Sustainability means the capacity to endure. In difficult times, sustainable business strategies can mean the difference in a business enduring and not. For seasoned business professionals, using “business strategy” and “sustainability” in the same sentence can feel like an oxymoron.
Initially, sustainable products were priced at a premium throughout the supply chain. The final result required a consumer to get less than the products that were replaced. Therefore, sustainability must be a business strategy to promote benefits consumers understand and value. The strategies also must be disciplined to ensure those benefits are in line with the costs incurred.
In the last decade, the potential to improve the overall value to consumers has occurred within the construction industry. Suppliers that continue to perceive sustainability as an expensive subset of the market may be missing a critical change in the expectations of the mainstream.
Sustainability produces an improvement in the direct value to potential customers. Like all good business strategies, it means spending more time up front understanding the entire system to improve the result, with the potential to remove or reduce costs, or realize top line benefits. Once consumer awareness and economies-of-scale kick in, the old way of doing things is no longer legitimate, and businesses begin to change market share.
In direct terms, a sustainable business strategy must be founded in the holistic sourcing, manufacturing, and operation of products and services. An organization must then align these credible improvements with sales and marketing designed to create awareness, differentiation, and validation of your substantive improvements. That is where innovative strategies are becoming business imperatives. Educational institutions, government programs, and the media enable average consumers to make more sophisticated choices. Programs like Energy Star, LEED, and Passivhaus are taking complex engineering and building science and converting it into marketing bites and energy scores.
It is critical to understand your goods or services from cradle to cradle and identify opportunities to improve the direct value to your customer. Given a choice, consumers will always choose better value. In remodeling, it may mean increasing your directs by $10,000 to improve the overall function of your house by $50,000 in operating cost. For suppliers, it is ensuring the premium they need to extract to build a better product that is demonstrated to reduce the net-present operating-cost less than that incremental premium. For remodelers, it is critical to work through the marketing to understand the spectrum possible in sustainable construction. Sustainability occurs along a range of incremental improvements. Initially, many have direct improvement to the consumer greater than the cost. Commonly, the extreme edges of innovation exceed the benefit. As you watch technologies such as lighting and HVAC, applications where the cost/benefit ratio favors the consumer, you see the adoption rate change dramatically.
A critical success factor in sustainable business strategies is converting arcane sustainable science into relatable consumer benefits. Monetizing sustainability creates a great tool in both creating consumer awareness and validating the benefits. Creating the cost-benefit relationship at the consumer level increases pressure on all associated companies to optimize the cost-benefit equation. Pending legislation like the SAVE Act (Sensible Accounting to Value Energy) offers the opportunity to take the future financial benefits of improving product functioning, and create present-day benefits to drive better overall consumer decisions. New green appraisal standards and energy labeling allow a consumer to understand the net-present-value of future savings. Homeowners who spend less on energy and replacements will have more money to make mortgage payments and upgrade their homes.
An interesting, and challenging, part of sustainability is that it impacts consumers in more ways than their finances. Demonstrating the value of comfort, heath, and safety can be much more nebulous. Creating sustainable goods and services directly speaks to the emotional needs of those consumers: creating safer, more durable, healthier, and quieter environments is better. Businesses that provide for improvements in both the financial, and emotional, needs of their customers, will do much better in the marketplace. Ultimately suppliers, trades, remodelers, and government officials will not determine the direction of sustainability. The first and last decision is always the consumer’s choice. Your job is to figure out a credible way to be on the winning side of that decision. PR
Building Science resources provided by EEBA and its National Education Partners. For further information regarding a Houses That Work session coming to a city near you or to register for the Excellence in Building Conference, please visit eeba.org.