Environmentally friendly: Does doing good come at a high cost?

Coffee Cups
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Disposable, single use coffee cups are the symbol of the UK’s coffee addiction. But these cups are also totems for wasteful, single use plastic products. And one business has had enough.

The stats are horrific. According to the Environmental Audit Committee: the UK throws away 2.5bn disposable coffee cups annually, less than one percent of coffee cups are recycled and half a million cups are littered every day.

It’s why Boston Tea Party (BTP), a small chain of coffee houses headquartered in Bristol, have banned single use cups. Since the start of June, takeaway customers have to bring their own cup, or ‘borrow’ a cup (i.e. pay a deposit, like the beer cups at a festival).

The risks are certainly there, admits BTP’s finance director Shelley Wadey. It could lead to a decrease in demand. If consumers don’t want to bring their own cups, there’s sure to be a competitor that’ll gladly offer them the convenience of a disposable cup.

“Modelling the risk is incredibly hard,” said Wadey. “We don’t know how many customers are going to along with us. But we’re hoping to create a movement with this.

“We hope that this is the way forward but it’s a leap of faith. I don’t have the stats to say how many more customers might patronise us because of the stand we’ve taken. So it’s pretty much impossible to accurately model.”

Worst case scenario, according to Wadey, is a 5% dip in revenue. That’s around a million pounds. “We’ve put our neck on the line,” Wadey said. “Customers want to do the right thing - but they’re constantly issued with a choice. And they choose single use plastic because it’s easy for them. But once the choice is taken away, it’s easier to make a good decision.”

It’s an attitude strikingly reminiscent of Richard Thaler’s nudge theory. Thaler’s Nobel prize winning work argues for better ‘choice architecture’ when it comes to public policy. Small changes or ‘nudges’ can help people make healthier choices.

If Wadey’s hunch is correct, and BTP’s nudge works, she expects minimal effect on the bottom line. Another consideration is how the environmental stand opens up new opportunities.

Wadey points to one of Boston Tea Party’s own suppliers, Frank Water, as an example. Frank used to supply its water in plastic and glass bottles before halting its use of plastic. Overnight, it lost 35% of it’s business.

But, interestingly, that loss has evened in the year since the decision. A spokesperson for Frank Water told AccountingWEB the company had experienced a 10% decline in sales. It’s a loss, but far less devastating than it could have been.

The loss was softened by the new business Frank picked up as a result of its choice. After Boston Tea Party’s founder heard about Frank Water’s decision, for instance, the company gave the water supplier its business.

Wadey is hopeful that BTP will experience a similar halo effect. “Our brand benefits from these choices. More people have heard of BTP than before our decision. People are now aware of our ethics. And those benefits are hard to measure.” The intimidating part is the upfront costs.

“Often, not always, it’s slightly more expensive,” said Wadey. “We could make more profits - but we have families and we want futures for our families. The risks are great but there’s no other choice we could make.”

It can be onerous and cost pressure will increase. But environmental policy can actually create savings when belt tightening is needed. As Michael Wilks, the finance manager at a startup called Winnow Solutions, explained to AccountingWEB, “There are a number of ways to cut costs ethically.

“Just looking around my desk I can see that most of our furniture is second-hand and reconditioned – cheap and ethical while being exactly as good as something expensive and unethical. Energy efficiency is another example – our Plumen bulbs give the same effect as incandescent bulbs but with a fraction of the electricity usage.”

A heroic stand like Boston Tea Party’s isn’t necessarily required, Wadey agrees. “Often there’s a win-win: you can do a good thing and get a cost saving,” she said. But this time, the financial benefit isn’t clear and “sometimes you have take it on the chin”.

“With this decision, we felt we have to do this. We can’t carry on giving these single use items into the environment anymore.”

About Francois Badenhorst

Francois

I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter. 

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15th Aug 2018 11:57

Hi Francois - I'd put it the other way around "will not being environmentally friendly come at a higher cost?"

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to Paul Scholes
15th Aug 2018 13:33

Definitely - I agree with you there, Paul. I've covered the cost cutting benefits of environmentally friendly policies before. But for this piece I was interested in the cost of taking a moral stand and how it fits in with fiduciary duty.

For me, I absolutely agree with BTP's decision. You can make all the profit you want, but it won't matter in a world ravaged by climate chaos.

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to Francois Badenhorst
15th Aug 2018 13:48

Yes indeed, I should have added that it's a bold move and hopefully will encourage others to do the same.

