Exxon, the Rockefellers, and the Future of Big Oil
Last week, the Rockefeller family made an historic challenge to Exxon Mobil Corp., the company founded by John D. Rockefeller in 1870 (as Standard Oil), and in which dozens of family members still hold stock. The challenge came in the form of a shareholder resolution to require an independent chairman of Exxon's board of directors, so that the company can better maximize long-term shareholder value in a rapidly changing energy environment.
Making the board chair independent of the CEO may seem a technical governance matter, but it has great significance. The family argued that having a board that was independent from the day-to-day operations of company management would enable Exxon to better assess the risks and opportunities that are altering the energy and environmental landscape — and that Exxon might alter its business strategy based on a different set of assumptions than those under which the company has been operating.
Research conducted by my colleague Ron Pernick and me at Clean Edge in 2006 looked into Exxon and its set of assumptions about our energy future. Exxon has long adopted a stance that renewable energy will be a negligible part of the energy mix for the foreseeable future, and that operational and market conditions will remain static and relatively unchanging. At the time, we wondered, given the realities of our increasingly volatile global energy marketplace — growing demand, declining production, global security issues, climate change, rising food costs, and other business, social, and environmental challenges — whether Exxon's narrow view would leave the company at risk from competitors and less able to seize new opportunities and adapt to shifting market conditions.
We found some of Exxon's assumption flying in the face of the facts — for example, that only 2% of the world's energy will come from renewable sources by 2030, despite estimates by the Renewable Energy Policy Network that already attribute 4% of the world's energy to new renewable sources. The company consistently underestimates the annual growth of solar, wind, geothermal, biofuels, and other alternative energy resources. Moreover, company statements — as underscored by its actions — is that they are waiting for a major breakthrough in renewable energy technology, at which point it will deploy its significant resources in bringing that technology to market.
There is good reason for the Rockefellers and other shareholder to be concerned about this strategy. By placing nearly all of its emphasis and focus on oil and gas, Exxon risks losing out on the new markets for renewables and places the company strategy within an outdated model of energy markets. As the renewable energy market has developed, it has become clear that our energy future won't be based on a single breakthrough, but on dozens, even hundreds, of smaller ones — new technologies, products and services, and business models. Everyone from GE to Goldman Sachs to Google seems to get this, and are investing accordingly.
So, diversifying investments more aggressively into clean-energy research and development would position Exxon to be better able to adapt to changes, capitalize on anticipated carbon trading schemes and expected developments in the regulatory environment, hedge its bets, and build new business opportunities as alternatives to petroleum-based technologies gain market traction.
Instead, the company seems to be biding its time, waiting for renewable energy markets to develop rather than jumping in to help build them. As a result, rather than taking a proactive role in advancing these technologies, Exxon runs the risk of either not having sufficient access to a viable partner when it finally decides to enter the renewables market in a substantive way, or of arriving too late and losing first-mover advantage, if not significant market share. Most of the other majors — BP, Chevron, Shell — have at least some robust renewable energy programs in place — wind, solar, geothermal, fuel cells, tidal power, and more — albeit relatively small ones in terms of revenue. But at least they're gaining experience and partners in the renewables space.
There are billions of dollars being invested by some pretty smart people in the notion that there's a Moore's Law of energy — that is, that innovation can make clean energy both ubiquitous are cheap. They're betting that energy can follow the path of microprocessors, hard-disk storage, and wireless telecommunications, where costs have plummeted as technology has steadily improved — and carbon can, in effect, be taken out of the energy equation. If even some of these bets pay off, Exxon's assumption — that oil and natural gas will remain the dominant energy sources for decades to come — could put them at a competitive disadvantage. Hence, the interest of long-term, multi-generational shareholders like the Rockefeller family.
It doesn't take much to roil the markets, as Exxon found out last week. At the same time that it revealed gusher-level profits, it's stock took a dive. The reason: Exxon's oil production was down 10 percent, continuing a yearlong decline. It's unclear whether the company will continue to have difficulty finding sufficient new reserves to replenish the billions of barrels it is pumping out of the planet, but if the trend continues, Exxon could find itself in trouble.
