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by Kathryn Jones, Oct 21, 2007
Venture Magazine
In 2001, BP CEO John Browne made a resolution to reduce his company’s carbon dioxide emissions. BP spent three years and $20 million looking for ways to reduce pollution. Not only did employees think of new ways to operate without damaging the environment, BP’s overall efficiency increased and the company saved $650 million in the first few years. By 2006, savings reached $1.5 billion.
In their book, Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value and Build Competitive Advantage (Yale University Press), Daniel C. Esty and Andrew S. Winston cite the trials and tribulations of BP and other big-name corporations to explain the advantages of having a eco-friendly outlook on business policies and practices. The authors believe that all companies, no matter their size or industry, can benefit from these tips as the “green wave” transitions from corporate buzzword to the everyday norm.
In an exclusive interview with Venture, Winston discusses environmental issues that affect all industries and how it benefits a company to track its environmental impacts while boosting profits and increasing brand value.
Venture: What provoked you to write this book?
Andrew S. Winston: Fundamentally, it was the desire to understand what’s worked with companies trying to go green and what hasn’t. There was a lot of discussion about companies going green, but most of it was focused on win-win. We thought that wasn’t totally credible, and it was time to reach out to the typical business audience, describe the benefits of going green in very real terms and bring a business savvy to the discussion.
Companies coming to the table and thinking about greening their business would not have to start at square one. They could learn from a few dozen companies who have been doing this for years. We thought we could take the lessons learned and help people avoid the hurdles.
Venture: When and why do you think companies began taking more of an interest in sustainability?
AW: In the last year, I think we had a turning point in the U.S. business community. [The green wave] has been moving along quietly for a few years, but in the last 10 months, it picked up. Every major national magazine has had green coverage. [The movie] “An Inconvenient Truth” and the work of Al Gore have been a part of it. I’ve heard from many executives – even if they don’t agree with him – that Gore has reached a lot of people and forced the discussion.
There have been previous waves of focus on green issues in the past, but the main difference now is who is involved. Companies like Wal-Mart and GE have made serious initiatives, and these are the biggest companies in the world. Their actions influence entire markets and economies.
Venture: Is it critical for small businesses to embrace sustainability, as well?
AW: I think the difference is minimal between small and big businesses. There’s really not much choice about going green, no matter what your size. This is the way the business world is moving. Small companies serve big customers, and they can be out-competed. It also creates value. By taking on environmental thinking, you can reduce costs, drive new revenues and enhance and differentiate your brand. Why not do it? It’s just a better way of doing business for all companies, small and large.
Venture: Why is it becoming increasingly important for companies that want to be successful in the future to evaluate their environmental impacts?
AW: There truly needs to be a monumental shift in how the business world operates. How we make things, live, work, shop, eat – everything we do should take into account the environmental impacts and the human impacts. We need to build a market economy that uses a lot less resources and a lot less energy for the same or higher quality of life.
Companies are realizing that this is not in conflict with their current business strategies and that they can achieve both. The trick is not being left behind and being noncompetitive. I tell clients that the real threat to their business is becoming irrelevant. Competitors, old and new, can take your place (if you don’t) redesign the way your product is delivered in a way that dramatically reduces environmental impact.
Venture: What environmental issues, in particular, should companies watch closely and what are some potential effects they could have on the market?
AW: The biggest issue is climate change by a long shot; it affects all of the others. In Green to Gold, we have a list of top-10 environmental issues. The big five are climate change, water (both quality and quantity) energy, biodiversity (the loss of species and habitat) and toxins. These are big issues and they affect companies in the market directly because they’re about resource constraints. Climate is a resource constraint. There is only so much clean air and stable climate. We’re dramatically affecting the world’s capacity to support us.
We can see what it’s doing in China. There has been coverage in The New York Times about this and how China tried to estimate its GDP, taking into account environmental damage. They didn’t want to reveal the results totally, because their “green” GDP growth has been lower than what they had been reporting. Environmental issues affect all markets, both the ones that are valued and the ones that are intangible and tough to value.
Venture: What are some ways in which all companies could lessen their ecological footprints?
AW: There is no one-size-fits-all. It depends, and it often comes back to what gets measured gets managed. It starts with knowing what your footprint is, understanding what your big impacts are and finding the most leverage. Clearly, everybody can use less energy. Companies are finding ways to cut 10, 20, even 80 percent of their energy in some processes, and it’s pretty staggering how much room we have to run in this realm.
I have a favorite example from Wal-Mart, where it has refrigerated aisles. When it put doors on its refrigeration cases, it cut its energy usage by 70 percent in that aisle immediately. It also put timers on the lights so that the cases light up when someone is nearby. [Wal-Mart] is cutting energy in very simple ways, and it’s making sure it doesn’t affect its sales. So, energy
is probably the easier place to start.
