Sustainability makes profit in companies: Environmentally conscious working as a trend of the future?


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Text comes from: Planet Proofed. Wie Ihr Unternehmen Schritt für Schritt nachhaltig und zukunftsfähig wird (2020) from Oliver Specht & Axel Nauert, published by Münchener Verlagsgruppe (MVG), Reprints by friendly permission of the publisher.
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Sustainable, long-term thinking and acting is also for Company increasingly important. The highlight: Companies also benefit financially through more sales. We'll show you how to do it.

Sustainability makes profit in companies: Environmentally conscious working as a trend of the future?

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Oliver Specht and Axel Nauert are management consultants and authors.

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How sustainability and profitability go together

As with the hero in the Shire in Lord of the Rings, our story begins with the ideal world. When I was on the ICE from Munich to Duisburg at the end of last year, I was able to use the travel time wonderfully to think. I love the peace and quiet on the train and the free time from everyday work. However, I went to Duisburg to dissolve my parents' household - a long process because a new, barrier-free household with a stair lift and outpatient care had to be found in order to make life easier in the future. When I thought of my parents - the older generation - I automatically thought of my son - the younger generation. He is eleven years old and takes over our habits: He enjoys life to the fullest, is sure of himself and is aware that it will stay that way. So he leads a carefree life because everything is there. The Christmas wish list is empty. No wishes open.

I think about the future for him. However, I know that the CO2 budget for a liveable planet earth will be used up after 25 years. Then he will be just 36 years old, in the middle of his professional life and probably also has a family: the next generation. Today he can still move or influence little. In 25 years it will be too late and he will tell his children that Grandpa (aka me) did not recognize the signs back then. Or worse: that Grandpa knew but didn't act. Because the facts from science were known - only belief was missing.

Why it doesn't help to do the same thing over and over again

I am already sitting on the train and use only a tenth of CO600 for the 2-kilometer journey compared to a car journey. And still I have a better quality of life. I'm sitting in the Deutsche Bahn on-board restaurant, having breakfast and writing this foreword. So there are no economic disadvantages. For the ticket I paid 25 euros (thanks to my Bahncard 50) compared to around 50 euros for petrol. The ICE is full, which means that there is an increasing number of people who see the same benefit. I wonder why the demand for sustainability is not recognized by other companies. The range of services on the train is limited.

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There are two types of breakfast, two newspapers and two types of beer. The railway is becoming more attractive as a mobility solution. So why are there no business models or companies that offer other services on the train? Make long-term profits and at the same time increase the attractiveness of sustainable mobility? Several different mobile services spontaneously come to mind: an Italian bistro, Greek restaurant, a bakery, kiosk services such as newspapers, lottery, books, etc. Or how about completely new mobility services such as a hairdresser, dental care, and beauty salon? True to the keyword: travel time is lifetime - and not stressful time like in your own car. In a traffic jam. The more I think about it, the more I believe that only business models that are based on this sustainable trend are successful in the long term. In other words: that make our planet earth more livable. At the same time I catch myself thinking: “Everything is fine. I'm sitting on the train, the train is full - it works! «And immediately afterwards I take my troubleebookto read about the development of the railway.

In doing so, I am amazed to find that the railways and stations in Germany were much more densely structured 25 years ago. So the last mile from the metropolitan train station to the place of residence could easily be covered. Since 1994, however, 6.100 of the 44.600 kilometers of the rail network in Germany have been shut down, which corresponds to a share of no less than 14 percent. At the same time, the number of registered cars grew by 18 percent. If sustainable mobility is a trend for the next 10 to 30 years, where are the companies that are investing in sustainable mobility offers? Today we have two well-known national transport companies (Deutsche Bahn and Flixbus) as well as local municipal utilities with transport companies. The number of employees in this segment has stagnated at around 25 over the past 500 years (compared with around 000 in the automotive industry). If we take the trend seriously, employees in sustainable mobility would have to grow much faster. Spending on sustainable solutions should also increase significantly. The public sector spends twice as much money on road construction and maintenance as it does on the railways and local public transport. Why? Do we need more surface sealing through streets and parking lots in the next 800 to 000 years? Shouldn't we sooner dismantle the streets and parking lots?

The working world of the future must become more sustainable

So what would I recommend to my son? "Go into the automotive industry." - "Do a bank training."? - Or: »Look for companies or business models that develop sustainable solutions for our living space.«? At the moment it is still our task to leave the earth as a livable planet for our children and grandchildren. We can do this when customers and companies rethink their approach, when solutions and technologies are developed for our planet instead of against it. We are convinced that companies can make a significant contribution to the sustainable development of our planet - and at the same time be very successful financially. We need this big, positive impulse - we all!