It's not too late. By changing strategies, Exxon stands to capture a better foothold in the evolving energy market and a significant percentage of revenues that would otherwise be lost.
Experts believe that the most viable technologies for the near term — such as cellulosic ethanol, next-generation solar technology, and plug-in hybrid technology, along with copious amounts of energy efficiency — represent the future of energy. With the likelihood of such events as a carbon tax or carbon caps within the next decade, the conditions for market acceptance of lower-carbon solutions become more attractive. The concept of negawatt programs is gaining traction, with power companies investing in conservation (average cost of $350/kilowatt) over coal ($1,000/kilowatt). The emergence of small, lightweight, long-running lithium-ion batteries has helped create a market for notebook computers, cell phones, and other portable devices. Efforts to scale that technology for use in automobiles could do for that industry what improved batteries did for computer and phone companies, building a market for hybrid, plug-in, or electric vehicles with great efficiency, acceleration, and range — at the same price or cheaper than today's gas-powered vehicles.
It's not just technologies that are changing. So are markets. For example, until relatively recently, the distribution of gasoline has been controlled by entities with an interest in keeping alternatives out of the infrastructure — the oil companies. But Wal-Mart and other independent retailers with large fuel distribution networks are largely impartial to the type of fuel they carry, and their market reach to consumers can accelerate the growth of alternative products and infrastructure. Large fuel purchasers like the Defense Department are actively creating conduits for the market acceptance of oil and gas alternatives by encouraging economies of scale and increased R&D. There are other disruptive technologies on the horizon that could gain market acceptance, further dampening demand for oil and gas. By waiting for a single "breakthrough" technology, Exxon is overlooking that this sector is engaged in an iterative process that is building a new approach to energy applications; waiting for the perfect solution is a potentially dangerous approach, from a business strategy perspective.
The modern history of innovation suggests that being big is no assurance of survival. Consider that six of the thirty multinationals included in the Dow Jones Industrial Average 20 years ago are gone today (Allied-Signal, American Can, Bethlehem Steel, Texaco, Union Carbide, and Woolworth), and a seventh, AT&T, exists in name only, the original entity having been scattered into multiple companies. Several others — Eastman Kodak, IBM, Sears, and Westinghouse — look radically different today than then. In many industries, the dominant players not that long ago are gone. Burroughs, Data General, Digital Equipment, NCR, Sperry, Univac, Wang — all leading computer manufacturers of the 1970s and 1980s — are cases in point.
The Rockefellers' efforts are aimed at ensuring that Exxon doesn't follow this path, and that it will overcome its stubborn, decidedly non-green, outlook toward one that recognizes the realities of a world in which carbon and climate become significant business considerations.
Will the strategy work? The odds are long, but we'll know more after the company's annual meeting on May 28. If history is any indicator, Exxon is likely to downplay dissent in favor of its own hellbent course.
May 5, 2008 in Business Practices, Clean Tech, Money Matters | Permalink | Save This Page | Comments (6)
A Deeper Dive into the Business of Water
Water hasn't yet risen to the level of energy and climate as a pressing issue for most companies, but the conversation seems to be flowing lately. And that conversation includes two concepts likely to enter the green lexicon.
One of those, "virtual water," received currency last month when its foremost proponent, Professor John Anthony Allan from King's College London and the School of Oriental and African Studies, was given the 2008 Stockholm Water Prize. Allen coined the term back in 1993 to refer to the amount of water embedded in the production and trade of food and consumer products. A cup of coffee, for instance has 140 liters (about 37 gallons) of virtual water, when you consider the amount of water used to grow, produce, package, and ship the beans. Similarly, a hamburger contains 2,400 liters (634 gallons) of virtual water.
The concept of virtual water (also known as embedded or embodied water) is of more than academic interest. As water concerns flood a greater number of regions, the embedded water of common products provides a useful understanding of how water resources are impacted by global trade. For example, it explains how and why nations such as the U.S., Argentina, and Brazil "export" billions of gallons of water each year — in the form, say, of water-intensive grain or meat — while others like Japan, Egypt, and Italy "import" billions.
