Justification Report for American Beverage Corporation

“There is a growing sense of the world’s interdependence and connectedness, and an understanding that progress is an illusion if it destroys the conditions for life to thrive on earth” (Buchholz, 1991). Twenty years ago, business ethicist and university professor Rogene Buccholz made the point that preserving natural resources should be a priority for the business community. Since that time, corporate social responsibility has become an even more important goal. Consequently, we prepared this report to provide the management team of American Beverage Corporation (ABC) with recommendations on launching a corporate environmental and sustainability program.

There are many reasons that ABC should commit to sustainable practices and principles, not least of which is protecting the earth’s resources. But as this report discusses, there are compelling economic and business reasons to go green as well. By launching a green initiative ABC will realize the following benefits: reduced operating expenses, increased sales, expansion into the green products market space, reduced tax liabilities thru energy saving tax credits, and decreased dependence on fossil fuels. At the same time, ABC can achieve environment-friendly goals thru programs that reduce greenhouse gas (GHG) emissions, cut back on water and energy usage, minimize our carbon footprint, and promote responsible corporate citizenship.

The following BBC News video summarizes reasons that business and political leaders support bold action to combat climate change: http://news.bbc.co.uk/panorama/hi/front_page/newsid_8383000/8383547.stm (Bennett, 2009).

Problem Statement

Together, we all share the planet and we envision a future that that keeps our planet livable even as we grow ABC to new levels of success. ABC is a dynamic beverage and snack food business that is committed to continued growth and expansion. Our shareholders expect continued profitability while we meet the challenges of today’s hypercompetitive global economy. At the same time though, we strive to embrace sustainable and eco-friendly practices. These goals are not mutually exclusive as many have believed in the past; in fact they complement and reinforce one another in ways that produce measurable and quantifiable positive results.

The global trend toward going green accelerates every day because it is both progressive and smart business. We all want ABC’s continued success, even as we pledge to protect the earth’s natural resources through more efficient use of energy, water, land, packaging and transportation. ABC is committed to actively working to promote green practices. In the past we used more energy and fossil fuels than we needed to, and we allowed our customers to go to competitors with greener products and technology. However, as we move forward with the adoption for the upcoming fiscal year of the recommendations in this proposal, we will grow ABC’s profitability as a result of implementing company-wide plans to reduce, reuse, recycle and innovate.

Method Used

To prepare this report, ABC’s Green Team conducted research to understand what challenges the company will face in the process of implementing green strategies. Research indicates that a routine problem that companies encounter is getting buy-in from managers for green programs. According to Jacquie L’Etang (1995), business ethicist and University of Stirling professor, managers encounter difficulties in developing corporate social responsibility programs because of conflicting interests and priorities. They encounter pressures, both internal and external, which means that programs like ABC’s Green Initiative usually develop from a combination of proactive and reactive policies. Understanding these constraints enabled us to shape a program that we believe almost everyone will be able to buy into.

Recommendations included in this report take into account those internal and external factors that affect the outcome of sustainability programs. By making the proactive attempt to uncover reasons for resistance, we hope to give our green program maximum opportunities for success. We know that ABC associates and management teams are all committed to the company’s success, and we acknowledge the effort on the part of all employees and other stakeholders.

It was the Green Team’s mission to evaluate each department’s operations, as well as ABC processes and procedures. Our sustainability assessment looked for opportunities to reduce expenses, and to recycle and reuse materials. We propose the following eco-friendly strategies and programs as detailed in the Findings section of this report.

In addition to conducting the sustainability assessment and surveying the literature on green programs, the Green Team also researched various options to determine whether they might contribute to the program that we are proposing. Whenever possible, we quantified recommendations so that we could identify the costs of trade-offs or investments, as well as the value of benefits that ABC will receive.

Findings

Reducing Operating Expenses

A significant reason for the popularity of green programs is their impact on bottom line savings. The recommendations included in this proposal allow ABC to cut expenses, and at the same time require minimal investment or upfront costs. As a result, ABC can realize significant financial benefits from going green starting immediately in some cases, and within the current fiscal period for others.

The ABC Green Team began this project with a sustainability assessment, a tool intended to inform decision-making in order to promote sustainable outcomes, and in our case, the development of this proposal. The metrics we used for appraisal will be used as a foundation for corporate sustainability reporting going forward, and initially involved ABC accounting and auditing systems.

Beginning with our IT department, we identified a significant opportunity to save both energy and money by implementing PC power management software. “Edison” software was developed by Verdiem as a tool to help companies like ours to reduce energy waste from IT devices. With minimal investment requirements and a straightforward implementation by our IT folks, ABC can start saving energy and fighting climate change within weeks (Kluster, 2011).

In addition to benefitting the environment, using Edison can cut ABC energy costs by $20 – $60 dollars per PC per month. These reduced energy costs can amount to six- and seven-figure annual savings for large companies like ours. For many companies, Edison alone is responsible for a 5 to 15% reduction in overall, organization-wide energy consumption. And unlike replacing equipment, which can be time- and cost-intensive, making our existing equipment more energy-efficient is a fast and easy process that pays off within months (Kluster, 2011).

Furthermore, if we still needed convincing, consider this: Fifteen PCs can generate the same amount of carbon emissions as a mid-size car each year. Fifteen PCs. By implementing effective PC power management strategies throughout our company, ABC will be doing our part to help out the environment (Kluster, 2011).

One of our goals here at ABC is continued growth at the same time that we promote sustainable operations. Maintaining our ability to grow requires that any changes to our operations must involve minimal impact on productivity. The average PC consumes 588 kilowatt-hours of electricity per year, and of that amount, almost 400 kWh are wasted by running PCs at full-power when not in use. By putting a computer in sleep mode during periods of inactivity, the Edison power management software can cut energy use on average 60 — 70%, up to as much as 90% in some scenarios. And given how fast our company has been growing, as the demands on our IT and PC networks grow larger, gaining control over energy use will prove to be an important advantage (Kluster, 2011).

