I have read a number of news articles recently reporting that many companies are flush with money. One estimate puts the corporate cash pile at $1 trillion. Economists and politicians can argue a myriad of reasons as to why companies are reluctant to spend it, but my question is: where is it coming from?
It’s interesting to me that in slow economic times, companies seem to be prospering enough to maintain a significant liquid position, or if you prefer, hoard cash. While debts and liabilities play a role in this as well, I put forth that much of this seemingly quick influx of money is the result of increased sales or reduced costs. And while some companies have seen an uptick in sales, a larger portion are fighting mightily to maintain the sales figures of past years. This leaves reduced costs.
About a month ago, I wrote a blog post about how the size/volume of some products seems to have shrunk, but the consumer price points have stayed the same. This may account for some of the reduced costs. But other companies are seeing cost reductions from their sustainable activities. Reducing energy costs is high on the lists of many of these companies. The 2010 Johnson Controls Energy Efficiency Study shows 65% of companies polled pay more attention to energy efficiency than in 2009 and a nearly equal percentage (64%) expect energy costs to rise. But it’s not just energy savings or recycling. Companies are looking at reduced packaging, distribution innovations and product improvements, all to keep costs down as sales remain slow. The additional silver lining, of course, is that all of these activities also fall into the category of sustainability and serve as excellent proof points for any company’s green claims.
So reducing costs = improved profits. And some cost cutting measures = sustainable activities. It’s a win-win for any company. And one more argument that sustainability is actually very good for business.