I recently attended a conference about the Newsweek Green Ranking and had the opportunity to listen to Dan Esty, author of Green to Gold, speak. It proved inspirational as well as educational.
He noted that sustainability is imperative for the business world. We have a business megatrend in the form of sustainability - big to small, old to new. Those who take it seriously will ride the wave, and those that do not will go under it.
We've seen other megatrends in the past, and we can use these examples to predict what will happen to those who fail to adopt quickly. The first was the "quality" megatrend. Those that got it early, profited. Those that did not, suffered. A good example was the auto industry and the U.S. vs. Japanese auto makers.
Information technology is another. This affects every business - everyone must have an IT strategy to optimize their business in order to remain viable today. For example, Google is doing well while traditional newspapers are challenged and have to re-think their business models. Canon is rising, and Polaroid is no longer a household name.
The current megatrend is "sustainability" because people are focusing on pollution control, energy efficiency and managing resources in an effective way. Those who are doing well are managing their business in a structured way by using quantitative data to drive results. A new model of environmental decision making has emerged - i.e. not just managing risk or following law but also capturing the upside - to drive revenue, build brands and new business models. It is a robust approach: an analytical way to not only manage business resources and cost, but also drive new revenues.
What is the required for success? Two things:
1. Vision - decide what to do - is it resource reduction and cost or new business?
2. Delivery on the vision - an action plan with the key to success being execution.
How does sustainability deliver competitive advantage? There are 4 major buckets of opportunities:
1. Risk Management - eco-risk as a matter of corporate success. BP has mis-managed the eco-risk. Cap down $40B. McDonalds' recalling 12 million Shrek glasses and having to buy back those items because they were made with cadminium. Being unprepared - carbon exposure. What companies are looking at - their carbon footprint. Changes will be coming from customers. Some companies are prepared, and others may be exposed.
2. Eco-efficiency - bring down energy bills. At $70/barrel, oil is 2.5 times higher in price than 10 years ago. Squeeze out waste and cost of buildings. Manufacturing can reduce scrap and waste. Reducing toxic materials and waste can also cut costs.
3. Innovation - bring new products to market and tap into consumer interest, and build brand and consumer loyalty.
4. Branding - connect to environmentally conscious consumers. Coke is investing and telling a story that consumers can relate to it. GE eco-magination line is booming. Clorox totally remade its image. Their Green Works line and Burt's Bees products are now leading on all green surveys.
Execution is Key: 5 core elements to succeed
1. Leadership - top level CEO endorsement
2. Focus on systematic models, metrics and quantitative data to shift resources
3. Strategic fcus that is integrated and aligned with broader business goals
4. Leadership and management program - folded into how it manages. Not just chief sustainability officer but also ownership across all business unites and key performance indicators that everyone is judged by
5. Reporting and communications - Tell stories about your performance and footprint reduction of carbon, water and waste. Present it in a way that is accessible so that people understand and care about what you are doing. A new model for communication is social media -blogs, videos, and pages on community sites with link to 2nd tier data that allow interested parties to further research.
Global climate change is the mega issue of our day. Climate change could drastically transform our planet in ways that even the best computer models cannot predict. There are simply too many factors involved beyond rising ocean temperatures. Unfortunately, the discussion has broken down in the U.S., and recent scandals around how this information is presented are a big problem. It is fundamentally unacceptable that transparency of all scientific data is not available. Peer reviewed information should be standard. We still do not completely understand how it will affect us, but with higher levels of transparency, what information is available will make the next steps only too clear - that the science is settled enough to take action.
There is also an issue with a cap and trade approach surrounding the economic burden of allowances. It sits mostly with energy companies. The idea of a carbon market looks like it will help us, however,it is simply not accessible to most people. It looks like some Wall Street shell game, and that understandably arouses the suspicion of a lot of people. We need a race to technology to drive alternative energy. The most effective transition in the next 10 to 20 years is gas. Why are we are not talking about it? The only countries that have managed to drive down their emissions to 1990 levels include: Russia, due to their economy; UK, by shutting down coal mines and ramping up natural gas production, as well as embarking on ambitious tidal and offshore wind projects; and Germany, who in the years since the first oil crisis on the 1970s have molded themselves into global leaders in solar technology and energy efficiency. This is the only proven model to follow.
Finally, what about the consumer? There are 3 consumer subsets that are interested in environmental performance
1. High disposable consumer: The hybrid car buyer who wants to show off the latest green product or organic quart of milk
2. Under 30 consumer: Understandably has a huge interest in preserving the environment. After all, they still have many years left on the planet and want to pass a healthy Earth on to their children.
3. Women: They are more interested than men. There is a huge gender gap here, and they are willing to pay. I'll leave analysis on this statistic to the community.
So the environment is obviously a big deal to a lot of people. Organizations that recognize this and make appropriate changes to their offerings and operations will ride this megatrend and remain viable. What is your organization doing to adapt to this new trend? As always, keeping the Faith in green!
Leave a comment