Reducing Carbon Emissions

According to reports from Verdiem’s current customers, large companies like ours can also cut PC carbon emissions by up to 440 pounds per year per PC. This reduction can literally mean savings of thousands of tons of carbon emissions each year by doing nothing more than managing PC power consumption (Kluster, 2011). As an example, Dupont estimates savings to date of $3 billion from its efforts to reduce carbon emissions. The company successfully reduced GHG by 63% during the 90s, far ahead of their announced schedule (Ryan, 2008).

Along with saving money and reducing carbon emissions, there are also intangible benefits to implementing a PC power management program, and any eco-friendly sustainability program. ABC employees can enjoy a deep sense of pride in working for a company that is doing its part for the environment. Not only will ABC computers be using less than half the power that they used to, and doing it without any impact on productivity, but our employees will know that they are personally helping to reduce the company’s carbon footprint and thereby fighting climate change (Kluster, 2011).

BBMG Conscious Consumer Reports conducted a study which showed that the vast majority of Americans expect that their business leaders and marketers should provide environmentally friendly products. Not only that, but Americans are adamant that any “green-friendly” claims must be backed up with legitimate practices. With ABC committed to a strong sustainability program, as evidenced by our Green IT strategy, communicating the value of our green program to customers and stakeholders has the potential to do wonders for our reputation and our brand (Kluster, 2011).

The ABC management team has a chance to become cost-savings and sustainability heroes for our organization. Every year companies waste nearly $4 billion powering devices that are not being used, but ABC will no longer be included in those statistics. ABC will curb these expenses, along with excess carbon emissions, by introducing power management strategies. We can produce impressive results on both fronts, sustainability and cost-savings (Kluster, 2011).

ABC’s Finance Department will be pleased to know how much we can lower our exposure to energy prices. Energy sales are expected to grow 50% worldwide by the year 2030, but ABC need not experience such an escalation. By reducing the amount of power required to run our business, we can mitigate risk from factors well beyond our control (Kluster, 2011).

One final point regarding our Green IT initiative, which is that energy-efficient IT is high performance IT. IT equipment can account for nine percent of all energy consumed by businesses; it is the third largest source of power for the commercial sector. Putting power management policies in place is probably the easiest way for ABC to control power consumption across our network (Kluster, 2011).

Other Corporate Programs

In addition to PC power management savings, our Green program proposes to lower operating costs in other areas: installing energy saving lighting, heating and ventilation in our offices will dramatically reduce ABC energy bills. ABC would ultimately like to follow WalMart’s example, with the giant retailer WalMart once again setting the bar high when it comes to renewable energy. They launched an ambitious long-term plan to eventually power each and every one of their stores using 100% renewable energy sources (Ryan, 2008).

In addition to focusing on conserving water, gas and electricity, resulting in significant savings on those bills, ABC will implement a program to purchase energy — efficient supplies and equipment, such as light bulbs, computers and printers, to keep down general operating costs. ABC can also save by recycling scrap paper.

There are a couple of examples of well-received green programs that involve paper recycling. Starbucks’ decision to use coffee cup sleeves made of recycled paper has saved about 78,000 trees per year since 2006. Bank of America, another example, proves that eco-friendly operations can coexist with business growth. From 2000 — 2005, Bank of America reduced their paper use by 32%, in spite of 24% growth in their customer base. They also run an internal recycling program that recycles 30,000 tons of paper each year, in the process saving 200,000 trees for each year of the program’s operation (Ryan, 2008).

Employee-Focused Programs

Allowing our employees to telecommute also helps fight global warming and dependence on fossil fuels; by eliminating employee commutes, we achieve a reduction in gas consumption, as well as decreased office space expenses. We look to emulate the success of technology giant Sun Microsystems: permitting thousands of its 34,400 employees to telecommute has saved the company millions of dollars in real estate and fuel costs between 2002 and 2008. ABC also plans to encourage other employee programs designed to cut back on GHG, include ridesharing and public transportation. Sun likewise offers an example of the type of GHG reduction that can be achieved, having set a goal of 20% by 2012 (Iwata, 2008). ABC has additional plans that include placing recycling bins around the building for paper, plastic and glass recycling, providing another way of letting employees participate in ABC efforts to go green.

Additional Operating Expense Reductions

ABC can realize significant costs savings and at the same time be environmentally responsible by reducing energy usage. Lighting, heating, and cooling are major business expenditures for any firm. ABC can reduce lighting output by installing compact fluorescent light (CFL) bulbs throughout the office which use almost 75% less energy than traditional bulbs. According to Energy Star, each CFL saves $40 in energy costs over the course of its lifetime. ABC can also cut its energy use by installing parking lot lights with motion detectors which dim when no one is in the lot, and then brighten when they detect a car or person in the lot (Jenkins, 2010).

Increasing Revenues

Not only do green practices give ABC a competitive advantage in the market, but like many companies, we expect to be able to sell waste materials to a manufacturer that repurposes or recycles the waste for a profit. General Mills offers one such example, selling the oat hulls left over after making Cheerios cereal. General Mills is reported to have sold 86% of their solid waste in 2006, making more profit from selling it than they spent on disposal (Jenkins, 2010).

Tax Savings

Another savings opportunity associated with going green comes in the form of lower taxes. The government is currently providing businesses with more green tax credits and deductions than ever before. By installing a Geothermal heating system, ABC can qualify for a tax credit of 30%. So in addition to sizable savings on our energy bills, we save 30% off the total cost of the system.