For Real, Not Just For Show
Consumers around the world talk about the environment as if they were discussing their own backyards (which, of course, they are). But will they continue to care about green issues now that the economy has taken a nosedive? That’s what companies the world over want to know as they consider their past investments in green strategies and plan for the future. The answer, according to our research, is a resounding “yes.” Green products and processes not only allay the depletion of natural resources, they can allay the depletion of cash flow for both companies and consumers.
In July 2008, The Boston Consulting Group conducted a global consumer survey to assess green attitudes and shopping behaviors and followed up with “pulse-check” surveys in Europe in October 2008 and in the United States in January 2009. In the October survey, we found:
- More consumers systematically purchased green products in 2008 than in 2007.
- Although consumers are cutting back on big-ticket items, they are reluctant to cut back on organic foods.
- When asked in which product categories they are willing to trade up, consumers ranked organic foods 20 on a list of 108 product categories (up from 43 in 2006).
- Consumers said they are willing to pay a higher price for green products if they are better.
To skeptics, sustainability may appear to be the media’s topic du jour. But being green isn’t just a fad. Most interesting, its attraction for consumers can have little to do with concerns about sustainability. A big appeal (especially these days) is that green products can offer money savings in addition to the benefits of health and safety. As long as consumers continue to worry about energy costs and their budgets, and as long as they continue to be conscientious about the ingredients of their food and personal-care products, being green will be an attractive business.
Customers expect companies to take the lead on green
Consumers believe that companies can be more effective than private individuals in acting on green issues, including health and safety, and they expect them to do so. Yet when we asked consumers what they were doing for the environment, the most popular actions were also budget-conscious ones:
- Turning off home electronics when not in use
- Recycling or reusing products
- Using less water
- Using energy-efficient appliances and light bulbs
In contrast, consumers were not nearly as likely to lay claim to more costly actions, such as buying a hybrid car.
Companies also have dual motives. The good a company does for the environment must also do good for its bottom line — whether in reducing costs or attracting more customers with green products. The expansion of green consciousness around the world makes the business case for green a compelling one, especially in a tough market.
- Most of the consumers we spoke with consider a store’s green credentials when choosing where to shop — a clear opportunity for savvy retailers.
- Two-thirds of survey participants said they would shop more often at a store if it carried green products.
- More than two-thirds said they would buy more green products if they were available.
Price is not the obstacle
Many companies believe that higher prices keep consumers from purchasing green products. Our findings show that price is not a significant obstacle for most buyers. (See “Awareness and Choice.”) In fact, it ranks lower as a barrier to green sales than lack of awareness of green alternatives or a lack of choice.
Yet consumers’ willingness to pay more depends on a product’s category and perceived benefits. To explore this further, we grouped products into five categories according to how consumers use them:
- Ingestible, such as foods, beverages, and over-the-counter drugs
- Products applied to the body, such as lotions, cleansers, and creams
- Wearable products, such as apparel and shoes
- Plug-in products, such as appliances and electronics
- Disposable products, such as paper and plastic products and household cleaners
We asked consumers to rate both the quality of green products in these categories and their willingness to pay a premium of 10 percent or more. The results were surprising:
- Nearly half of respondents in all countries said that green products offer comparable or superior quality over conventional alternatives.
- About 30 percent of consumers are willing to pay more for fresh meats, seafood, produce, and dairy products — and nearly two-thirds perceive green products in those categories to be superior. (See “Product Category and Perceived Benefits.”)
Willingness to pay a price premium is also fairly high in the plug-in-products category, where the money-saving benefit is also a powerful motivator. But the results were somewhat different in the disposable-products category. Here consumers are accustomed to green alternatives and have come to expect green attributes as a given.
Being green is not a license to charge more, however, and green products need not cost more. Many companies could lower the price of green products by eliminating as much as 16 percent of their own costs. Reducing the amount of product packaging, for example, would permit more products per truck and per shelf at the store, thereby saving on fuel, logistics, and out-of-stock costs.
Businesses challenges to satisfying the green consumer
Producers and sellers of green products need to a better job of helping consumers understand product claims, providing more information about choices available, and better displaying those choices in the store.
What does “green” mean?
Because the industry lacks clear definitions and standards, some companies have been able to make sweeping and unsubstantiated claims about their environmental credentials. That’s caused many consumers to become skeptical about green products and companies to become wary of offering them. Nearly all the consumers in our survey reported being confused when shopping for green products and uncertain about exactly what being green means, what benefits it provides, and how to tell if a product is green. In fact, when presented with a list of 13 sources of information about green products, most of the survey participants ranked independent consumer reports as the most credible source, followed by academic and scientific publications, family and friends, and nongovernmental organizations (NGOs) and public-interest groups. Manufacturers were ranked eighth, and retailers were even closer to the bottom of the list.
Yet when we asked consumers how they judge whether a product is truly green, one-half to three-quarters of respondents admitted that they rely on product advertisements, although an even greater portion said they are skeptical about advertising claims. Consumers told us they often consult labels, too, even though they don’t always believe them. Only 28 percent said that they understand the differences among various symbols for green certification. And a majority of consumers consider many certification labels to be misleading.
Where are all the green products?
Despite the media attention to green, consumers remain unaware of green options in many categories and believe that the choices are limited when compared with conventional alternatives. They also complain about the “green ghetto” in the supermarket, where a limited assortment of organic products are crowded together in a low-traffic location.
Retailers should reconsider the tradeoff between convenience and price transparency. Most of the consumers we spoke with would prefer to see green products offered next to conventional products on store shelves, rather than in a separate section. Of course, that arrangement makes price differences more apparent, and retailers fear that consumers could balk. But since many consumers are already prepared to pay more for green features if they offer added value, and since fewer green products will be sold if they are banished to a separate section, retailers may benefit in the long run from displaying green and nongreen products together.
As the “Awareness and Choice” graphic shows, lack of awareness and information about green product offerings seem to be the major reasons why consumers don’t purchase green products. When we asked survey participants who said they don’t shop regularly for green products why they don’t, lack of choice (“I’m not satisfied with the range of green product offerings”) and relevance (“I don’t think green issues are relevant in this product category”) were the next most commonly cited reasons for not shopping green. Price (“green products are too expensive”) ranked below those factors as a barrier to green shopping.
We estimate that companies lose, on average, nearly 20 percent of potential purchasers when consumers aren’t adequately informed about their green-product offerings. Some companies are rising to this challenge by improving their advertising of green products and striving to earn consumers’ trust in their green credentials. One popular strategy is to partner with respected NGOs and government agencies for the purpose of solving an environmental problem. Not only are such partnerships likely to have a greater impact than efforts undertaken by companies on their own, but the company also benefits from the associated publicity and goodwill while avoiding claims of greenwashing.
