Going Green: The Financial Benefits of Environmental Engagement

Hardly anyone would turn down an opportunity to earn or save money. And when such opportunities have no downside, they are truly worth pursuing. Becoming environmentally engaged is one of these rare opportunities—it costs nothing, is accessible to individuals and organizations, and results in substantial financial benefits. It’s also simple: all it takes is a commitment to caring about, learning about, and improving the environment.

Quite literally, it pays to become environmentally engaged.

Reusing waste

An old clementine box has been repurposed to hold books.
An old box of clementines can serve as a space-saver (Source)

As the saying goes, “one person’s trash is another’s treasure.” Yet, as a country that generates around 268 million tons of waste every year (most of which goes to landfills) it seems that we may be largely overlooking the second half of this phrase. That’s unfortunate, considering both people and organizations stand to benefit from turning trash to treasure. 

On an individual level, there are numerous ways to repurpose trash. Coffee grounds can be utilized as fertilizer for acid loving plants. Old t-shirts can serve as effective cleaning rags. Clementine boxes can be used as shelf-organizers—and surprisingly stylish ones at that. The cost benefits of these examples may seem negligible, but, taken in aggregate, they aren’t—consider all the purchases of compost, dish towels, space-savers, and plant fertilizer you’ve made. If you saved only one third of that, it would likely be a considerable amount. 

The same applies, at scale, to larger organizations. Organizations can donate unsold or flawed inventory to charitable organizations. Companies can sell waste products—particularly plastics—to be repurposed, rather than simply disposing of them. Such behavior contributes to the circular economy—and when done at the organizational level, contributions can be substantial. According to experts, Europe currently re-uses only 9% of the waste it generates. By moving towards a circular economy, European businesses (for instance) could save a staggering $630 billion a year. That’s more than the total education expenditure of European governments in 2018. 

So why don’t we currently reuse waste? Largely, because we aren’t engaged enough to actually do anything. Recycling—something many of us can do—can be seen as a rough proxy for America’s willingness to reuse goods. In America, while 94% of people support recycling, only 34.7% actually recycle.

Considering consequences

When individuals and organizations act with others in mind, they ultimately benefit more than they could if they acted out of pure self interest. This is something economists call “internalizing externalities.” The classic example is one in which several different companies—say fisheries—are individually incentivized to pollute. Perhaps they can fish more cheaply with chemicals, or perhaps they won’t pay to help sustain fish populations. However, this combined pollution eventually kills the fish, and all the fisheries go out of business: no one was thinking of the consequences of their actions, only of short-term gain. 

It’s a simple example, but it’s one we all too often ignore when living our daily lives. When a large number of people begin to consider the impacts of their actions—environmental impacts included—they ultimately improve the overall outcome. As environmental engagement spreads, its positive effects increase.

One concrete way in which this saves money is through reducing the need for pollution taxes. These taxes can be high, particularly for larger companies. Individuals can benefit too, because the fairest price for products is reached only when the environmental consequences of making the products fully considered. Engagement means considering the whole picture—which, ultimately, is best for everyone’s finances.

Sustainable growth eventually wins

One of the most interesting facts I’ve ever encountered has to do with the importance of sustainable growth: “Someone who earns 15 percent annual returns over a decade will, perhaps surprisingly, end up with more money than an investor who earns 20 percent a year for nine years and then loses 20 percent the tenth year.” This sentence is more striking when considered visually:

A graph displays steady, sustainable growth, which beats aggressive, volatile growth.
The benefits of aggressive, unsustainable growth are soon wiped out

You might be thinking that this only applies to the stock market. In reality, it applies to any scenario in which being unsustainably aggressive results in a large downturn. Consider, for instance, the deforestation of the Amazon rainforest: while rapid deforestation may be “good” for loggers in the near term, it will ultimately lead to the collapse of the Amazon ecosystem—with the long term collapse outweighing the short term gains. This phenomenon has been seen time and time again, with fisheries, animal populations, forests, and more.

