Month: November 2011

After reading Sean Goodall’s blog post Add Value, Boost Profits, I was reminded of the importance of adding value to consumers in order to remain profitable. Sean talked about TOMS, and how they have been successful in adding value through their “One for One” campaign – where for every pair of shoes you buy, a second pair of shoes is donated to a child in need.

Another company that offers a wide range of value added services is FedEx. They offer services such as package pickup and money back guarantees, which has helped FedEx become a popular company among consumers. In fact, FedEx has been ranked the number one company for consumer satisfaction in the express delivery market for 17 consecutive years!

Even though it is difficult to measure the value of having satisfied and loyal customers, it is undoubtedly one of the biggest strengths a company can have. The company will be less affected by changes in income, and it will be harder for new companies to enter the market and increase their market share.

In order to create a high degree of customer value, companies must successfully differentiate themselves from their competitors. They must carefully identify the needs of their customers, and create a strategy and corporate culture which aligns with the needs of their consumers. They must then create an effective value delivery network which enables the company to meet the needs of their consumers.

Imagine a world where the price you pay covers all the negative externalities. When buying gas, part of the price you pay offsets the negative impacts on the environment. Similarly, when you buy lumber you simultaneously help to saving the rain-forest, or when buying food you are paying the farmers a fair price, such that they can continue to farm in an efficient and planet sustaining way. Is this way of living a utopia or is it just common sense?

The problem lies in three main areas: The cost of the societal damage is difficult to measure, it is difficult to allocate the costs to various businesses and, most importantly, people, businesses and countries are greedy. Although the general consensus is that climate change needs to be counteracted, it is still difficult for countries to agree on a feasible solution. The climate talks in Copenhagen in 2009 epitomized the aforementioned. Going into the conference, most people were optimistic and pleased that action was taking (or at the least starting to) take place. Despite of the optimism, the talks ended in failure, primarily due to the US’s and China’s unwillingness to act. Even though new targets were set for reducing carbon emissions, there there were no legally binding contracts, and there were no consequences of not meeting the targets.

So, how can business be conducted in a more just and sustainable way? The answer is that we need to come up with a quantifiable measure to set prices on ecosystems. But how do you set a price on fresh air? And what is the value of pollination from insects? At the end of the day, it’s an accounting problem. According to the Harvard Business Review, companies are beginning to price the “unpriceable”. Conservation International and The Nature Conservancy are working together with PriceWaterhouseCoopers to come up with ways to value ecosystems. Perhaps accountants will become one of the greatest contributers to counteracting climate change.