First steps toward capturing the green advantage
There ’s no doubt that consumers everywhere are increasingly choosing green products, but they are also expecting more from the companies that make and sell them. The first challenge for green-minded companies is to understand which actions will be most meaningful in their categories and for their customers. Next, they should make those actions an integral part of a compelling case for competitive advantage. Capturing the green advantage involves incorporating green strategies into planning, processes, products, and promotion — reducing costs in some areas and improving materials and ingredients in others — and making sure customers understand the benefits of being green.
The green movement is about reducing waste and minimizing our impact on the environment. Companies that translate these goals into a holistic approach to offering differentiated green products and bringing down costs across the entire value chain have been rewarded with higher margins and market share.
Successful Green Transformation: The Four Ps
Green strategies offer product makers and retailers a competitive advantage in product differentiation and cost savings. Green initiatives have emerged across nearly all consumer sectors, including automobiles, electronics, durables, energy, health care, packaged goods, and retail. Some players harnessed their “greenness” as a competitive weapon — a path to leaner operations, greater market share, and more attractive brands. Others have encountered bumps in the road that have resulted in higher costs, allegations of greenwashing, and disaffected customers. What separates the winners from the losers is a clear green agenda. It calls for a top-down vision and coordination across the value chain — in other words, a holistic approach to going green that enlists every part of the organization: the four Ps of planning, processes, products, and promotion.
We’ve looked across the consumer industry and identified ten best practices for gaining a green advantage. Below we explore each practice, singling out a few companies as exemplars. Needless to say, most of the companies we mention are working on several fronts, not just one or two.
- Factor sustainability into strategy, future resources, and budgets. A leading hotel chain in Europe has been tackling environmental issues since 1994 and highlights proactive sustainability as a core value in its mission statement. In 2007, the company announced that it planned to halve its carbon-dioxide emissions by 2011 and eliminate emissions entirely by 2025.
- Make the rules, don’t just follow them. Joining in industry partnerships with respected certification programs is a smart long-term investment. Many companies are beginning to adopt the standards of a few of these programs. One is the Energy Star label, created by the U.S. Environmental Protection Agency in 1992 to reduce energy consumption and greenhouse-gas emissions from power plants. Some 2,000 manufacturers use the label, which appears on more than 40,000 energy-efficient products at more than 1,000 retailers.
- Make a clear business case for sustainability initiatives. A consumer-packaged-goods company was able to improve its balance sheet and help protect the environment through changes made to one of its household-cleaning products. By shrinking the product’s midsize container by two-thirds and greatly increasing its concentration, the company was able to lower production costs for water, cardboard, and resin; reduce logistics costs through more efficient warehousing; decrease the number of trucks needed to carry the product; and increase sales through reduced out-of-stocks and improved shelf efficiency. These moves increased profits by about 16 percent.
- Go green across the full value chain. Consumers have wide-ranging expectations for green businesses, and they — and their national governments — are likely to grow even more demanding over time. These facts should spur companies to go beyond discrete, one-off responses — a switch to recycled packaging, say, or the offer of a low-fat alternative. Wal-Mart, which received high ratings among our survey participants, is turning itself into the reference company for green by its determination to put a green stamp on the entire life cycle of the products it sells: the raw materials they contain, how they are supplied and transported, how they are displayed in the store, how they are used by the customer, and how they are disposed of.
- Target early wins to build momentum, credibility, and motivation. When developing a change agenda, it is essential to have the whole team onboard. An easy way to rally the troops is to leverage quick wins. By replacing or retrofitting equipment such as lighting, toilets, electronics, heating and air conditioning systems, and water heaters, companies can demonstrate immediate results — with a return on investment as high as 150 percent in some cases. A national supermarket chain with more than 400 stores saved $12.2 million in one year by retrofitting lighting and installing energy management systems. An office building with leasing revenues of $6 million a year recouped 25 percent of its investment by taking similar measures.
- Embed green goals into incentives and reporting structures. What gets measured gets done. Companies need to transform their goals into specific initiatives and integrate them into their overall reporting structure. Tesco has designed metrics that track such granular data as CO2 emissions by source. It has also introduced a set of key performance indicators that measure these emissions against specific targets, such as “reduce CO2-equivalent emissions from our existing stores and distribution centers worldwide by at least 50 percent by 2020” and “restrict air transport to less than 1 percent of our products.”
- Make sure consumers understand why your green product is superior to all the others. As far back as 1997, Toyota knew that automobile owners would become increasingly concerned about the effect of their driving on the environment. Since then, advertising campaigns for the Prius clearly spell out the hybrid’s environmental benefits as well as the excellence of its engineering. That has made the Prius the world’s most well-known gas-and-electric hybrid vehicle.
- Get the pricing right. “Just because it’s a sustainable product doesn’t mean it has to cost more,” says Matt Kistler, senior vice president for sustainability at Wal-Mart. “When buyers come to me expecting an environmentally friendly product to be more expensive than the current one, I tell them they need to ask the right questions. A green product should use less packaging and cost less for transportation. Sustainable products should be the same price or less than the products we are replacing.” Companies should aim for products that are affordable as well as environmentally friendly.
- Direct green efforts from the top and get buy-in from key stakeholders. “What I thought was going to be a defensive strategy is turning out to be precisely the opposite,” says Wal-Mart’s CEO, Lee Scott, on the greening of the company. Scott has become the public face of Wal-Mart’s 2005 commitment to cut greenhouse-gas emissions at its stores by 20 percent by 2012, double the fuel efficiency of its truck fleet by 2015, reduce solid waste in its U.S. stores by 25 percent in the next three years, and sell organic food at prices its customers can afford. By staking their own names and reputations on these promises, Wal-Mart’s leaders have overcome a good deal of skepticism about how serious the world’s largest retailer is about protecting the environment.
- Be consistent in order to be credible. Goals, actions, and messages must have a common underlying vision. General Electric never misses an opportunity to send out messages about its “ecomagination” efforts through TV and print ads, conferences and trade shows, press releases and magazine articles, sustainability reports, podcasts, educational online games, and a dedicated Web site. It also measures the effectiveness of each medium and knows which channels have the greatest impact.
- Winning the hearts (and wallets) of green consumers is a wise move for producers and retailers. But going green is not merely a tactic for a single product or a discrete process. Rather, companies should strategically employ green planning, which incorporates green targets and resources into corporate strategy; green processes, which allow companies to practice what they preach; green product offerings; and green promotion and messages.
On the Web
We can’t do it all ourselves, but we are trying to read all of it. As we develop this special report, we will share the most useful, interesting, and provocative resources we find on the web. If you have any good links to share, please add a link to the comments at the botton of this page.
Innovation as a Green Strategy (GreenBiz)
At its own in-person roundtable earlier this month, executives from IBM, IDEO, and elsewhere riffed on how innovation and sustainability are inextricable.