When visually presented with this idea of aggressive, unsustainable growth vs. sustainable, reasonable growth, it’s far easier to understand the appeal of the latter. That’s another advantage of becoming environmentally engaged: you gain perspective about the long-term. Growth that is achieved through pollution or excessive resource extraction will not pay off in the long run, but reasonable growth will. By targeting sustainable growth business owners and companies will eventually be better off.

Avoidance of regulatory concerns

Both individuals and companies are frequently subject to substantial fines related to breaking environmental rules and regulations. Currently, there are heavy penalties on those found to be treating, storing, or disposing of hazardous waste without a permit—fines can be up to $50,000 per day that someone is in violation. In fact, googling “EPA Hazardous Waste” fine turns up a new result almost every day. 

And, of course, the EPA often levies large fines against organizations found to have acted negligently or recklessly. Additionally (and partially because of the impact of these fines), poor environmental behavior often is calamitous for companies. Consider BP’s stock price from 2000-2012. It’s rather easy to spot the time of the Deepwater Horizon disaster:

A graph shows a sharp decrease in BP stock price after the 2010 oil spill.
The stock has never recovered to the highs of 2009, which occurred before the spill (Source)

For BP, this was a $100 billion dollar lesson. This is a story that has played out time and time again. VW, for instance, was recently found guilty of altering emissions records, resulting in a $25 billion dollar fine. And yet, despite these examples, companies seem loath to behave in ways that minimize environmental harm—resulting in billions of dollars of fines every year in the U.S. due to regulatory violations. 

Of course, companies would ideally practice environmental engagement not to avoid fines, but because the consequences of failing to do so—such as a willingness to overlook pollution, environmental problems, and regulatory violations—often result in drastic and irreversible harm to people and ecosystems. But, as continual violations have demonstrated, fines alone are not enough to bring about sustainable policy. A company or individual commitment to caring about, learning about, and understanding the environment would go a long way to help. 

Pro-environment behavior is tax rewarded

Just as how people and organizations lose money as a result of environmentally destructive behavior, they often gain money as a result of environmental engagement. There are numerous tax benefits that exist to incentivize pro-environmental behavior, which tax-savvy people can benefit from. For instance, the Equipment Tax Credit rewards individuals who use energy efficient windows, fans, heat-pumps and more. Another credit worth knowing about is the Energy Tax Credit, which allows for a 30% income tax reduction on solar, wind, and geothermal equipment. 

Many other tax assets have to do not with green appliances or energy systems, but rather green buildings. If you live in a city, you’ve probably seen the following icons displayed in buildings (or on the websites of buildings):

Image displaying different LEED certificates
LEED certificates acknowledge buildings that have been sustainably designed (Source)

These are LEED certifications, which essentially serve to rate buildings on their green-ness. Under LEED, building owners who meet certain criteria on heating, cooling, and interior lighting can receive a tax credit of “$1.80 per square foot on new and existing commercial buildings.” That might not sound like much—but consider the fact that each floor in a skyscraper is around 20,000 sq. ft. For a building of 70 floors, that amounts to ~ 4.5 million dollars!

Improved brand identity and goodwill

As people have become increasingly interconnected, they’ve been better able to coordinate to discuss the actions of companies. Likewise, there has been increasing pressure on corporations to be conscious of societal issues. For instance, there was a recent—and obviously understandable—uproar about a ridiculous Pepsi commercial starring Kendall Jenner. This led to widespread boycotts of Pepsi products. However, the same factors that cause widespread blowback against companies who demonstrate ignorance or apathy can reward companies that demonstrate a commitment to care. 

The success of brands like Toms, Lush, and Patagonia can largely be attributed to the fact that they have focused on environmentally sound business practices. And although consumers aren’t always willing to pay large premiums for green brands, a sizable portion are willing to pay more when premiums are reasonably affordable. Still more are willing to pay so that others will know that they are environmentally conscious—as this paper shows, Priuses demand premium prices in part for this reason. So, for both selfless and self motivated reasons, it can be financially beneficial to have your brand aligned with pro-environmental causes. 

These benefits will only grow in the future. Increasingly, people see environmental protection as more important than economic growth. As of 2019, it’s not even close:

A poll showing consumers value environmental protection more than economic growth.
Preference has grown steadily since 2011 (Source)

Brands would do financially well to capitalize on this change in consumer sentiment. Likely the best way they can do so is through an honest commitment to better environmental policy, something which is once again reliant on environmental engagement. 