The concept also could be useful in national agriculture policy, much as "embedded energy" has aided policy makers' understanding that growing and processing corn to produce biofuels can require significantly more energy than the process yields. (Not that this knowledge has dissuaded policymakers from supporting energy-intensive biofuels, of course.) And it may become a factor in the price of many raw materials, should carbon taxes or trading systems illuminate the energy and carbon intensity of things like aluminum, glass, and plastic.
There are other implications. Virtual water calculations will, no doubt, lead companies, individuals, and others to calculate their "water footprint," the full measure of the water embedded in the products they buy and the activities in which they engage. And it may accelerate interest in what Peter Gleick, co-founder and president of the Pacific Institute, calls the "soft path," a much more integrated, sophisticated approach to water in which different types of water — potable water, gray water, brown water, etc. — are used for their highest and best use, rather than using potable water — the highest quality, for flushing toilets, watering lawns, etc.
Last year, in an interview, Gleick expressed to me how little companies understand the water embedded in their systems.
There are very poorly understood or appreciated connections between business and water. Every business uses water in one form or another. Some use a lot of water, some not so much, but for many businesses, water is a surprisingly large component of production, either directly or indirectly, in the supply chain. So, for example, the beverage industry may use three or four gallons of water to produce a gallon of soft drink or beer or milk, but often a thousand times as much water is used in the upstream part of the process, perhaps to grow the sugar that goes into a soft drink. Similarly, in the textile industry, it takes water to make clothing but it takes a lot of water to grow fiber.
Businesses are often unpleasantly surprised where a local community objects to their use of water or there's a drought that affects their supply chain or there's a water contamination problem that results in their license to operate being removed. We're seeing more and more examples where businesses that don't pay attention to the water required to run their business run into unpleasant surprises.
Gleick went on: "I actually think the risk to companies is larger in some ways for water than it is for energy. There are substitutes for energy. You can replace oil or electricity with biofuels or with renewables. Water has no substitutes."
Coca-Cola recognizes that. And over the years, it has bumped up against activists, communities, and others for its water use — which is, of course, the fundamental ingredient of all of its beverages. In recent years, a series of developments pressed the need for a more comprehensive global water strategy. In the late 1990s, it began acquiring water brands (its principal U.S. offering is Dasani). In 2002, the company faced protests in India about the company's drawing down of groundwater resources. A year later, it began reporting water quality and quantity as a material risk to its business in its U.S. Securities and Exchange Commission Form 10-K for investors.
In response to this Coca-Cola "developed and continues to evolve one of the more sophisticated water stewardship programs in the private sector," according to a new report from Business for Social Responsibility (Download — PDF). "As of March 2008, no other organization in the world has publicly pledged to achieve "water neutrality" across global operations that span more than 100 basins and sub-basins around the world."
Water neutrality. It's a compelling idea in the age of carbon-neutral and zero-waste commitments. But water is a bit different from carbon and waste: unlike the other two, there's a finite amount of water. And as Gleick points out, there's no known substitute for it. Moreover, as BSR points out:
True sustainability as it relates to water will involve more than "neutralizing" the volume of water that [Coca-Cola] uses. This is because fluctuations in the amount and quality of water available to a given community or ecosystem play an important role in sustaining the diversity and proper functioning of river ecosystems and watersheds.
Coke announced its water-neutral goal last summer. The company committed to "set specific water efficiency targets for global operations by 2008 to be the most efficient user of water among peer companies" and that by 2010 it would "return all the water that we use for manufacturing processes to the environment at a level that supports aquatic life and agriculture."
Coke will need to work hard to keep its goal afloat. The BSR report notes that last year, six organizations — Twente University, WWF, Coca-Cola, World Business Council for Sustainable Development, Water Neutral/Emvelo Group, and UNESCO-IHE — came together to investigate the benefits of water neutrality as a meaningful milestone. The groups developed three criteria for legitimate use of the term:
- Defining, measuring, and reporting one's "water footprint";
- Taking all action that is "reasonably possible" to reduce the existing operational water footprint;
- Reconciling the residual water footprint (amount remaining after a company does as much as possible to reduce footprint) by making a "reasonable investment" in establishing or supporting projects that focus on the sustainable and equitable use of water.
