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Measure the Cost Effectiveness of Your Efforts to Go Green

Filed under Running A Business.

The benefits of greening your business include cost savings, as well as psychic and intangible benefits.

The benefits associated with adopting a green program in your small business fall into three categories:

The first benefit is cost savings, an improvement in your bottom line. If going green didn't translate into some sort of financial benefit, few small business owners would seriously consider adopting such a program.

The second benefit is the psychic benefit that you get from feeling that you're doing your part in the effort to be environmentally friendly. For some small businesses, the psychic benefit is of little value. For others, the psychic benefit is an important motivator in going green.

The third benefit is what might be called intangible benefits. They're difficult to measure, other than anecdotally, and they include factors such as advantages you might gain in recruiting employees or in landing new clients.

To determine whether your green efforts are successful, from both an environmental and economic standpoint, you need to evaluate your progress. There are several ways to consider the effectiveness of your efforts: measuring savings, measuring your carbon footprint, and gauging intangible benefits.

Measuring the Savings of Going Green

Being able to measure the amount of money you save from the green initiatives you adopt is arguably the most important step in the process, because without it you probably wouldn't adopt a green program. You need to be able to know whether your green initiatives are delivering cost savings.

Measuring your savings mostly involves common sense. You measure what you were spending before the changes; then you measure what you're spending now, and you compare the two to see if you saved money. It's not always quite that simple, but that's the gist of it.

Determining your current costs. The first step, therefore, involves determining your current costs, before you adopt the green initiatives. Making measurements is easiest if you keep your initial steps simple. For example, if you adopt seven or eight green initiatives, you're going to have far more difficulty determining if any one initiative is delivering value than if you adopt one or two initiatives.

Savings that can be measured Also, in measuring your savings, it's best if you start with metrics that are easily measured. For example, you can probably easily determine your monthly electric costs. On the other hand, adopting an initiative and then measuring whether it improved your employee recruiting efforts would be a far more daunting challenge. Consequently, start with simple initiatives that involve easily measured metrics.


Let's suppose that you start with efforts to reduce your consumption of electricity. A good starting point would be to determine your monthly costs for each of the previous 12 months. Depending upon where you live, your monthly electric costs can vary quite a bit from season to season. You should therefore avoid the trap of determining a monthly average and then comparing it to your first month after adopting your green initiative. You'll get a much more accurate determination if you compare January to January and July to July. If you're trying to reduce electric consumption, you may need a full year after the initiative is implemented to get a true reading of whether the initiative is delivering value.

Other initiatives would, of course, involve different measurements. If your goal, for example, is to reduce waste, you would need to measure the amount of waste you currently produce over a period of time. You would then re-measure the waste you generate after you implement the initiative in order to determine your savings. Similarly, if your goal is to reduce your office supply costs, you would determine your current costs over the previous year and then measure it against your office supply costs under your new green initiative after one year.

Carbon Footprint and Electricity Usage

A carbon footprint is commonly considered to be a measure of the impact human activities have on the environment in terms of the amount of greenhouse gases produced, often measured in units of carbon dioxide. The greenhouse gases are generated by the fossil fuels we burn to sustain our everyday living. The carbon footprint of any individual, business, or country can be measured.

Measuring carbon footprints is not without its detractors, from those who question whether man's carbon emissions are creating the greenhouse effect to those who argue that methane emissions are a better measure of environmental impact. For better or worse, however, the term "carbon footprint" has caught on as the most popular shorthand reference to any entity's environmental impact.

For our purposes, the carbon footprint can be a useful measuring stick. If we can determine each of our carbon footprints before adopting green strategies and then measure our carbon footprints again some period after making the changes, we should be able to determine if our changes are having any environmental impact.

Cost Savings and Psychic Benefits

The drawback, for many small businesses, in measuring carbon footprint is that a reduction in the carbon footprint doesn't necessarily translate into cost savings. You may well save money in the process of reducing your carbon footprint, but there is no guarantee of a direct relationship. Thus, measuring the carbon footprint addresses the psychic benefits of going green--feeling better about yourself and your environmental impact--more than it does the cost benefits of going green. Even so, those psychic benefits can have value. Surely you will feel better about going green if the changes you implement both save you money and produce less pollution than if they only save you money.

To measure your carbon footprint, you can go to any number of websites, including the following:

Depending upon the site, you may be asked for various pieces of information, such your monthly gas and electric bills. You may also be asked about your work and travel habits.

Although the carbon footprint is the most popular measurement, it is not the only one. An alternative is measuring kilowatt hours.