You are not holding a strictly scientific text in your hands here. Rather, he wants to invite entrepreneurs, consultants, executives, specialists, employees, women and men to develop sustainable strategies for the procedure, to use findings from recent trend research, to choose clever product designs, to pursue and implement circular economy (Cradle to Cradle) step by step and it wants to give recommendations for action. This text is in the context of a passionate dialogue. We have been conducting this dialogue differently in the interdisciplinary Alpha consultancy group for over a year. In this joint reflection process, we have created an innovative management approach that brings together sustainable strategy, social and ecological responsibility, new leadership, potential development and modern organization. Some places in this book refer to it. For the practitioner, we describe the path using a fictitious case study, a book within a book, so to speak. It's a story in its own right. But it would be a shame if you skip the rest.

For ecological change, we have to think and act strategically

I was an early reader of the magazine natur, founded by Horst Stern at the time. I remember one Article, who warned of global warming 25 years ago, well scientifically founded, with the prospect of more frequent storms and floods. At the same time, I was a frequent flyer as a consultant, even became a pilot myself and had a (more than) sufficiently motorized Volvo V70. After an extremely exhausting ten-day workshop near Chicago, I came back to Munich and wanted to work differently, to live differently. I then dealt with new topics, with nutrition, yoga, music and neurosearch. I like my job as an organizational psychologist, coach and implementer, because I like people. I am concerned with how we manage to approach the new and preserve our spaceship Earth, this "blue jewel", as Alexander Gerst said on the ISS.

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We have extremely competent people in organizations, good engineers, good researchers, good managers. The children of the board members go to the FFF demonstration on Fridays, talk to their parents and ask them why they are acting this way and not otherwise, whether they are not interested in saving and maintaining this spaceship and repairing the damage it has already caused . It is a complex task that must now be tackled. Gaining knowledge was always my aim, and my concern that we might be too slow is my engine, my motivation. My preoccupation with neurosearch has changed my view of people and psychological phenomena. I know that we have to take other aspects into account in our approach today and act strategically.

But we're fine ...?

The “Corona-Zeit «was a time to slow down for many people. However, some people used the time to think about the issues that really mattered to us in life and to put them on paper. 2019 was a successful year for most companies. The business models worked.

Our fictional case study is about an automotive company. The chairman of the board of management, Mr. Dr. Movinger (45) is extremely satisfied with his company. He has been there for six years and has pushed a lot, at the same time he has earned respect in the workforce. His sales colleague Mr. Schulz (55) has been working for Mobility GmbH for 25 years. For him it is important that the company culture is right and that the focus is on people. The chief financial officer mr Dr. Unger (50) has only been there for a year, is highly intelligent and is still in the role of an observer. The CEO for Technology & Development, Mr. Dr. Wohlfahrt (64), will retire next year. A successor is already in the starting blocks: the young and eloquent engineer Ms. Vogel (39). In previous years she was employed by an electric car start-up in California.

Case study Mobility GmbH

Dr. Movinger leans back proudly. He has just presented the annual financial statements of Mobilitäts-GmbH to his shareholders. His company was able to increase sales by another 3 percent last year and so they closed the year for the fourth time in a row with a record result. The share of luxury cars (SUVs) could be increased significantly, which led to a strong overall margin of 10 percent. Dr. Movinger joined the company six years ago as chairman of the management board and also took over the production department. He had been poached by a competitor with whom he had held many different positions, most recently where he was responsible for the US business. During the years at Mobilitäts-GmbH he was able to implement some important projects that are now paying off. With the workforce - initially skeptical about the "foreign" newcomer - he has now earned the respect he deserves, because he lends a hand and keeps the company on a short leash. The shareholders are also more than satisfied: the company is on a profitable growth path. The outlook is Dr. Movinger a little more careful though. The trade dispute and Covid-19 are uncertainties that can have a negative impact on sales; this may limit growth in the medium term. For Dr. Movinger is clear that he will stick to the previously successful business model. After all, the company is the market leader in the luxury segment and will continue to expand its strengths. He will cushion risks with a new cost-saving program. A reduction in overhead capacities would have been the next step anyway and is therefore pending in any case.