Becoming a Green Business (State of California)
Companies just starting the journey can start with this list of first-step compliance practices.
Cultivating the Green Consumer (Stanford Social Innovation Review)
How can businesses help consumers be as green as they say they want to be?
Joel Makower, author of Strategies for the Green Economy, surveys some earlier reports. You can also read Makower’s State of Green Business report.
Seafood Watch (Monterey Bay Aquarium)
The best way to gain deserving trust is to provide authoritative, easy-to-act-on information. The Seafood Watch guide, available on a variety of computer and device platforms, helps individuals decide whether the fish they’re ordering is sustainable. If not, the guide offers alternatives.
There are dozens of personal carbon calculators. We’ve tested many of them, and we’ve found WattzOn to be not only the most comprehensive, but the one with the most practical and wide-ranging underpinnings. Google is developing one, too.
Don’t Bother With the Green Consumer (Harvard Business Review)
Steve Bishop says going green means focusing on practices, not customers.
Today's Oxymoron: the Green Consumer (Washington Post)
It always pays to be skeptical. To this author, going green means “having less, not tossing stuff and buying eco-friendly replacements.”
Companies going green balance the imperatives to do well and do good. Two worthy resources on that are Can Businesses Do Well and Do Good?, from The New York Times’s “Economix” blog, and Does It Pay to Be Good?, from the Spring 2009 issue of MIT Sloan Management Review. Economix and The Wall Street Journal’s Environmental Capital blogs cover green business on a daily basis, as does our own Beyond Green.
Green, Despite the Downturn
Catherine Roche, a partner and managing director in The Boston Consulting Group’s Düsseldorf office, is an author of “Capturing the Green Advantage.” She spoke with MIT Sloan Management Review editor in chief Michael S. Hopkins about what has changed since she conducted the study — and what hasn’t.
Your survey was done in July. Between now and then much has happened. What is different now compared to when you collected the data?
Companies have been shocked by what they’ve seen out in the marketplace. There’s been a major drop off in consumer demand. Now the initial shock and fear is probably starting to settle down a bit and people are coming back to asking: What was our agenda before? What’s still valid? What needs to change?
We think green was on everyone’s radar screen back in September, before the economic crisis took center stage. And the good news is that it won’t disappear in the fallout from the crisis.
For many companies, the focus now is on getting leaner as fast as possible. Let’s make the most out of the resources that we have — which fits in perfectly with the goals of “green.” If nothing else, green is about trying to use our resources more efficiently, stretch them as far as we possibly can and avoid waste. I think companies, at least the way they act internally, are still going to be very much looking for this as a lever for cost savings.
Now in terms of their dialogue with consumers, I think green remains an important message that companies need to keep delivering. Beyond our July survey, BCG also conducted pulse-checks on green sentiment in October 08 for Europe and January 09 for the United States and it’s clear from those findings that green is still something that’s on consumers’ mindsÖand that they’re regularly factoring it into their shopping behavior.
The one thing companies might emphasize more is the message that green doesn’t have to cost more - for either consumers or companies. You can be green in an affordable way and in a way that’s going to fit into your tightened budgets. Companies that can make that point credibly, and show that they can offer green in a way that’s convenient, won’t cramp a consumer’s style, and won’t hurt a consumer’s budget, are going to do very well from this.
Wal-Mart is a great example. They have fared well compared to the general retail sector over the last three or four months because their value message is so established and so credible — and its value message on green is also well established and credible. Wal-Mart spoke that way even before the economic crisis began. Now, it’s a message that’s finding strong resonance with consumers.
The leading players on green are saying: “Before the crisis, green was about health and safety, green was about savings, green was about things that are directly beneficial to you — it’s still about that.” Let’s not lose sight of that.
What are the big differences between what you might have been saying to companies six months ago and what you are saying now?
We’re saying essentially the same things, but we nuance it differently. We try to prove to them quite clearly and strongly the business case for green. It’s not only about consumer differentiation; it can also save you a lot of money now — not two or three years from now, but now. Also, it’s more of a motivational spin for your own internal organization to say “we need to save cost, not only for the good of the company but also for the good of future generations.”
A green message motivates a lot more internal energy and brings a lot more enthusiasm, bottom up, than you’d get with ordinary cost-saving messages. When I talk to companies now, I really emphasize the fact that green need not cost the company more and need not cost the consumer more.
I would’ve made that point a year ago, but a lot of companies might not have heard it. They would’ve noted that they can charge price premiums for green. But that is a tougher sell in many categories in this economic environment.
I’d also encourage companies to make sure that they’re clear on the benefit they’re delivering to the consumer and have identified the right price that consumers are willing to pay.
A year ago companies were very interested in starting internal initiatives to move on green. They felt compelled to because their consumers expected them to and they wanted to drive action. And a lot of them implemented new positions in their organizations, such as a “Head of Sustainability.” There was some groundswell of activity. Now there’s a little bit of backing off, with companies saying, “Let’s wait and see, let’s do the urgent things now, fight the fires that we really have to, and we’ll come back to it.” There are still things being done, but it’s harder to get a CEO’s immediate attention.
You said companies see green as a lever for cost savings, but do consumers see it that way?
Yes they do. When we ask people to identify their most regular green behaviors, the ones at the top of the list have a clear “saves-me-money” benefit. We get answers like “I’m going to use energy efficient light bulbs” and “I’m going to turn off the lights in my house when I go out.” and “I’m going to bring my own bags to the grocery store.” and “I’m going to try to cut down on driving and watch my gas consumption.”
Consumers say they can do these things fairly conveniently, that it doesn’t really cramp their lifestyles, and it has a clear bottom-line benefit for them. Consumers have definitely caught on.
With all that’s happened in the economy, are there any ideas in the study that you wish you could have pursued more?
CEOs are wrestling with the question of how much to communicate. “Do I risk being accused of “greenwashing”? “How bold should I be?” “How do I back up my message to make it feel meaty enough and real enough?” They want to get more credit for what we’re doing, but on the flip side they’re afraid to make too many promises.
Afraid of what?
Afraid of backlash. Afraid of somebody saying, “You’re saying you’re doing all this great stuff on green, but we just researched what you’re doing elsewhere. Your factory in Malaysia still has some questionable labor practices and the two things don’t hang together. You’re inconsistent, less than sincere.”
That risk leads a lot of senior executives to say, “I’m interested in green and I’m pursuing it, but I’m doing it in a very under-the-radar way. I don’t want to talk about it in the media because I’m too worried about backlash.”
Speaking as a media member I’m happy to hear that. We have seen, it’s safe to say, over the last year an explosion of sort of green PR for companies. It’s become very difficult to parse it enough to know what is substantive and what of it is not.