Measuring Energy Consumption in Kilowatt Hours

Next to your carbon footprint, probably the next most common approach to measuring human energy consumption is in terms of kilowatt hours. The idea is to compute the amount of energy humans consume in all their activities and express that figure in kilowatt hours. One kilowatt hour is the amount of energy that a one-kilowatt light bulb will draw if left on continuously for an hour.

Energy consumption varies widely around the world, with the developed Western countries consuming far more kilowatt hours than other countries. According to an article in The New Yorker, India averages 1,000 kilowatts per person, and China averages about 1,500. European countries are at about 6,000. The U.S., by comparison, averages 12,000, as does Canada. Furthermore, kilowatt hours of energy have gone up rapidly in the Western countries in the past 40 years, and developing countries such as India and China are expected to raise their averages significantly in the coming decades.

Reducing energy consumption. There are groups out there trying to do something about it. The 2,000 Watt Society, for example, is an organization backed in part by the Swiss Council of the Federal Institute of Technology. Its goal is to reduce energy consumption so that no country's citizens uses more than an average of 2,000 watts per year.

The goal can be achieved, according to a paper laying out the 2,000 Watt Society's plans, by achieving dramatically better energy efficiency rather than by, say, cutting back on the standard of living enjoyed in the developed world. They also envision improvements in the materials we use as well as steps such as "adopting a smarter way of life and rethinking current business practices," whatever that means. Clearly, much more has to be done in terms of reducing the developed world's dependence on fossil fuels if the 2,000-watt goal is to be achieved.

As an indication of just how difficult a mission it will be to reduce consumption to 2,000 watts for someone in the industrialized world, anyone who drives a car an average amount each year--even a hybrid--or who travels by plane probably won't be able to live a 2,000-watt lifestyle. The New Yorker article found one family in Switzerland that actually was living a 2,000 watt lifestyle: a dentist, his wife, and their two children live in a house in an energy-efficient development that is heated by a geothermal heat pump, they have photovoltaic panels on the roof that produce all their electricity, they own no car (they live close to public transportation), and they travel on vacation only by train.

Interestingly, in their paper outlining how 2,000 watts might be achieved, the 2,000 Watts Society does not envision our having to give up airplane travel to meet the goal. In fact, other than assuming that new technologies will marginally improve airplane efficiency, they don't foresee much improvement in those areas. Instead, they foresee significant improvements in alternative energies and reductions in fossil fuel dependence.


If you are interested in learning more on kilowatts as an expression of energy consumption, explore any of the following:

Gauging Indirect Benefits of Going Green

If you reduce your energy consumption and the amount of waste you generate, you can measure the economic benefits to your business. These reductions also confer an intangible benefit in the sense that they help reduce carbon dioxide emissions and landfill accumulations. You are doing your small part to reduce potential global warming and environmental degradation.

Those savings are tangible in the sense that they are measurable, but they are intangible to your business because the good feelings you have confer no direct economic benefit. Your green initiatives might make you feel better about your environmental stewardship, but the reduced carbon dioxide output doesn't necessarily affect your bottom line. Thus, the benefits they confer to you are intangible. Only you can determine their value because the value they confer varies from owner to owner.

Having said that the benefits are intangible, however, does not render them unimportant. By making small changes in the way you operate your small business, you can do your part in fighting environmental degradation. There's nothing wrong with patting yourself on the back for that.

Feeling good about the environment isn't the only intangible benefit. Some intangible benefits could directly affect your business.

Recruiting Advantages, Improved Employee Health, and Gaining New Clients

If you have employees, by greening your business you might gain a recruiting edge over your competitors. Even in the best of circumstances, however, that value is difficult to quantify.

A poll from, the division of that focuses on the emerging workforce, found that 80 percent of young professionals are interested in securing a job that has a positive impact on the environment, and 92 percent would be more inclined to work for a company that is environmentally friendly. As green technologies develop and continue to garner public attention, those percentages aren't likely to go down anytime soon.

On a related note, some green experts contend that green buildings produce a healthier working environment for employees. The improved indoor environment is said to reduce incidences of respiratory disease, allergies, asthma, and sick building syndrome. Those experts also contend that the internal office environment lead to improvements in worker performance unrelated to health.

It's also possible that your green policies could gain you a competitive advantage. This benefit, however, is even more speculative than the recruiting advantage, but it also enjoys an advantage over the other intangible benefits in that it would confer a direct bottom line benefit. Even one new client would justify all the green initiatives.

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