More and more corporations are accepting the challenge to create more sustainable, environmentally friendly ways of doing business. Today, a slew of businesses are touting their inclusion in the Dow Jones Sustainability Index as a point of pride. Since solid sustainability strategies can leave companies on better long-term footing than their rivals, investors should definitely take notice.
Last year, the Harvard Business Review published a study that revealed two reasons why green innovation helps companies and shareholders alike. First, sustainability can lower expenses and boost sales. Second, green initiatives can give companies a competitive advantage, an element shareholders should always look for in their companies.
The study highlighted several companies that saved considerable money, boosted sales, and/or increased consumer goodwill through eco-friendlier policies, including Hewlett-Packard, Wal-Mart
Wal-Mart's plans for a sustainability index have made a big impression of their own, and many other large companies are working on similar constructive strategies.
Bragging rights (and shareholder fights)
I'm not surprised that companies are touting their appearance in Dow Jones' listings. Shareholder interest in sustainability initiatives is increasing, as the pivotal proxy season demonstrated. Last March, climate-change-related shareholder proposals filed at publicly traded companies increased 40%, to a record 95 resolutions.
By the same token, less conscientious companies may be losing their edge by falling short on sustainability issues. BP
In search of sustainable profits
Clearly, many companies are embracing sustainability initiatives to shore up their competitive advantage and consumer goodwill alike. Creating ways to do business less wastefully harnesses the strengths of a creative marketplace, and the push for cleaner, safer, better practices bodes well for the long-term success of both the businesses taking part and the shareholders invested in them.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.