In the first management meeting after the shareholders' meeting, the sales manager, Mr Scholz, presented a new study on the subject of "mobility habits of the younger generation". Initial surveys show that the importance of having one's own car is declining and becoming less relevant for the younger generation. Initial sales statistics in the 18 to 25-year-old customer segment also confirm this trend in Germany. Dr. Movinger dismisses this as irrelevant and instead refers to the international business and sales potential in the luxury segment. In his opinion, Mr. Scholz should concentrate on this segment. Mr. Scholz is an old hand. He has been with the company for 25 years and therefore knows almost everyone in both the company and the industry. He has worked his way up to the top of sales and has a good nose for customer trends and sales potential. He is passionate about automobiles - a real car guy. He sees the company as his family and is happy about the leadership of the strong one Dr. Movinger at the helm of the company. So he likes to follow him. He thus wipes away his original concerns about the new buying behavior of young people Dr. Movinger's remarks away, he is finally right: The products and technology of Mobility GmbH are so outstanding that sales will continue to work in the future. SUVs offer tremendous driving pleasure with maximum comfort. And which customer will want to do without it voluntarily?

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Also the last new addition, Dr. Unger as CFO is satisfied. The previous year he switched from a supplier to Mobilitäts-GmbH. The supplier's liquidity situation was extremely strained. They were less and less involved in new, innovative orders, and in the old "diesel segment" they had to contend with overcapacity. The move to MobilitätsGmbH came at just the right time. Everything was fine here - a financially solid company with growth potential. For him the most important aspect is the profitability of a company. In that he is with Dr. Movinger agree. The achieved EBIT margin of over 10 percent is continued as the minimum target for the next few years. They even see possible increases in this margin through growth in further luxury segments. The investments in engine technology and new SUV vehicle models are paying off, which is particularly popular in the luxury segment. Sales there are growing in double digits and they will expand their market share. Especially in China, where the class of the wealthy is growing and more and more people are developing an appetite for luxury goods. The shareholders like that too, for them Dr. Unger now compiles a monthly overview of the company's figures. He ensures that the profitability is right and that the actual figures are within the planning corridor. That in turn pleases the owners. To minimize risk, he proposed the cost-saving program. He brings experience from his old company with him. When benchmarking the numbers, he discovered early on that the SG&A (Sales, General & Administration) expense ratio at Mobilitäts-GmbH was significantly higher than at his old employer. Accordingly, he sees great potential here.

Dr. Wohlfahrt's thoughts are already in his second life: in the quiet mountain hut on the Tegernsee. From next year he will finally have more time for his family and grandchildren. He is proud of his life's work, because he has made a significant contribution to the Mobilitäts-GmbH becoming a leader in diesel technology. The new generation of engines has a sensationally low consumption and the 2-liter displacement gets by with a quiet driving style with only five liters per 100 kilometers, so in practice that is a range of 1.200 kilometers with its full 60-liter tank. In addition, the driving pleasure is not neglected: the 4L model goes from 6 to 0 kilometers per hour in 100 seconds. He just doesn't understand this whole environmental discussion - but he doesn't have to either. He is skeptical of his successor. This is not a real car guy - but some shareholders had insisted that someone with experience in electromobility should be brought into the GF team, and so it was Dr. Let Movinger be persuaded, even if he is not really convinced. With the last fiscal year is Dr. Wohlfahrt highly satisfied - a grand finale to his career.

The discrepancy between public perception and customer opinion

Mr. Dr. Movinger from our case study looks back proudly on the successful business last year. He wants to do everything possible to repeat this in the coming year. He knows that they build the best cars with engineering from Germany - despite the many pessimistic voices that their business model is at an end. Technologically, they are still superior to the competition. Since they are leaders in diesel generator set technology, this lead would be even greater without the diesel crisis.

The increasing (electoral) success of environmental parties is viewed with skepticism by many companies. The environmental activists have identified motorized individual transport as the main reason for environmental pollution and climate change. That is why they are promoting alternative concepts, especially in cities. In contrast to commercial enterprises: In surveys by market research institutes, customers tend towards sustainable products, in car dealerships they choose high-powered vehicles. Last year, a total of 15,3 million cars were registered in the EU, 1,2 percent more than in the previous year - despite the introduction of new emissions and consumption tests (WLTP). Germany, the largest EU car market, showed an increase of 2019 percent in 5. Here, too, more than a million SUVs and off-road vehicles were registered for the first time - now with a market share of over 30 percent. (VDA, 2020)

So there is a large discrepancy in public perception and consumer behavior. Companies will continue to do everything possible to keep their customers happy. Current surveys on customer satisfaction show good to very good marks for the companies. Many entrepreneurs see the problem rather with the environmental activists with their horror scenarios: They block the streets and send the children to demos during school time. In their opinion, cars only contribute 10 percent to CO2 emissions and work is also being done to optimize combustion engines. German diesel technology is a role model in terms of its efficiency and its CO2 emissions. However, the technology is bad-spoken and not politically supported.