Venture: What are some eco-tracking tools or methods you might recommend to help companies map their effects on the environment or identify their own environmental risks?
AW: Knowing where you stand is the core of eco-tracking. Developing metrics and an understanding of how you affect the environment means you need to start tracking things you haven’t tracked before. Use a lifecycle assessment to understand how your products and services affect the environment from suppliers to customers.
An AUDIO (aspects, upstream, downstream, issues, opportunities) analysis from Green to Gold is a way to look up and down the value chain. It asks you to look at the 10-biggest environmental issues from a top-line level and see how they affect your business. Ask yourself, “How does water, energy or climate change affect my business?” Even if you believe your impact and your own factors and operations aren’t that big, you should look up and down the value chain to see how these issues affect your suppliers and customers. What other issues come up, and what are some opportunities that you can leverage to create value and a competitive advantage?
Venture: When a company wants to focus more on sustainable practices, why is it important for it to evaluate all the stakeholders involved?
AW: “Stakeholders” is a broad term covering a lot of different people. They are communities, NGOs, the media and your employees, among others. So, it’s smart to get to all entities surrounding your company and understand their concerns and learn from them.
Venture: Why is it important to understand your supply chain?
AW: The big-brand companies are going to take the heat for whatever happens anywhere. We are seeing this lately with Mattel and other corporations that are facing real questions about what’s in their products, such as lead in toys.
Companies need to go back and audit their suppliers, and sometimes the suppliers to those manufacturers, to understand what their environmental impacts are and how much everyone in the chain is complying with regulations and their own standards. IKEA goes as far back in their supply chain as the forests in Russia that supply wood to IKEA’s furniture makers. This isn’t cheap, but there are real advantages. If you know your supply chain better, you know your business better.
Venture: Everyone knows the old slogan “reduce, reuse, recycle,” but in the book you introduced two new priorities: redesign and re-imagine. Can you elaborate on these ideas?
AW: It’s still important for a company to ask, “How can we use less of something or how we can reuse it?” But you can step back even further and really impact your resource use by asking, “How can we redesign this product or process in the first place?” Xerox just came out with a new green paper, which is something between regular paper and newsprint, and – long story short – it uses half as many trees to make that paper as regular copy paper.
Re-imagining is taking it to another level and asking yourself, “What does our product really do? What is the service it offers? How can we provide the same service with far less resource usage?” The example that I’ve been using lately is video conferencing. There are new, very expensive products from Cisco and HP and other start-ups that have these very high-end videoconferences. They’re expensive, but not too expensive when you think of how much money is saved in air travel. Airlines probably didn’t think of tech companies as their competitors, but now they are. These tech giants re-imagined how a meeting could happen.
Venture: Can you give me an example of a firm that managed to turn its environmental efforts into substantial profits?
AW: The classic example in the revenue category is the Toyota Prius. It’s a great case study in many ways. It’s innovative, fun to drive and it won a lot of awards for its design. It also solves an environmental problem by reducing gas use. But it’s more than that. It’s driven revenues because it has given Toyota this halo around its brand. They’re seen as a leader in innovation, and that’s allowed them to sell more of every kind of car.
Venture: How can CEOs inspire an eco-advantage culture within their firms?
AW: We say in the book that it’s hard to do this right without CEO commitment. CEOs need to make a statement, pretty bold and regularly. Sometimes this comes down to nitty-gritty tools like bonuses. Executives having part of their bonuses depend on environmental metrics can be important, as is recognition for people that are coming up with good ideas. Also, competition can work wonders. If a company tells all of its facility managers how they’re doing relative to everyone else in the company, you’ll see how fast the people running those factories and buildings will want to compete and win. Green talks in both ways.
When Wal-Mart put doors on its refrigeration cases, it immediately cut its energy usage by 70 percent in that aisle.
Authors Winston and Esty have consulted on eco-friendly business practices with firms ranging from start-ups to Fortune 500 companies. In addition, they have either written for or appeared in Time, Newsweek, Businessweek, Forbes, The New York Times, The Washington Post, ABC News, National Public Radio and CNBC. Published in 2006, Green to Gold, has quickly become a bestseller and “must have” for any executive interested in riding the green wave into the next generation of environmental sustainability.
Winston is founder of Winston Eco-Strategies and a fellow of the Center for Environment and Business at Yale University. He is the former director of the Corporate Environmental Strategy Project at Yale’s School of Forestry and Environmental Studies. He has also served as the marketing and development director for Time magazine and the director of business development for MTV and VH1.
Esty is the director of the Yale Center for Environmental Law and Policy, as well as the Center for Business and Environment at Yale University. As a senior official at the U.S. Environmental Protection Agency, he helped craft government policies on waste, food safety and air and water pollution regulations. He is also chairman of Esty Environmental Partners and has helped set up environmental advisory boards for Coca-Cola and Unilever.
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