Investing in green infrastructure gives returns

Municipal governments spend billions on infrastructure every year. New York Governor Andrew Cuomo, for instance, recently unveiled a plan to invest $275 billion in infrastructure over the next five years. Clearly, it’s vital to make sure that infrastructure spending is prudent, and investing in green infrastructure is one of the best ways to do so.

Green infrastructure pays dividends. London’s trees, for instance, return over $172 million in annual benefits. Austin’s urban forests lower residential energy usage by over $18.9 million per year. Combined sewage overflows, or CSOs, are another costly problem that green infrastructure can reduce in a cost-effective manner. The Philadelphia Water Department, for example, estimates that it can “afford to spend up to $260,000 per acre on green infrastructure projects rather than continue to treat the stormwater that otherwise would flow from these project areas into their combined sanitary/stormwater system.”

But there’s still a lot to be done in many areas. As of 2014, for instance, Houston only had only one green infrastructure initiative (New York had nine). You can help save your community money—and make it look nicer—by contacting local decision makers and encouraging them to consider using green infrastructure.

For further discussion of the benefits of investing in green infrastructure, feel free to check out Sarah’s post on 7 proven methods of green infrastructure, or Vaughn’s post on the intersection of green infrastructure and environmental maintenance.

Tracking purchases

Oftentimes, individuals and even organizations simply don’t know how much they spend on certain things. In a classic example, people are often shocked to realize that their purchase of Starbucks coffee costs them thousands of dollars a year. It’s easy to spend $5 a day when you don’t really track the expenditure—but it’s much harder to feel comfortable when you measure coffee purchases and find that the costs exceed $1825 a year! 

When people begin measuring what they are doing, they learn about what they are doing—and they behave differently based on that learning. Part of environmental engagement, therefore, involves tracking your consumption of resources. In one well-known example, applying a smiley-face based measurement of your energy usage vs. your neighbors’ resulted in significant reduction in energy consumption:

An energy bill using emojis to comment on energy usage.
An example of the energy bills, complete with emojis, utilized in the study (Source)

And this isn’t a one-off thing: there are numerous economics papers which, time and time again, demonstrate the fact that measuring consumption (and particularly energy consumption) causes people to use less. That means savings. 

To put it another way: how can you know if you’re spending too much on energy usage (or anything else) if you don’t know how much you’re spending?

On another note, introducing measurability allows for proper policy. This has an inherent, although not always immediately apparent, financial benefit. After all, the prudent use of tax dollars today reduces tomorrow’s tax burden. So—as my colleague Briana touches on in her recent post on the proposed NYC seawall—environmentally engaged, data-driven decision making is financially vital. 

Intangible benefits soon grow tangible

It’s no secret that companies value employee happiness. But not only are happy employees likely more fun to work with, they’re measurably more productive—up to 20% more productive, according to one study. Another found that happy salespeople generate 37% more in revenue. Of course, there’s an issue with correlation and causation. But generally, one would bet on companies with great cultures to do comparatively better, all else being equal. As such, companies would do well (financially and otherwise) to ensure employee happiness. 

One major determinant of happiness is one’s environmental quality. Mere exposure to healthy outdoor environments makes people happier and healthier. And, as people increasingly care about the environment, people increasingly want workplaces which share that commitment. Some companies are already taking corresponding actions, for the benefit of their employees, themselves, and the world. Environmental engagement is in alignment with employee happiness—and therefore productivity. Likewise, individuals who wish to perform would do well to try and get involved with the environment!

Saving the planet saves money

The above examples are highly diverse: they include financial benefits from recycling, happiness, green infrastructure, tax breaks, and more. Yet one theme underpins these diverse benefits: they can best be consistently achieved through environmental engagement! It’s likely that you’ll realize these financial benefits—and others—if you focus on that mindset.

All this is to say: ironically, when you care about the environment, learn about the environment, and improve the environment, you’ll ultimately realize that you can’t put a price on it. But that shouldn’t come as a surprise—after all, it’s the case with most of the valuable things in life.