Exactly. Consumers can be skeptical, wary of trusting a company. Our research shows a high instance of consumers saying “it’s important for me to get information and I need guidance,”. But trust of retailers and manufacturers to provide that information is very low.
Georges Kern of IWC Schaffhausen says the most important thing about green is the internal benefit he gets at his company. What sort of HR advantages emerge from adopting a greener product and service strategy?
We’ve seen that motivational benefit cited elsewhere, too. Several companies cite statistics that their employees are prouder to work with them because of major environmental initiatives and commitments.
Many have introduced employee suggestion programs around green to pull in many new ideas for cost savings that the company wouldn’t have thought about otherwise.
Some even go much further — for example letting their employees take short leaves from work for personal green initiatives, and they even provide some funding for that. Such efforts can produce satisfaction levels among employees that are outstandingly high.
You make much in the report about the need to educate consumers. How do you imagine that education process will unfold?
We were looking at it from the standpoint of retail, asking why so many consumers who would be interested in green products don’t buy them. We found there were two main obstacles — and surprisingly price was not one of them. First, it’s awareness. Consumers don’t know that there are green alternatives in many categories. They don’t know the benefit. Second, it’s perceived lack of choice. There’s a perception that if I buy green I’m going to be limited to a product from a separate section in the store that might not be as effective as the conventional alternative.
Retailers and manufacturers both have some burden to bear on that front. Retailers need to communicate choice and give consumers a sense of why green matters in this category. They must also figure out what to communicate to consumers both when they are in the store and before they get there.
There’s also a lot that manufacturers need to do about communicating on the product itself. What’s it about? What’s in it for the purchaser? And manufacturers need to work with retailers on independent standards that consumers can trust and rely on to really tell them if something is in fact green and can live up to its product claims.
Standard-setting is a big issue. There are many standards around “green” out there now, and for the most part they don’t mean much. They aren’t closely regulated unless there’s a lawsuit and some specific complaints, like there has been in the beauty industry as well as other areas.
So who is going to set the standard? Industry? In many cases they should be the ones that are lobbying for standards and proactively shaping them, but will consumers trust them? Consumers have told us they’re looking for independent third-party standards to overcome the trust issues.
Although there is much uncertainty about standards, it’s a huge opportunity for companies that can get out ahead of it and nail it. Early movers will have more of an opportunity to affect the way those standards are formed. Companies that wait might find themselves left behind.
Imagine you’re talking to a CEO who can’t hire you, for the sake of argument, and you’re going to give some advice about just a first move. What’s the first thing you ask executives to do, when you go in and actually begin an engagement or for that matter if you’re just going to throw some advice over the wall so they make some moves on their own?
It depends on where they are starting from. For companies at the average level of competence around green — they’ve got some stuff going on but it’s not tightly organized — the first thing they need to get a grip on is where they are vis-à-vis their competition and customers. What’s going on? How do they stack up?
When it comes to green, many companies don’t know what’s happening in their own companies. We’ve often found that things happen in bottom-up ways, driven by employees’ good intentions. They start happening over in operations and procurement and logistics, on the marketing side in product development, but there’s nobody standing over it all and figuring out how it adds up to a consistent strategy that will make sense to the consumer. Companies really need to see how all of these things come together, which issues are worth prioritizing and putting money against, and which ones are going to be most important.
Related to that, companies need to be clear on their aspirations for green. What kind of green do you want to be? Do you want to be a leader in this topic space, a company that’s very active and aggressive and vocal about its green initiatives, or rather more subtle and “under the radar”? Do you want to be with the pack? Ahead of it? Behind it? What kind of compromises are you willing to make in your business model to make it happen?
Companies need to know where they are, what they’re doing and how that stacks up against the competition. They need to know where their weaknesses are. And then, after the senior leadership is engaged and talking about where they want to go on green, companies can put together a credible pathway to get there.
In the report, you note that the planning is critical. Many companies are grappling with green and don’t yet have a coherent strategy.
To get the ship sailing, you really need to know in which direction you’re going. Then you can organize for it, put some targets down, and build a clear view on how you might actually meet them. That’s much more effective than making a bold statement like “we’re going to be carbon neutral by year X,” when no one in your organization knows the plan to get there.
When we start conversations with our clients on what pushing “green” to the next level could be worth to their organizations, CEOs pay attention. They’re saying, “What? They’ve been managing to get that kind of logistics or store operations savings? We should be getting that and more.” But it requires getting the numbers and facts on the table in order to size the prize.
Sustaining an Emotional Business
Georges Kern was born in 1965 to a renowned jeweler family. He has worked in the watch industry since 1992 (starting at TAG Heuer), and has served as chief executive of the venerable watchmaker IWC Schaffhausen since 2002.
In an interview with MIT Sloan Management Review editor-in-chief Michael S. Hopkins, Kern discusses how he runs his business with a long-term view, how the current financial crisis is different from the last one, and how to make sustainability a source of competitive advantage. He also considers which partnerships are right for a company bent on sustainability — and which aren’t.
How would you define sustainability?
I’d say it means taking the long-term view, building value for all your stakeholders over the long term.
Do you think that’s a definition generally shared by people when they talk about sustainability?
To be honest, I don’t know. But I do know that the issue of sustainability will be an extremely important one in the years ahead. We saw the starting point of sustainability, of taking the long-term view, ethically and morally, after September 11. I think recent events, such as the financial crisis and the bad repute the banking sector has got itself into, will encourage consumers to think about what companies actually stand for. I’m convinced of that.
Watches are an emotional business. People who buy our products are driven by their emotions. Nobody buys a watch simply to know what time it is. We are selling emotion. In the case of products like these, I believe consumers are going to do a lot more thinking during the purchasing process. I’m convinced this will be a key element in the years ahead.
Some people might think that a business predicated on an emotional response is tougher to run in difficult times. Are people going to be making different kinds of emotional decisions?
I really don’t know if emotional products will be more difficult to sell than non-emotional products in the near future. But I would say that for both types of companies or products, your behavior, your long-term view, your ethics, your sense of social responsibility: all these aspects are key elements of the consumer’s choice.
These days, when people buy things — and here I’m talking business to consumer — they tend to think about it a lot more than before. You no longer have the guy who’s just made a good deal on the stock exchange walking into a shop and buying something for $10,000 or $20,000. That’s all over. So people are thinking about what they buy. They think about the product. They think about the brand. They think about many elements.
Any company has to bear these issues in mind because everything today is wide open. There’s public pressure on us. Thanks to the Internet, everything is in real time. All the journalists are out there, on the alert. If you make a mistake - it is all over the world in two minutes.
Do you think this period of financial crisis represents a moment of opportunity for people who want to think more in the long term? Or is it going to make it harder?
