GUEST AUTHOR BLOG: Why Every Business Needs an Eco-Strategy by Dan Esty and P.J. Simmons co-authors of: "GREEN TO GOLD BUSINESS PLAYBOOK: How to Implement Sustainability Practices for Bottom-Line Results in Every Business Function."
The evidence is in, and the findings are clear: every business needs an eco-strategy. The “Green to Gold” discussion has changed from whether we need to adopt a green strategy to how.
There’s a fascinating drama playing out across this country and worldwide regarding sustainability and environmental protection. In fact, sustainability has become a business megatrend that will affect the foundations of competition in every industry and in every marketplace. This is causing every smart company to reassess its policies regarding the environment and sustainability.
Take General Electric , for example. Under Jack Welch, the company had a ‘take no prisoners’ attitude toward the Environmental Protection Agency. During his tenure, the company was criticized and dubbed an environmental bad actor over its battles to clean up dioxin and other pollutants its factories had dumped into the Hudson and Housatonic Rivers. Ultimately, the legal battles over the cleanup cost the company tens of millions of dollars. (*Editor's Note, CNBC is co-owned by GE and Comcast )
Then, Jeff Immelt took over, and things changed dramatically. GE actually became a world leader on corporate environmental matters. Executives there no longer feel burdened by the environmental regulations. Rather, they see environmental issues as opportunities for competitive advantage and marketplace success.
This response is becoming more common, creating a groundswell.
More and more companies are finding that their customers and constituencies judge the overall quality of their brand based on their response and policies regarding the environment.
So, how can a company improve its eco-policies? In reality, all companies – both large and small – are somewhere in the four-stage process of doing just that. Those four stages are:
- Eco-resistance: Marked by hostility toward any regulations and the science behind topics such as climate change
- Eco-compliance: Acceptance of regulations and a commitment to meet legal requirements
- Eco-efficiency: Focused on lowering costs by cutting energy consumption and eliminating scrap and waste
- Eco-advantage: Driven by efforts to innovate and to deliver processes, products, and services, which solve customer environmental problems
It’s important to know where your company is along this spectrum, because it turns out that there are increased benefits at each station. Companies who arrive at Eco-advantage are also discovering that doing so is affecting their brand and bottom line in exponentially positive ways.
Eco-advantage companies look to:
- Identify and reduce environmental and regulatory risks, not only within their own operations but across their entire value chains. This reduces liabilities, avoids unnecessary costs, and increases speed to market.
- Cut operational costs and improve efficiency by reducing environmental expenses, including scrap, waste, and disposal fees.
- Grow their revenues by designing and marketing environmentally superior products that meet their customers’ needs for energy efficiency, improved resource productivity, and reduced pollution.
- Create intangible value for their businesses by enhancing their brands, connecting with customers on an emotional level through environmental stewardship, becoming more productive, and retaining the best employees.
How do you get there?
There’s no one size-fits-all approach, but there is an agenda that we would recommend that should be helpful to any company in any industry. First, think about the key environmental issues and impacts your business faces. That would include waste, packaging, recycling, air pollution, water pollution and availability, greenhouse gas emissions, energy use, chemicals, heavy metals, toxins, resource impacts, and land use.
Some companies take a triple bottom line approach and look beyond environmental issues at a broader set of social concerns, including worker wages and benefits, workplace diversity, poverty and community development, labor rights, child labor, human rights, workplace safety, ethics, and health and nutrition.
Another approach focuses on strategy risks and opportunities presented by environmental or social concerns. Would improving these issues reduce business risks? Cut costs? Drive revenue growth or spur innovation? Build brand loyalty or corporate reputation?
"Sustainability has become a business megatrend that will affect the foundations of competition in every industry and in every marketplace. This is causing every smart company to reassess its policies regarding the environment and sustainability.""
A final approach is one that centers on how the issues and impacts, as well as the strategy risks and opportunities, play out across the various business functions of the enterprise. Applying the lens of sustainability to evaluate day-to-day activities might be a way to reduce waste and inefficiency and increase profitability across all the business functions.
We would encourage you to consider all of these approaches as you develop your own Eco-advantage game plan.
It will require vision and commitment, systematic analysis, a workable strategy, and real dedication to execution. There are no guarantees, of course, but companies large and small – from Coca-Cola and Toyota to Clean Air Lawn Care and New Belgium Brewing Company– are finding the benefits of moving to Eco-advantage, even in these difficult economic times.
About the authors: Daniel C. Esty is the Hillhouse Professor at Yale University and Director of the Yale Center for Environmental Law & Policy and the Center for Business and the Environment at Yale. He served as a senior official at the U.S. Environmental Protection Agency and more recently as energy and environmental advisor to the Obama presidential campaign and transition team. As Chairman of Esty Environmental Partners , he’s advised CEOs across the world and designed strategies for 100+ companies in dozens of industries.
P.J. Simmons (New York, NY) is Chairman of the Corporate Eco Forum a preeminent network of senior Global 500 executives focused on sharing best and “next” practices in corporate sustainability and driving eco-innovation. Click here to learn more.