, Planet, and Profit, and the idea that in order for an organization to be ‘sustainable’, it must not only be profitable, but also be mindful of its impact on the community and the planet.
Many small business owners I speak with say that they cannot afford to implement sustainability. They don’t have the time or funds for it. The challenge is that in today’s business environment, not addressing sustainability poses a risk to the long-term viability of the business. So, while in the short-term, it might make sense to ignore it because of lack of time, funds or expertise, in the long-term, doing so can hurt the business.
There are many reasons to implement sustainability. The one I will focus on here is mitigating regulatory risk. If you are not in compliance with federal, state and local environmental and other laws, you risk being fined, which can result in wasted time, related financial cost, as well as potentially lost revenue and negative publicity for your brand. Sustainability-related regulations can be related to recycling, storm water run-off guidelines, release of toxins into the air or water, and hazardous waste disposal, among other things. Here are three reasons to comply with sustainability-related regulations:
1. Fines and other costs
Being out of compliance with state, local and federal regulations can cost money in the form of fines as well as potential litigation. This is the case not just for sustainability but for other regulations as well. Sustainability-wise, for example, your business can be fined for not recycling (if recycling is mandated where you do business) or you may incur construction delays and costs from a discovered site contamination.
Enforcement is growing at the federal level. Per the EPA, $1.6 billion was collected in administrative and civil judicial penalties in 2017, higher than any of the previous ten years, other than in 2016, which included one $5.7 billion action taken.
It is also growing at the state level. Let’s take a regulation that is relatively common in the US and applies across a majority, if not all, businesses – recycling. If recycling is required in your county, city or state, and you are not recycling, you could be fined for noncompliance. In New York City, a business is fined $100 for a first offense, $200 for a second, and $400 for a third. This can add up, especially for smaller businesses. San Francisco is looking at an ordinance that would require businesses that are sorting improperly to hire a permanent trash sorter or be fined up to $1,000 per day. Other cities, such as Philadelphia, have recycling laws in place and are recognizing that not enforcing them is costing them money; therefore they are looking at ways to increase enforcement.
Typically, the larger cities lead the way and others follow suit, so if you are not in a large city, you can get ahead of the regulations in your city or town by recycling properly. If you are already out of compliance with local regulations, then future, more stringent changes will make it even more costly and difficult for your business to change. It is easier and less costly to implement now than to scramble to implement once regulations become more stringent, even if you don’t think your business will be fined.
In addition to the fines, factor in the time spent rectifying the issue instead of putting a system in place to ensure compliance, plus potential time spent on litigation for larger issues, and you have a serious money and time sink that could be avoided.
2. Lost revenue
Being out of compliance with sustainability regulations can indirectly or directly impact your local community and result in lost trust. Lost trust can take months, if not years, to regain. Many customers patronize businesses that share their values. A 2017 Cone study found that 78% of those surveyed would refuse to purchase a company’s products or services upon learning that it supported an issue contrary to their beliefs. Millennials, the largest living generation, want to do business with responsible companies. Millennials care about an organization’s environmental and social actions. If those actions negatively impact the environment and/or community, they will take their dollars elsewhere – and they are not the only ones to do so.
If you own a local automotive repair shop and mismanage your hazardous waste, this can impact your staff, via potential spills, fires, explosions, and exposures to toxic chemicals. It can also impact your community via the pollution and contamination runoff into the air and waterways near your business site. This in turn can negatively affect the health of individuals living near your business.
Once your business is seen as negatively impacting the community, it is highly likely that many will choose not to spend their dollars there. Hazardous waste may not seem like a big deal, especially if that is not something that is part of your daily operations, but even a small quantity can have a negative impact and must be disposed of responsibly. If your business has smaller amounts of hazardous waste, be sure to look into local programs, such as this one or this one, that can help you dispose of it for free. This will partially reduce the cost of compliance.
3. Tarnish your brand and reputation
Closely linked to the above is the negative impact that fines and being out of compliance with sustainability regulations can have on your brand. Image is paramount to a business, and what may be a small transgression can quickly reduce the goodwill that your business has worked years to build.
Negative brand association means not only lost customers, but also potentially lost partnerships, lost contracts, reduced lending options, and an overall higher cost of doing business. In one study, reputation risk was the top driver for regulatory compliance and was twice as important as avoiding fines.
The increased focus on environmental justice, coupled with easy access to social media and online databases that rate companies means that individuals can quickly find out the current state of your business and if there are any reported issues. For larger companies, apps such as Buycott and DoneGood, and Orange Harp are available to review an organization’s actions. For smaller companies, it may be the local newspaper or environmental nonprofit.
The above discussion focuses on common sustainability-related regulations that most businesses could face. If your business is more specialized and subject to additional environmental regulations, there are additional risks to noncompliance, such as higher worker’s compensation insurance, higher employee turnover, loss of license to operate, stopped production, and even criminal charges. While these are not discussed above, they should be taken into consideration and provide added incentives for compliance.
If you're considering implementing sustainability at your organization - including recycling, hazardous waste disposal and other actions, be sure to download our free sustainability checklist that can help you determine what you are already doing and some additional actions you can take.