Ecocognition: Finding the economic benefits of reduced environmental impacts

As global population grows there is a corresponding increase in consumption and demand for resources. The challenges that emerge with this growth increase the pressure on ecosystems and the valuable services they provide, enabling the planet's life support systems. An economic approach aimed at understanding the benefits that accrue from reduction of eco-impacts is essential to turn these challenges into business opportunities. 
 
In an article published in the Journal of Industrial Ecology, researchers at the University of Wisconsin introduce the concept of "ecocognition," or, as they describe it, "recognition of benefits that accrue from reduction of eco-impacts." Their research was spurred by the observation that most business leaders fail to take necessary actions because they lack understanding of the benefits of reducing  environmental impacts. To illustrate potential benefits, they studied more than 100 organizations and arranged the companies' benefits into seven major domains that organizations typically manage: markets & products, reputation, risk mitigation, human resources, material sourcing, strategic direction and collaboration. The researchers find that tools such as life cycle assessments (LCA) can help expose important benefits, not only for the companies' bottom-line but for society as a whole.
 
Reducing environment impact has, for example, helped Unilever, a global consumer goods company, to double its revenue by halving their environmental impacts. Others, such as Toyota, have realized, through lifestyle marketing for hybrids, opportunities to message effectively to stakeholders. Other examples, such as Method's and Seventh Generation's safe household cleaners, or Patagonia's branding strategy, improved customer loyalty and brand management. The reduction of eco-impacts also strengthens products and markets through spurring the development of innovative products and services.
 
Using LCAs, Grohe, a major sanitary fittings company, developed a low-flow and water-reduction technology for showerheads. By breaking water streams into micro flows, achieving increased water pressure, less water is used while creating the sensation of a strong water flow. This strategy allowed Grohe to access new markets, while legitimizing their presence in the Middle East.
 
Unilever also leveraged LCA to create a 60-percent revenue increase in Vietnam with a "Comfort One Rinse" branding strategy, impacting 12.5 million households and saving half of the water used per wash. Protector & Gamble used innovation initiatives in Brazil to develop low-water formulas for soap. Also Nestle, the world's largest food and beverage company, applied LCA to focus on risk reduction within their supply chain. They developed a strategy of reduction and reuse by engaging closely with local communities.
 
By developing deeper relationships inside the supply chain of companies and organizations, businesses can reduce their impact as far back as where resources are extracted from the ecosystems. This helps organizations increase resilience while mitigating risks such as cost volatility as demand for the resources increase and supply decreases. The enhanced relationships spur not only supply-chain integration but also improve resource security and availability. A further important advantage — which has been described by companies such as Toyota, BMC, and Dell — are reduced supply-chain costs originating from initiatives in reuse and substitution. Nestle, Unilever, and Protector & Gamble report operational added value thanks to dramatic reduction in supply-chain risks.
 
The article presents a wide array of success stories, where businesses promote actions to reduce environmental impacts, which go beyond traditional motives that only seek benefits from eco-efficiency and responsibility. The results highlight the benefits of integrating IE methods with business strategy. However, every sector has its own characteristics and thus duplication of the same approach is often difficult. Nevertheless, the ecocognition framework allows companies to grow by creating new products and innovative business strategies, which are ultimately also beneficial to our planet and society as a whole.