It’s an opportunity. There’s going to be a mind shift, because society is going through a mind shift. It’s funny. I’m a member of the Young Global Leaders, which is part of the World Economic Forum. And Klaus Schwab [founder and executive chairman of the World Economic Forum] asked all of us to send memos giving our ideas. We had to write essays. I wrote exactly what I’ve just said. He told me that 90 percent of the group — there are 600 of us in all - wrote about ethics and morals. And I’m talking about business guys. They’re all in top positions. Perhaps it’s also a question of generation. Maybe our generation, people who were born in the 1960s and 70s, have a different attitude towards many things from previous generations, because we have much bigger problems with climate change, AIDS, epidemic diseases etc.
A very good friend of mine is in the board of directors at a Swiss Bank. We often talk about how the biggest philanthropists in the world are new money, not old money. Who’s providing the money for foundations? It’s new money, not old money. There is also the generation issue. But in this respect there will be a natural process of change.
Things like that also happened right after September 11. If people had been asked to write essays the way you described, you might have found the same result: 90 percent of them writing about ethics and morals. But we’re where we are now. How long-lasting is the effect you’re talking about?
The difference is that we are now in a huge economic crisis. September 11 was a devastating act by fanatics that rocked our concept of what is morally acceptable to its foundations, but what we face now is an existential economic destabilization, which directly effects everybody.
People are fed up. What are the successful brands today, in the crisis we’re going through? Number one, brands with values, with content, with history: brands that offer reassurance. And second, brands that are not showy. People are cocooning. When you look at the figures for home decoration, you see that investments here are on the increase. Why? Because people are staying at home. Society is changing. Education is changing. I see what my kids are learning at school: Who turned the light off? Who turned the water off?
In the midst of these changes, do you think it’s important to establish a common definition of corporate sustainability?
It could be interesting. To come back to Davos for a second, Klaus Schwab suggested that businessmen swear some sort of Hippocratic oath for sustainable management. I thought it was a very interesting idea, even though many people wouldn’t follow it. But having a kind of agenda of this kind could be interesting. It’s very difficult to establish, I guess, because businesses are so different. But there are nevertheless a few principles that could be established.
When you consider all the sustainability issues that affect us, which ones do you think will most affect management’s strategic decision-making?
We can divide this issue into three areas. First, there’s how you behave within the company, how you treat your people, how you build your corporate culture, how you involve your employees. We all want to retain our best people. We want them to stay and prosper with us. I think the spirit in the company is very important.
The way you do business is also very important. What kind of products, what kind of daily decisions do you take? Are these short-term decisions, designed to make short-term profits? Or will they help build up the company?
Finally, you have to watch your behavior towards external stakeholders, your shareholders or the town or the country you’re based in, or the issues that might interest the general public, like climate change.
You mentioned climate change as one of the areas of concern you have to address responsibly because of pressure from stakeholders. Do stakeholders have other concerns that you think are going to push you as a leader in new directions?
I’m convinced that climate change will dominate the debate for the next 10, 20, 30 years, especially in Europe, the United States and a few emerging markets. Of course you can talk about education, health, war, all these matters. But what is the issue that really concerns us, the one where we really do have an influence? I believe climate change and preserving the natural world will be the dominant debate. The next one will probably be water, which is linked to climate change. I think the change to the climate will be dramatic and it’s already happening. Look at the changes in the automobile industry, for example: within 18 months its strategy has undergone a complete about-face.
How do you account for that?
Public pressure, the price of oil, changes in consumer behavior. This is what’s happened to the American car industry. At any rate — and this is the approach that’s also been adopted by the Young Global Leaders — I believe that if there’s no economic incentive for companies to change their behavior, they won’t do it. You have to show companies that they can make money and be good corporate citizens at the same time. And this — the idea that you can be successful as well as being a good corporate citizen - is the point we’re trying to get across.
I’ve talked to the CEO of Timberland, which is a very green company. Timberland launched a boot made of recycled material, which has been a huge success. But Jeffrey Swartz told me it’s a huge success because it’s a cool product, not because it’s a green product. It’s cool and it’s green. And this is the added value, which is great. But if it had been a bad product, it wouldn’t have sold.
You talk about how you build your corporate culture and deal with people inside the business. Have you seen or felt different kinds of demands from them to change your culture, to behave differently?
No pressure. But we have a climate program. IWC is the first watch company in the world to hold certified carbon-neutral status. I’ve been here for seven-and-a-half years. When we launched the program two years ago, I had more positive response than when we were paying unusually high bonuses to all the staff. People were queuing up in front of my office. It was unbelievable.
You got better results from that program than you did from paying bonuses?
Yes, in terms of emotional response. People still like to get their bonuses. But the emotional response was much higher.
But if you’ve got limited resources and you’re trying to figure out how to allocate them, do you think you’re better off taking “X” dollars and applying them to bonuses or the kinds of measures that you just described to help advance on the sustainability front?
I’m 100 percent convinced that having these programs, having this reputation, is helping us attract and retain talent, even if we might pay less. We’re paying the same amount as the others. But what we have is a huge competitive advantage and it helps us retain talent.
It was a purely top-down initiative. You can’t implement these kinds of programs from the bottom up if you have the CEO blocking it. I’ve talked to many of them in our search for sponsors. All the cases I know from companies being involved in climate change or on these kinds of projects, it’s always top-down, because it’s such a cultural change. You cannot do it organically. Somebody has to take the lead, and I don’t know one single example where it came from the bottom up.
Amid all the strategic agenda items that CEOs face today, how do you prioritize sustainability?
That’s a very difficult question because at the end of the day you need to make your profit, your cash flow, etc. So let’s be pragmatic. People always have to do their duty. But when you talk to CEOs in Davos or in other organizations, sustainability is definitely on the agenda. But, again, let’s not be naive. It is on the agenda, at least partly, as a result of public pressure.
You had the IPCC report two or three years ago and then the Stern report. Those reports on climate change were all over the press. Then the consumers reacted. You would be a very bad businessman if you didn’t consider the sustainability issue. We get reactions from the public and consumers on this all the time. People are waking up in a dramatic way. It’s a new element of management — but you still have to deliver your profit.
You said two things that are really very interesting if we take them together. One, you’d have to be a naive businessman not to respond to the emerging pressure and awareness out there. And two, you describe how you get an enormous competitive advantage attracting and retaining talent by making the investments you do. Given both those things, how do you explain why other companies don’t follow suit?
Some people simply don’t believe it. You can’t expect everybody to see things the same way at the same time. Some people say it’s all nonsense, unnecessary panic. But I’m convinced that companies that incorporate all these aspects into their operations will ultimately be more successful than others. But it’s like everything in life: some people believe in it and others don’t.
So you view acting on sustainability challenges as a source of competitive advantage?
A hundred percent, yes. There are two ways of doing it: in your behavior as a corporate citizen and how you spend your marketing dollar. We have clear strategies. Companies spend a total of $750 billion a year on marketing. What we try to do is to spend our part of it in a meaningful way. You won’t find our logo on a Formula 1 helmet. Never. We support projects that are sexy but also meaningful.
