At Method, a maker of household cleaning supplies, eco-friendliness is more than a trend — it's a founding principle. Indeed, it was the inspiration for the $100 million company, which was launched with a commitment to "make products that work, for you and for the planet." That was a tall order for a start-up, given that Method sells products that compete with such mainstream chemical-heavy brands as Windex and Clorox. Founded in 2000, Method stresses the importance of sustainability throughout its operations, from the products it sells — perfume-free, concentrated laundry detergent, for example — to the way it distributes them: its truck fleet is now largely powered by biodiesel.

While Method and other well-known eco-oriented brands have been increasing their share of established market categories for more than a decade, the gospel of green is now spreading far beyond this cadre of early adopters to a broad swath of traditional businesses. Suddenly, executives who are far less passionate about environmental issues than Method's founders are discovering that the financial benefits of going green can manifest themselves in numerous and surprising ways.

Although there was speculation that the recession and halting recovery would crush many corporate green initiatives as companies looked to cut back on any efforts deemed nonessential, in fact the opposite has happened. A study by MIT's Sloan Management Review and The Boston Consulting Group (BCG) released in February found that sustainability spending has more than survived the downturn, with 59% of companies reporting that their sustainability investments increased in 2010 and nearly 70% saying they expect to spend more in 2011.

Today, CFOs looking to squeeze as much efficiency out of their plants and operations as possible have found that certain cornerstones of the sustainability movement, such as reducing waste and power usage, offer fresh ways to do what they do so well: manage risk and control costs. The environmental benefits are a nice outcome, too, of course, but they are not the main motivation behind many companies' heightened focus on green initiatives.

Finance executives are also realizing that greener practices may be able to help them control volatile energy and input costs, which are a growing concern. In June's Duke University/CFO Magazine Global Business Outlook Survey, nearly 80% of finance chiefs said high oil prices have had a negative impact on their companies. The overall trend for oil and other commodities is up, with staples like cotton and coffee both more than doubling in the past year. Indeed, Aeropostale, the teen-clothing chain, cited cotton's climb to more than double last year's price as one reason for the company's 10% decline in operating margin in the first quarter. (For more on inflation, see "That Rising Feeling.")

Whether the cost of energy and materials will continue to soar as a result of growth in emerging economies, or whether weak demand in the United States and Europe will keep it in check, price volatility in one direction or another seems certain. For CFOs, one way to hedge against price swings and maintain some ability to plan and forecast is to figure out how their companies can reduce their use of such wildly fluctuating commodities. Between the cost-cutting opportunity and the possibility of making materials costs more predictable, finance chiefs are finding that green business has transformed from an idealistic approach to an incredibly pragmatic one.

A New Source of Advantage
The MIT/BCG study broke respondents into categories, including "embracers," who have made sustainability a permanent part of their business agenda, and "cautious adopters," who are focused on measurable investments like resource efficiency and waste reduction. ("Sustainability skeptics" made up just 3.5% of the sample.) Contrary to the stereotype, embracers aren't forgoing profits in favor of environmental goals. Indeed, say the study's authors, "Embracers are confidently making the link between sustainability and profitability…some 66% of embracers say their organization's sustainability-related actions or decisions have increased their profits."

Gene Lynes, CFO of AdvantageIQ, a publicly traded provider of energy-management services, says that for many companies, particularly those with substantial real estate holdings, energy costs are typically one of the top five expense line items. When clients call on AdvantageIQ, "most often, sustainability is an important element, but there's an analysis of cost savings that goes hand in hand with that," Lynes says.

While the business began by helping customers simply process and track their energy spending, "that's shifted over time as customers have become more and more interested and proactive in driving the costs out and moving more toward thinking about sustainability," Lynes says. Clients can expect to see energy savings of two to five times what they pay AdvantageIQ in fees as the company helps them identify billing mistakes, choose the most cost-effective energy providers, and reduce energy usage during the most expensive peak load times, according to Lynes.

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