There was a similar discussion/debate/rant the other week over WeWork's decision to stop funding meat purchases.

Governments, being populated by politicians, drag their heels over this stuff, leaving companies and households, populated by humans, to act.

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to Paul Scholes
16th Aug 2018 11:36

Yeah, it's a bold move to leave money on the table. There are a few hopeful signs that society is finally fumbling its way out of this 'profit above all' mindset.

And you're right, of course, about the politicians. But I'd hesitate to grant businesses full clemency for their role in the currently unfolding climate disaster. Corporations, especially, bear a heavy responsibility for the mess we're in.

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16th Aug 2018 10:36

Given that directors have statutory Corporate Social Responsibilities (https://www.assentriskmanagement.co.uk/corporate-social-responsibility-c...), surely we should see much more of this kind of action?

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to coops456
16th Aug 2018 11:31

I'd be inclined to agree! If it comes down to a choice between profits and planet, then surely there's only one winner? And yet, I still see people resisting the notion.

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to coops456
16th Aug 2018 15:57

I agree but, having banged on about it now for over 10 years, especially on here, I’m still waiting for acknowledgment that there’s even an issue from most directors.

I blame Nigel Lawson!

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19th Aug 2018 17:55

The article concentrates on a simple, single example of how one company can make one decision to meet with a pre-conceived "demand" for a particular type of service. Fine. It's the company's choice, their risk, good luck to them.

But the real issue is not whether to be eco-friendly, but HOW to be eco-friendly AND then how to PROVE that the consequences are indeed eco-friendly.

The opportunity cost of "bring your own coffee cup" is sufficiently immeasurable as it is.

So think about being a minor part of a broad supply chain, regulated by a global standard setter, enforced by (say) the European Economic Area. You can't accurately measure the totality of the environmental impact of your operations, because there are too many dependencies (your suppliers' processes) and unknowns (your customers' customers' processes (yes, note the double plural possessive case)). And there's nothing you can do about it anyway, because the manufacturing method is pre-defined and pre-approved by a variety of regulators (in different fields/disciplines) following a global standard.

Now think about how you would disclose this in your annual financial, eco-warrior & corporately social report.

Now think about how any one regulator might want to approach this, given that this regulator has objectives which conflict with those of the standard setters (and other regulators).

Now think further about how you would defend your situation against such a regulator.

Now consider that the only way western governments have achieved their eco-friendly recycling targets is by shipping the bulk of "recycleables" to China... for landfill. What an elaborate way to launder littering out of the nation's figures and onto the surface of the Pacific Ocean. I presume the flotilla of plastic on the Pacific has its own IATA code and Wikipedia page, otherwise the BBC would never have found it.

What's a board to do?

a) Write an honest annual report that is issue-literate and scientifically-literate (good luck finding a statutory auditor who'll understand that!), but face prosecution from the pseudo-scentists who regulate such non-financial matters?

b) Or play the pseudo-science game, giving the regulators - and the ignorant public/investors - what they think they want in the short-term, kicking the can down the road, and hope for retirement before the truth is out and a revisionist witchhunt scours history for each and every error & omission?

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to martinengland
20th Aug 2018 12:03

Hi Martin - Whilst I think I get most of what you say, and agree with it, I'm not sure whether you are an advocate of environmental impact reduction or you think there's little point trying, because it is so messy and/or the science/advice is so variable?

I gave up on standard setting for reporting years ago, it's hard enough to get the 1,000 largest companies to do it in a way that's comparable, let alone the other 99.whatever%.

Given the responses I get I still think there's a lot that needs doing to convince people that there is a need to be eco-friendly or rather to make them aware of the various issues.

On this particular issue I'm pleased to see organisations prepared to take a risk and reverse practices we have grown to see as essential. There was a bit of a Twitter storm over the weekend surrounding a company that had started to manufacture coffee/drinks cups out of cornstarch, with thousands of likes and congratulations before someone reminded them that there is actually no need to carry around a cup or bottle of water, you just visit the establishment, have a drink and leave empty handed.

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14th Sep 2018 10:12

Putting the environmental issues to one side, you have to hand it to the coffee sellers, everyone is struggling on the high street, profit warnings right left and centre, big names going under, not theses coffee houses, and some of they dont pay their fare share of tax.

I suppose when your product is 85% tap water, and you pay just above the minimum wage you are always going to be on a winner. Lets all do it.

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