For example, there is an unbelievable expedition called the Plastiki Adventure from David de Rothschild. He will set sail in May in a one-of-a-kind 60-foot catamaran built of post-consumer plastic bottles and recycled material. The crew will navigate more than 100 days and over 10,000 nautical miles from San Francisco to Sydney via a number of ecologically threatened regions, which will include the Great Pacific Garbage Patch, a huge ocean waste dump in the North Pacific Ocean as big as Texas. Using the Plastiki as a platform for rethinking waste as a resource the expedition will not only raise awareness on the issues but will showcase smart solutions to beat waste. David de Rothschild is a remarkable personality and extremely smart; his adventures and messages are very captivating and will no doubt inspire individuals to act more responsibly. This is the kind of smart project we support. It’s a different way of approaching marketing, and this is where we want to spend our money.
So it’s not just about how to manage the company but also how we spend our marketing dollar in a meaningful way. I think this will also be much more of an issue for corporations in future. They’ll have to ask themselves questions like: Do we want to invest in Formula 1? Does it make sense to put our logo on a soccer team shirt? Or shouldn’t I invest a little bit in this project, which makes sense, or in this project, which also makes sense? How can you guide the $750 billion spent annually on marketing in the right direction?
What are the obstacles or difficulties that face your organization when you’re attempting to meet sustainability challenges or adopting the kinds of initiatives that you’ve described?
In the company I’m in charge of, there are no difficulties, because I’m the boss and I just do it. Thank goodness I have the strong support of our employees and of Richemont, the shareholder.
Let me stop you for a second…
Oh, people are skeptical, sure. If you want to build credibility when you’re doing the kind of things I’ve mentioned, there has to be a thread running through it all. As I’ve already pointed out, we have a clear way of spending our money. We’ve been doing it for many years. So we are not greenwashing ourselves with one little project. It is part of our culture, and we have established this over the years.
What capabilities do you believe your business needs to have in place or develop in order to meet sustainability challenges or make more effective use of the opportunities that arise?
We are really talking about soft factors here. It’s all about having the right take on what is going on around you and adapting to it. Of course we have people who are specialists in the environment, but acting and thinking in a sustainable way is something you can learn by yourself. It’s very much a question of attitude and the willingness to accept responsibility. You need to stay alert and interested to keep your horizons wide open. I would say it’s much more soft factors than hard factors, which you might need to develop in your business.
Let me go back all the way to the start of our discussion and your notion of the long-term view. Is it hard for some companies to embrace this ideal?
So how would you advise them? What would you suggest a company does to get from where it is now to thinking in the longer term?
There’s the huge problem of corporate governance. We need proper control mechanisms. The management needs to be effectively controlled by the board. One way or another, there must be new rules for corporate governance.
Secondly, while I am convinced that we need to work towards further economic prosperity, we must avoid the kind of excesses we have seen in the past if we are not to jeopardize systemic balance, whether be it natural, economic or social. Ultimately it’s all about equilibrium of systems in life.
Join experts and practitioners as they consider what it takes to gain and maintain a green advantage. New voices will weigh in as this roundtable progresses. And we want you to be part of the conversation.
Ray Anderson, Founder and Chairman, Interface, Inc.
Jeffrey Hollender, President & Chief Inspired Protagonist, Seventh Generation
Sheila Bowman, Senior Manager of Outreach and Education, Seafood Watch
Balu Balagopal, Senior Partner & Managing Director; Global Topic Leader, Sustainable Development; The Boston Consulting Group
Kathrin Winkler, Senior Director, Corporate Sustainability, EMC Corp.
Wilpam A. Swope, Vice President & General Manager, Corporate Sustainability Group, Intel Corp.
Mitch Jackson, Director of Environmental Affairs and Sustainability, FedEx
Francois Ajenstat, Director of Environmental Sustainability, Microsoft Corp.
Charles Kane, President & Chief Operating Officer, One Laptop per Child
Mark Stoler, Director, Environmental, Health and Safety Operations, General Electric Co.
Bob Langert, Vice President of Corporate Social Responsibility, McDonald’s Corp.
Jimmy Guterman, Executive Editor, MIT Sloan Management Review
Ray Anderson was working toward sustainability before sustainability was cool. As founder and chairman of Interface, Inc., the world’s largest manufacturer of modular carpet, Anderson has shown how a committed company can rethink a product previously notable for its noxious effects on the environment. Since 1995, the company has reduced its waste more than one-third; he says Interface is “on track” to be sustainable by 2020.
In the beginning we set out to become sustainable because it seemed like the right thing to do, and our customers were asking. We responded to our customers. The whole thing started with our customers asking what are you going to do for the environment, and we had no answers. When we heard what the customers were saying, it quickly became clear, hey, this is smart, too. Our customers care; we have to care.
As our waste elimination effort began, so did the savings. We got ahead of the cost curve and then it was really easy to take some of those savings and reinvest them into R&D. That is the other big piece when you moved toward sustainability. Once you’ve got your people aboard, you’ve got to figure out the technology challenge.
I speak 150 times a year, so there’s interest in hearing the Interface story. But I honestly don’t know to what extent our model has influenced other companies. CEOs don’t call up and say, hey, thank you for the model. That just doesn’t happen.
Businesses that are smart about sustainability know it cannot be the program of the month or even the program of the year. It’s the program of a lifetime. It really has to be that long-term commitment, and it has to be more than nice words. There’s got to be a commitment to action to doing this stuff. Greenwashing is the kiss of death. If you think that anyone might use that word to describe what you’re doing, you’ve got a real problem. I know that’s true in our marketplace.
We went through one recession earlier this decade. We came out of it in ’04. It was very clear that we survived largely on the strength of the sustainability initiatives, what they had brought to our operations: the reduction in cost, the better products, the motivation of our people, the goodwill of the marketplace. All of those were working right through that recession. As the marketplace went down 36 percent, our sales went down only 17. We gained market share through that recession. We believe the same thing will happen this time.
Jeffrey Hollender, the President & Chief Inspired Protagonist of Seventh Generation, is the co-author of What Matters Most and How to Make the World a Better Place.
Catherine Roche correctly observes that many CEOs “are wrestling with the question of how much to communicate.” How bold should they be? I say: It depends on the circumstances.
When making green claims for a product, service, or the brand itself, CEOs should proceed cautiously, as do-good marketing campaigns rightly invite scrutiny and skepticism. A company that declares itself to be “sustainable” or “responsible” must first do the hard work of instilling those attributes at the very center of all its activities. The British retailer Marks & Spencer uses a giant electronic ticker in the lobby of its London headquarters to continually flash quick-hit progress reports on the company’s social and environmental initiatives. The scrolling data’s implicit message: M&S is genuinely committed to “doing good;” more importantly, it’s holding itself accountable for the results. An authentically green company does what it says it will do. If its actions fail to live up to its promises, consumers will quickly conclude that it’s just a poser.
