How Frugality Can Win over Skeptics

By Andreas Fransius, Peace Is Profitable Contributor

Proponents of responsible business practices often end up preaching to the converted, by failing to make a strong case for why such strategies help firms to make more money. By focusing on ethical arguments and lofty rhetoric, such campaigns often fail to convince business leaders who are justifiably concerned with their bottom-lines. It is therefore pertinent to consider the type of concrete arguments made by The Economist, in reconsidering its previous opposition on Corporate Social Responsibility (CSR).

While it has been justifiably critical of traditional CSR, The Economist has also been slow to see the business potential of responsible business. However, two tangible arguments have urged it to reconsider its skepticism. The first concerns how firms can be more imaginative and innovative in how they define competitive advantage, and particularly how a long-term outlook can make firms more competitive. The second concerns how making the most of finite resources can help to cut costs.

The second point about resource efficiency is arguably less sexy, but is probably more persuasive to firms in the short-term, especially in adverse economic circumstances. In an age when managers are increasingly interested in finding ways to cut expenses, increased frugality is probably a quick-win. Furthermore, such gains can be easily measured using hard data.

To be effective such strategies should be implemented at an early stage of the production process. A pioneer in this regard is Nike, which recently launched the Materials Sustainability Index (Nike MSI), which enables designers to make products with less adverse consequences for the environment. By providing information on potential impacts before the products are made, it is possible to mitigate waste at the source rather than to provide costly adjustments later on in the process. The index itself adds up a number of characteristics related to the base material and the material vendor to assess potential impacts.

Frugality might not provoke sexy associations, but the opportunity to lower costs while reducing waste is a powerful message in the face of a possible double-dip recession.

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