First Steps in Making the Business Case for Sustainability

Welcome to the first class of Become a Sustainable Business Change Agent.

This week we introduce you to several people who are making changes and talk about the class and the entire specialization. We also begin to think about what type of changes you should look for at the start of your change agent career. Finally, we discuss what a good proposal has to do to be approved. The proposal has to convince decision-makers that your change helps the company or organization. So you need to make sure that the right people support your idea, that the right person receives it and that you have made a sound case for the sustainability change you are proposing. During the next classes we will help you learn the tools to put together a powerful proposal and to identify the key people who will influence your idea being implemented. We hope by the end of this specialization you will have a proposal for a change in your company, or have the tools so when that opportunity arises you can be an agent of positive change.

This week we discuss what you should be trying to accomplish with your first sustainability change project and give you some ideas of the types of projects that are likely to be successful. We also introduce the notion of establishing a baseline so you can measure the effect of your change.

An important aspect of making the business case of change is to show the likely financial impact of the change. Ideally, we will find improvements that increase profits either by saving the company money or by increasing sales. To demonstrate these financial benefits we use a standard tool from financial analysis - Net Present Value analysis (NPV). The idea underlying Net Present Value analysis is that we estimate all the cash inflows and outlays associated with a project, then through a technique called discounting (or computing the present value) we shift all the cash flows into the present so they can be compared. You cannot compare an outlay made to day directly to a cash flow or profit to be received in two or three years. Combining the present value of the cash flows - adding the present value of benefits and subtracting the present value of outlays - gives us the Net Present Value. If the NPV is positive the benefits, adjusted for time, more than offset the costs and the project enhances the value of the company. If the NPV is negative then the monetary benefits do not more than offset the costs. But there may be non-monetary reasons for pursuing the project. This is where we begin to consider the reasons for companies becoming sustainable discussed in Week 2 of this module. The business case includes the financial impact and non-monetary sustainability impacts of the change.

In this module we cover two topics: The benefits for companies of being sustainable and aspects of our economic system that prevent/discourage companies form being more sustainable. The goal of the module is to give you the first tools for making the business case for sustainability. The benefits of sustainability will be important as you put together your proposal for change. If you work in the sustainable business arena very long you will need to know some of the vocabulary and economics that cause some of our environmental and social problems. These are market failures. We'll introduce three: externalities, common access resource problems and information failures.