On the other hand, when owning up to a misstep, a truly green company will jump to make its actions transparent. My company, Seventh Generation, strives to bare its less-than-admirable impacts on society and the environment, but we don’t always succeed. Last year, the Organic Consumers Association publicly disclosed that our dish liquid contained detectable levels of the contaminant 1, 4 dioxane. We had the least amount of dioxane of any dish liquid tested, and we are working with our supplier to eliminate the contaminant entirely. But no matter. The revelation challenged one of our most valuable assets—our reputation. It also taught us a valuable lesson: It doesn’t pay to be opaque. As painful as it would have been for us to disclose the problem, rest assured that it hurt far more when an outside agent did it for us.
Companies that want to gain an advantage from sustainability need tools. Seafood Watch, a program developed by the Monterey Bay Aquarium, is one such tool. It began as a service to consumers but has proven useful to businesses, too. What started as a paper list to help individuals make sustainable choices when they ate fish – sustainable meaning the sources can exist over the long-term without compromising species survival or ecosystem health – is now available on everything from wallet card to iPhone application. Sheila Bowman is the senior manager of outreach and education for Seafood Watch.
We’ve distrbuted 27 million pocket guides over the past nine years, so we know we’re getting the word out. Consumers are where we started, and we want to keep pushing them, but we’re focused on helping companies make choices for healthy oceans, too. We have large companies coming to us, telling us that their customers want them to be more responsible. The message is filtering up from consumers to businesses. Among our 180 partners are Aramark and Compass Group North America, two of the country’s largest distributors of fish. These huge distribution houses know that sustainability is here to stay and they want information so they can start selling the right products.
When these companies go to prospective clients, they are often asked what their green practices are. Aramark, for example, works with many universities, where students want seafood to be seasonal, local, fresh, and organic. These companies are responding to market pressures to become more sustainable and more competitive. Once one company does it, the others look at sustainability more serious. And we’re helping them do that.
Balu Balagopal is Senior Partner and Managing Director as well as Global Topic Leader, Sustainable Development, for The Boston Consulting Group.
My first advice to companies trying to deliver a sustainability message is to not overextend and get ahead of themselves. Don’t try to communicate all your great actions and intents unless they are completely backed up by actions. Otherwise, it’s just greenwashing. Customers are generally skeptical and they’ll see through it. It’s essential that any communication come on the heels of a clear, observable track record. Some companies prefer not to communicate at all until they have that track record, in the belief that less is more. That’s a public relations strategy choice.
As it relates to communicating the sustainability of products and garnering price premiums from that, companies have to do it in a way that’s consistent with the needs, wants, and aspirations of the specific segment they’re targeting. And don’t forget design. Providing tangible good design benefits are as important as whether a particular product is green.
Education is a very powerful force, even though people don’t necessarily view it as purely education. There’s always an advertising/public relations angle to it and consumers know it. You cannot divorce the two just because a message is primarily educational in nature. BP, for example, goes out of its way in its ads to say that all energy sources are important. It’s a good example of their particular educational message, which also speaks to their strategy. But their strategy is not the primary focus of the message. Intent can always be communicated, but in a world where people have accused companies of greenwashing, my personal advice would be to be cautious in your communications. If your systems and processes and people are not all in sync, there is increased probability that there will be no sync between what you’re saying and what you’re doing. Don’t take that risk.
Senior Director, Corporate Sustainability, EMC Corp.
The most obvious way for us to gain advantage from sustainability is via our offerings to the market. If we look at our environmental impact as a company, a significant portion is our use of electricity. But for every kilowatt-hour of electricity we use in our operations, there are five or six kilowatt-hours used by our customers. A key way for us to differentiate is to reduce use in our products. Rather than have a green product line per se, we drive efficiency across our product portfolio. You can use an efficient product in an inefficient way if you don’t pay attention, so we give our customers ways to run their infrastructure efficiently.
Companies need to embed environmental and social sustainability into their day-to-day business rather than add it as a separate function if they are going to get an advantage out of it. That way, employees get deeply involved. Our employee engagement initiative has leveraged the passion and talent of our global employee base. Employees are the best ambassadors for showing who a company really is. And employee engagement is where innovation comes from: innovative products, processes, ways of thinking. Environmental issues create common ground, connections, networking, across division that might not have connected before. Thats great for employees: it gives greater context for their work. And it’s obviously great for a company to inspire that kind of collaboration.
William A. Swope
Vice President and General Manager, Corporate Sustainability Group, Intel Corp.
Intel has set a goal to reduce its total worldwide greenhouse gas emissions by 30 percent per unit of production from 2004 through 2010. By the end of 2007, Intel was on its way towards this goal as it had reduced normalized global warming emissions 20 percent below 2004 levels.
I’m not sure sustainability would ever be part of our marketing. Our historical customers—HP, Dell, Lenovo, Acer, the OEMs—they care a lot about our doing the right thing, but I don’t think there’s any price premium associated with it. Today, it’s just part of being a quality supplier. Our customers are demanding that we do it better in the future and we will.
Employee engagement is a big part of why this is working for years. We’ve spent more than $20 million on sustainability initiatives that came directly from employment suggestions. We try to empower employees so we can all live more sustainable lives.
We’ve been publishing an environmental report since 1994. We’ve been pretty consistent in paying attention to this before the current buzz.
Mitch Jackson is the Director of Environmental Affairs and Sustainability with FedEx.
The transportation delivery industry is highly competitive, which makes differentiation extremely important, and a focus on sustainability gives us a competitive edge in a number of ways. First, FedEx has a long history of innovation, which we extend into our sustainability efforts. For example, through collaboration with the Environmental Defense Fund, FedEx was the first company to have developed and put commercial hybrid-electric delivery trucks into service. Since that time, we’ve led our industry in working with EDF, suppliers and policymakers to help grow the cleaner truck market. Today more than 50 companies have purchased hybrid trucks, including our competitors, which we applaud. Another way that our sustainability programs help differentiate us from the competition is through our culture of efficiency. Customers are well aware of our time efficiencies, but what might not be as well known is how we achieve resource efficiencies that have benefits for the customer and consumer.
In the FedEx Global Citizenship Report (pdf) that was released in October, we outlined our goals to reduce greenhouse gas emissions 20 percent and increase vehicle fuel efficiency 20 percent by 2020. We’re making progress against these goals, including the construction of a solar facility at our Oakland airport hub that when built in 2005 was the largest rooftop solar power installation in California. Today, we source 1.5 MW of power from solar-electric systems with another 1.4 MW installation expected to be activated in Cologne, Germany, in 2010.
