Guest post from Julianna Davies
As the focus on businesses both large and small has been to make products, services, and manufacturing processes more environmentally friendly, the costs of going green have begun to mount. For some businesses and industries, this process of revamping their current line of products to comply with new regulations has become financially crippling. Further, the lack of employee knowledge made the transition look more like a scramble. While many business schools have developed new material and many professionals have done off-campus business coursework in the middle of their careers to get up to speed, there are still many problems. Even if the desire is there to become more sustainable, the investment capital may not be.
At a time when prices for clean energy such as solar and wind power remain significantly higher than fossil-fuel based sources, businesses are often not willing to switch to the more expensive alternative. The installation and upkeep of renewable energy sources often comes at a high price that is not always justifiable in an uncertain economic climate. With an economy in recession, government subsidies and grant programs for assisting the switch to renewable energy are dropping fast, as well, which can further disincentivize a company on the fence.
Sometimes the switch to environmentally friendly business practices means a total redesign of the product line, or at least a change in the materials used in manufacturing. Switching materials can often require new technology, or can mean greater distances for import — both of which add to the bottom line. While there are strong arguments for taking the greener route and adopting more sustainable business methods, more than just the health of the earth is usually at stake. Following environmental regulations and consumer trends towards green business practices while attempting to keep making a profit is a delicate balance, and is harder than it looks.
While many conversions to environmentally friendly production are big cost savers in the end, the wait is sometimes longer than businesses have. When money is tight, recouping costs is a top concern. Cost savings are not always clear for all green adaptations, either. Hybrid vehicles are a common example. Although hybrids tend to be more fuel efficient, their cost upfront is often higher than comparable standard cars, and recouping gains at the pump can take years. The expense and difficulty of repairing a hybrid on top of rising insurance premiums makes companies wonder if replacing their fleet is really worth the extra expense.
Small and medium sized businesses generally face more financial difficulties in operating costs than large corporations due to the lack of economies of scale associated with a smaller output and customer base. Larger companies have a greater ability to raise funds for green adaptations and to absorb the costs of major revamping. They can wait for expenses to be recouped in the long run. That time is often a luxury for smaller companies.
It is true that many businesses are not environmentally friendly simply because their profits trump environmental sustainability in their priorities, but this is not a universal truth. Many businesses have a concern for the environment, but staying afloat in this economy requires cost-saving measures in the short term that mean putting off environment-saving measures until things become more certain.