Green to Gold
How Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage
by Daniel Esty and Andrew Winston
From the Publishers Weekly review:
"Two experts from Yale tackle the business wake-up-call du jour-environmental responsibility-from every angle in this thorough, earnest guidebook: pragmatically, passionately, financially and historically. Though "no company the authors know of is on a truly long-term sustainable course," Esty and Winston label the forward-thinking, green-friendly (or at least green-acquainted) companies WaveMakers and set out to assess honestly their path toward environmental responsibility, and its impact on a company's bottom line, customers, suppliers and reputation. Following the evolution of business attitudes toward environmental concerns, Esty and Winston offer a series of fascinating plays by corporations such as Wal-Mart, GE and Chiquita (Banana), the bad guys who made good, and the good guys-watchdogs and industry associations, mostly-working behind the scenes. A vast number of topics huddle beneath the umbrella of threats to the earth, and many get a thorough analysis here: from global warming to electronic waste "take-back" legislation to subsidizing sustainable seafood. For the responsible business leader, this volume provides plenty of (organic) food for thought. "
Soundview Summary - Soundview Executive Book Summaries
The business world and the natural world are inextricably linked. Our economy and society depend on natural resources. Every product comes from something mined or grown. The environment provides critical support to our economic system - not financial capital, but natural capital. And the evidence is growing that we're systematically undermining our asset base and weakening some of our vital support systems.
Why are the world's biggest, toughest, most profit-seeking companies like General Electric, Wal-Mart and others talking about the environment now? Because they have to. The forces coming to bear on companies are real and growing. Almost without exception, industry groups are facing an unavoidable new array of environmentally driven issues. Like any revolution, this new Green Wave presents an unprecedented challenge to business as usual.
As the business world wakes up to the fact that many natural resources are finite, a second reality is emerging in parallel: Limits can create opportunities. Companies that manage nature's bounty and boundaries best will minimize vulnerabilities and move ahead of their competitors.
Top 10 Environmental Issues
Here are the top 10 environmental issues facing humanity:
- Climate Change. This catch-all includes rising sea levels, changes in rainfall patterns, more severe droughts and floods, harsher hurricanes and other windstorms, and new pathways for disease.
- Energy. For big energy users, resource and energy productivity may become a major point of strategic advantage.
- Water. Companies around the world now face real limits on access to water. A rising population and growing economies are putting substantial stress on resources. Pollution is increasingly a concern.
- Biodiversity and Land Use. Biodiversity preserves our food chain and the ecosystems on which all life depends. A key factor in the decline of biodiversity is habitat loss. Many companies face pressure about their contribution to sprawl.
- Chemicals, Toxics, and Heavy Metals. Part of what makes air pollution - and all forms of pollution - more dangerous is the presence of toxic elements. The legal liability surrounding toxics can turn out to be virtually unlimited.
- Air Pollution. Significant air-quality controls on factories, cars and other emissions sources have radically reduced air pollution levels over the past 30 years in the United States, Japan and Europe. But the air is still not clean in many places.
- Waste Management. The EPA estimates that the 1,200 Superfund sites across the country will require about $200 billion to clean up over the next 30 years. Under the liability provisions of the Superfund law, anyone found responsible for the waste at a site can be held liable for the full cost of cleanup, even if the toxics were disposed of legally.
- Ozone Layer Depletion. With a thinned ozone layer, the world becomes a more dangerous place, with reduced agricultural productivity, higher risk of skin cancer and other health problems.
- Oceans and Fisheries. More than 75 percent of the world's fisheries are over-exploited and beyond sustainability. For those whose livelihoods depend on fishing, recreation and tourism, the effect of declining fisheries may be severe.
- Deforestation. Every company that uses wood, paper or even cardboard packaging has some stake in, and responsibility for, the state of our forests.
Building the Upside
Environmental strategy has been on a long march for the past 40 years, from a tactical focus on compliance, to an additional - but still tactical - emphasis on costs and efficiency, to a more strategic view centered on growth opportunities. More and more companies now see the top-line potential from artfully managing the pressures of the Green Wave.
The Eco-Advantage Mindset
Those who ride the Green Wave - WaveRiders - build a foundation for Eco-Advantage by reframing how everyone in the company looks at environmental issues. For these companies, environmental thinking is not always the final word on strategy, but it is always a consideration.
WaveRiders use an environmental lens to change the way they think and sharpen their business strategies. Environmental thinking becomes intrinsic to how they do business. Deeply embedded, the Eco-Advantage Mindset arises naturally at every opportunity.
The Eco-Advantage Mindset is a powerful motivator and the core of the environmental lens that helps companies step up to challenges and find opportunities for seizing advantage. But it's just the beginning. Companies need tools to get going. Getting the lay of the land requires thinking and analysis that might not come naturally. Eco-Tracking helps to answer fundamental but sometimes unfamiliar questions:
- What are the company's big environmental impacts?
- When and where do those impacts arise?
- How do others view the company's environmental performance?
Pollution Prevention Hierarchy
For most companies, the state of the art in environmental thinking can be summed up with the slogan, Reduce, Reuse, Recycle. Most companies are still working on integrating these three Rs into the production process.
The pollution-prevention hierarchy has two further levels. Before reducing, companies should explore ways to redesign what they do and how they do it. And even before that, they should try to reimagine their products or processes. Just as companies have learned it's generally cheaper to reduce than to reuse, recycle or throw out, now they are discovering that it is often more profitable to redesign and reimagine.
Eco-Advantage has a twin logic. On one hand, the strategic gains are based on hard-edged analysis. The business case for environmental stewardship grows stronger every day.
In parallel, there's a strong case for corporate environmental care. WaveRiders have made money by refining their business strategies to incorporate environmental factors. But as much as they are driven by profits, they are also aware that their stewardship helps more than the bottom line. When short-term gains don't justify green initiatives, they are willing to look for long-term value for themselves and their workers, for their communities, and for the planet. The gold they've discovered by going green is not only about money. Copyright © 2007 Soundview Executive Book Summaries
Daniel C. Esty is Hillhouse Professor of Environmental Law and Policy at Yale University with appointments in the Environmental and Law Schools. He is also a former top official with the U.S. Environmental Protection Agency and has advised companies across the world on corporate environmental strategy. He lives in New Haven, CT. Andrew S. Winston is director of the Corporate Environmental Strategy Project at Yale’s Environment School. He has advised companies on corporate strategy while at Boston Consulting Group and has held management positions in strategy and marketing at such leading media companies as Time Warner and Viacom. He lives in New York City.