Arguing with myself on Green measures

It has become a sort of trend to talk about green measures and green management for companies. Green lobbyist press for more legislation for this and it seems that society does expect businesses to be more eco friendly. However, many fail to understand that there is a cost to being eco friendly.

One may argue that given the public perception, companies taking eco friendly measures if properly planned will manage to do a good marketing exercise that at the end will result in an increase in revenues which should cover the investment made to be Green. So should being green be considered part as one’s advertising budget? Certainly not since you will need to communicate what you are doing so that customers know how brave you are. Therefore you have an additional investment to make.

In this context, as a finance person I would argue we need a cost benefit analysis to seek how many new revenues we will need in order to first break even and then have a return on my investment. Secondly I would also want to know whether this return will actually be higher than the opportunity cost that is if I invest my money or other resources elsewhere would I get a better return?

If the answers to the above are considered as not feasible from a financial perspective, than the other option one has to become green is to distribute the cost of investment in the products or services prices. However, the effects of this will depend on the price sensitivity of your market. Generally, the Maltese consumer is very price sensitive but it may be observed that in certain parts of the island price changes are even more critical than in other areas. The same considerations are to be done between for example the financial services sector and the health services sector.  With this in mind one needs to evaluate the effects of increasing prices and the possible loss of customers.

In spite of the above there could be circumstances whereby there is the third non costly option that helps firms in being eco-friendly. They would also give an eco-friendly image which could be integrated in their marketing strategies. If one takes for example the simple separation of waste in an office one can do this in a fairly simple way. If one prohibits food and drink in certain rooms than waste in those rooms would generally be paper and in the allowed rooms such as canteen than it would be other waste. Alternatively even if one wants to use carton boxes rather than buying separation bins it can be achieved. It is these simple solutions that will make things work and cost effective.

On the other hand if we wish more complex and costly solutions than we need to assist businesses for it to be feasible. Regrettably this has not been the case and in many circumstances even where assistance was available the bureaucratic procedures of the funding programme rendered the whole thing not feasible. The authorities will argue that this is public money and we need to ensure that they are properly used. I am sure we all agree on this but this can be achieved without hindering the funding process and by assisting small and micro businesses.  Recently I was involved in the reimbursement of projects by Malta Enterprise  to two different entities. Malta Enterprse has basically made it impossible for these to get their reimbursement. This is both at application stage as well as reimbursement stage. Everyone in Malta knows that ARMS Limited issues its bills late and they have been unpredictable. Both these projects included a part refund of these bills but according to Malta Enterprise you need to pay these bills in the same period that they are accrued.  So for example if you have a project that ended in December 2014, all the bills related to that period needs to be paid by end of December. Coincidentally it is February and these bills are still not received. What should one do? The only way is to give up to your project as Malta Enterprise will not budge. This is the exact way how authorities are discouraging businesses from using European Funds.

In this scenario, green in Malta becomes very difficult for the reasons mentioned above. Perhaps NGOs should work towards  promoting simple solutions that businesses and persons can generally apply.