Some argue that for a company to be considered socially responsible it must make environmental investments. Period. Even if there is no long-term value for the investment. In my opinion, this is just another form of greenwashing. For environmental programs to be sustainable, the effort must create benefit for the bottom line and the planet. Without meeting both of those requirements, the environmental program or product likely won’t survive. The reverse is also true. If FedEx’s business decisions don’t make sense for the environment, that likely means we’re not being as efficient as we can be.
Francois Ajenstat is the Director of Environmental Sustainability with Microsoft Corp.
There are three ways a company can become more sustainable: implement sustainability into the way it runs its business, implementing it as part of an existing product offering, or implement it as part of a new offering.
The first of those three is traditional corporate social responsibility work. It shows you’re a leader, it might help your brand, it helps employee and stakeholder satisfaction, and it’s more symbolic than a business opportunity. We installed a private bus system that transports employees from neighborhoods to campus. We did it to ease congestion and drive employee satisfaction, but it removes over 30,000 car miles each week from the Seattle region. For employee recruitment, that’s a big deal. Future candidates look as sustainability as a key way to pick their companies.
As for implementing it as part of an existing product offering, we added power management features to Vista. Using them, customers can save $50 per PC per year. So rather than sell Windows based on features or extra widgets, now we can sell it based on reduced emissions and costs.
Our new product around sustainability is an environmental sustainability dashboard that midmarket companies can use to track energy and carbon emissions directly from supply chain. The power management functions in Vista will have bigger impact, but as far as communications goes you get a bigger bang with a new product. People know that the motivator behind the product is sustainability, and the whole story doesn’t get muddied with other things.
When your company tells its sustainability story, be sincere, be conservative, be fact-based. Don’t hide things. Be completely transparent. Don’t oversell.
Charles Kane is the President & Chief Operating Officer with One Laptop per Child. The organization that puts out the famed “$100 laptop” isn’t in the computer business to make money, but it does influence the commercial laptop market. One Laptop per Child is a prime example of a nonprofit entity that is having an enormous influence on the business and sustainability initiatives of its for-profit competitors.
We’re very proud of creating the “netbook” market segment. The rest of the market didn’t think laptops could exist at this low price, but we drove them that way. These companies still don’t want there to be a low-price notebook PC in this space. It offers a very low margin compared to other machines. A year ago, a $900 notebook was unheard of, but now you can get machines for $250-300. And our technology is still very differentiated from what the commercial markets are producing. Our laptops are water resistant, drop resistant, very focused on power management and mesh [low-power networking] capability. None of those are present in the current set of commercial laptops. We didn’t want to get into the laptop business when we started, but no one would build the laptop we wanted. It might be different if we started today. But we want to continue to influence the commercial market, in part by continuing to push the price down.
We’re a nonprofit, but we have to be able to sustain ourselves. There are ways to self-sustain a business by putting a margin into it. That’s what we’re doing in Latin America. About 85 percent of our machines worldwide are in Latin America. We’ve taken a decision to spin out an OLPC Latin America that will be self-sustained by some very minor margins. They will be minor but they will be enough to sustain our model.
Mark Stoler is Director, Environmental, Health and Safety Operations at General Electric Co.
Across our industrial businesses, we now have a wide variety of environmental products. It started much narrower but expanded. We don’t see sustainability as just tied to our energy and water businesses. Our aviation customers are looking for less noise pollution and more efficiency. So are our locomotive customers. Our health care customers are looking for energy efficiency and are paying close attention to lifecycle cost. These are trends we’re seeing across the board. The customers are asking for more efficient and less polluting products. Some of our customers are going that way on their own, some are going to be driven that way. But that is where everyone is going.
We always ask: Where can we spend effort to get the most cost return? We have to tie the environmental aspect to business trends. In 2000, GE was not in the wind business, but we saw the trends and thought we could improve existing technologies. Now we’re a big player. In 2000, we were not in the water business, but we’ve built the largest desalination plant in Africa. We have a huge business around technologies that reduce water use.
Bob Langert is the Vice President of Corporate Social Responsibility, McDonald’s Corp.
We don’t think about sustainability from a competitive advantage viewpoint. We do things that make us a better company with better people, better able to make better decisions based on our values. We don’t think of sustainability as a program or initiative. Sustainability thinking is a mindset. From a governance viewpoint, for sustainability to be part of the decision-making process, we have to have a seat at the table. That gives us a huge leg up. Sustainability is not the sole lens, but it is an important lens to have. Our supply chain represents 80-to-90 percent of our impact on the world, so sustainability has to be a pillar of our supply chain.
We’re not bashful about saying that things need to be economically viable. You can always come up with a flash-in-the-pan sustainability initiative that takes care of things for a year or two, but the initiatives have to be deeply rooted in economics as well to last.
I can’t overestimate the power of working with outside experts. It’s a tremendous model of success and progress: match the right expert with the team, make progress based on science, and don’t be pressured to do it all by tomorrow.
Jimmy Guterman is the former Executive Editor of MIT Sloan Management Review.
We’ve had a diverse group of participants in this roundtable: different types of businesses, different positions, different goals. While following the roundtable over the past week and a half, it was fascinating to see how the perspectives diverged—and how much they had in common, whether they were representing a multibillion-dollar conglomerate or a spunky startup.
Two of the CEOs in the roundtable, Interface’s Ray Anderson and Seventh Generation’s Jeffrey Hollender, both run sustainable companies because, as Anderson says, it’s “the right thing to do,” but they both know that their high-profile commitment to sustainability is a source of competitive advantage. For Anderson, it’s a way to pick up market share in a downturn; for Hollender, it’s the benefits that come with following through on what you say you’re going to do—and being transparent about it. The Boston Consulting Group’s Balu Balogopal puts it even more bluntly: often it’s best not to talk publicly about what your company is doing regarding sustainability until you’re actually doing it.
Those in the trenches recognize that there are many ways to bring this conceptual approach into action. Kathrin Winkler at EMC and William Swope at Intel seek to engage employees for new sustainability ideas, Francois Ajenstat at Microsoft showed how a company can reposition a venerable product based on its sustainability offerings, and Mitch Jackson at FedEx and Bob Langert at McDonald’s talked about the value of working with outside experts.
Some of those outside experts are from nonprofits. Sheila Bowman from the Monterey Bay Aquarium discussed how her institute is working with large companies to make better sustainability choices, and Charles Kane of One Laptop per Child showed how his nonprofit, almost inadvertently, created a whole new market for sustainable PCs.
Mark Stoler from General Electric has one particular insight that it’s worth dwelling on for companies deciding whether to focus on becoming more sustainable. GE is in many, many businesses, but it’s not only the energy businesses that have to pay attention to sustainability. “That is where everyone is going.” Which means we know what will happen to those that don’t.