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The normal state is still the goal

From today's perspective, you are probably right, because many companies posted record results in 2019. The sales of cars have increased and 2019 was also a record year for the tourism industry. Because the traffic performance of the airlines grew by 4,2 percent worldwide. The German airlines were also able to increase their traffic performance slightly by 1,3 percent. In total, there were over 248 million arriving and departing passengers at German airports. The demand for the products and services has increased! If we look at these figures: What is the need for action for radical change? A question that many entrepreneurs answer to us by saying that we should stop talking badly about everything. Germany is well on its way and should continue on this path. There is simply no need to panic. But of course one would be vigilant and react to the changes, especially in the international context. At the moment (June 2020) we are in the middle of the corona crisis. And nothing is good. But finally we have a tangible culprit for this: Covid-19! For many business leaders, luck in misfortune, because at the supervisory board meetings they can now blame the negative developments in 2020 on the coronavirus. You don't have to explain it in detail. There is no comparison and no reference values. The previous year is not comparable and the planning is obsolete - a new planning is also impossible. Nobody knows when we will get back to normal.

And here is the crux: Unfortunately, the old normal state is the goal again. Because in the normal state, entrepreneurs can practice the old, "successful" business model again and thus continue to be successful. Even if not immediately with record sales, but perhaps with higher margins in the luxury segment. It is unimportant whether a V- or U-shaped development occurs, the old state is sought. One thing is certain in the uncertainty: there will be strong growth in 2021. True to an old management rule: After a downturn, there is an upswing with attractive growth rates. The stock exchange has already anticipated this. After the initially violent drop of almost 40 percent in February and March 2020, it went up again by more than 25 percent in spring. The next upswing is sure to come. This is what we have learned from previous stock market crises: Black Thursday 1929 (-85 percent), the 1973 oil crisis (-45 percent), Black Monday 1987 (-36 percent), the dot-com bubble 2001 (-38 percent) and the 2008 financial crisis ( -54 percent)

4 business models that could be obsolete tomorrow

  1. After the crises, things have always gone up. The stock exchange is already pricing in future developments. So everything's going to be fine now, isn't it? At the moment we see little concrete plans from companies. But there are increasing signs that companies want to continue on their successful course from 2019, which is why there are in some cases capacity adjustments for personnel and machines. But the business models that were successful in 2019 will be continued. Here are a few current examples of business models that could be out of date tomorrow.
  2. In 2019, BMW achieved sales of more than 100 billion euros for the first time - 7 billion euros more than in the previous year. After the corona crisis, before the corona crisis: more luxury, SUVs and electric drives. In the luxury segment, BMW reactivated the 8 Series for the first time, and in 2019 the giant SUV X7 was launched. Overall, BMW wants to double its sales in the luxury class to 2020 cars in 140.000. The X7 sold almost 2019 times in 40.000. Accordingly, the CO2 value for the new vehicle fleet, which is decisive for the EU Commission, hardly drops. In 2019 the value was 128 grams, one gram less than in the previous year. BMW has to reduce this result by around 2021 percent by 20, otherwise severe penalties threaten.
  3. The Lufthansa Group's turnover rose by 2019 percent in 2,5, i.e. by almost 900 million euros. The market was characterized by high competitive pressure, especially from low-cost airlines. After the corona crisis, about a tenth less of the current fleet will be needed for Lufthansa in the future. Accordingly, AirlineChef Carsten Spohr announced in April that “the aviation industry is not expected to return to pre-crisis levels quickly” and that it could take months “for global travel restrictions to be lifted and years for global demand for air travel to return Pre-crisis level corresponds to «.2
  4. Nestlé was able to increase sales in 2019 by 1,2 percent to 93 billion Swiss francs. Nestlé also grew by more than 2020 percent in the first quarter of 4. In the corona crisis, the company is temporarily sticking to the original outlook for 2020 as a whole. A further improvement in organic sales growth and the underlying operating profit margin is expected.
  5. Bayer AG's sales rose by 2019 percent to EUR 3,5 billion in 43,5, and adjusted profit rose by 28 percent to EUR 11,5 billion. In the coming year 2020, adjusted profit is expected to increase by at least 7 percent. Bayer sees the planning as realistic even in corona times. Sales should increase by 3 to 4 percent to up to 45 billion euros. In addition to the medical division, the agricultural business also met expectations after the takeover of Monsanto, making a profit jump to 4,8 billion euros - glyphosate made a significant contribution to this, despite all its negative effects on the environment.

Conclusion: sustainability can be tough, but it's worth it

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