There are more than a few squishy issues here — the definitions of "reasonable investment" and "reasonably possible," for starters. But we've got to start somewhere. Over time, I hope, the bar will rise.
Can it work? Will "water neutral" become the Next Big Thing in the field of corporate resource efficiency? Can it actually make a difference? It's a nascent idea, so it remains to be seen. But the high likelihood of continued water crises suggests that more and more companies will be learning about "virtual water" and "water neutrality."
For now I'm guessing that only a handful of companies — those whose products and reputation are most linked to the precious resource — will be willing to take the plunge.
April 3, 2008 in Business Practices, State of the Art, Trendwatching | Permalink | Save This Page | Comments (10)
The State of Green Business, 2008
My colleagues and I at GreenBiz.com have just published State of Green Business 2008, an accounting for how, and how much, the greening of business is moving the needle on environmental issues.
The simple answer: not much — and certainly not enough.
I'd been thinking about this report for a good five years, but it was only last year that my team and I got to it. Probably a good thing: The state of data on business and the environment likely wouldn't have been sufficient in previous years to accomplish this.
The free, 64-page report includes the top green business stories of the year just passed — a lengthy piece I'd previously debuted in this blog (see here, for example). But the heart of the report is the GreenBiz Index, a set of 20 indicators of progress on the greening of business.
It began with a simple question: With all that's been going on in this arena — all of the things I write about here, and the 1,000 or so news stories we reported last year on GreenBiz.com, ClimateBiz.com, GreenerBuildings.com, and GreenerComputing.com — what was the actual impact? Was all this activity actually moving the needle on climate change? Was it reducing our use of energy, water, and materials? Was it making any difference?
We set out to find out.
It was extraordinarily difficult, one of the more challenging exercises I've been through. The quantity and quality of available data were wanting, to say the least. Some of the things we set out to measure weren't possible — for example, it turns out there's no current data on the use of water by business and industry in the United States, the focus of our inquiry. In other cases, we had to cobble together our own indices, such as piecing together the quantity of materials - cardboard, aluminum, steel, and glass - used for packaging.
But the effort was worth it. We believe that the GreenBiz Index represents the best accounting of business progress on the environment.
Of course, I'll look forward to your comments. We'll be updating this annually.
The report is free, downloadable here.
January 30, 2008 in Business Practices, State of the Art, Trendwatching | Permalink | Save This Page | Comments (6)
Clorox Aims to Show that 'Green Works'
Can a major consumer packaged goods company with a name indelibly associated with household bleach become a leading light in the green marketplace? That's the hope of Clorox, the Oakland-based company, which this week is launching its first new brand in twenty years: Green Works, a line of cleaning products that are, in the company's words, "at least 99 percent natural" — made from coconuts and lemon oil, formulated to be biodegradable and non-allergenic, packaged in recyclable bottles, and not tested on animals. The initial launch includes five products: an all-purpose cleaner, a glass cleaner, a toilet bowl cleaner, a dilutable cleaner, and a bathroom cleaner.
It's an intriguing moment. Green Works enters the marketplace with a near perfect storm of market conditions: growing mainstream consumer demand for green products that don't require compromise or sacrifice; significant interest from Wal-Mart and other big retailers in pushing greener products to the masses; a product that seems competitive with the leading green brands; and endorsement from Big Green.
That last item comes in the form of an "alliance," just announced, with the Sierra Club, which has endorsed Green Works and whose logo will appear on Green Works labels starting around Earth Day. Sierra Club will receive an unspecified financial payment. Sierra Club doesn't often endorse products, especially ones from big companies. The last one I can recall was Ford's Mercury Mariner Hybrid SUV, back in 2005.
The idea of Clorox as a green leader may strike some as odd. The company is known mostly for its flagship product, Clorox Bleach, which is seen by some as a stain from an environmental perspective, though the company says the product is misunderstood and safe. (Green Works products do not contain bleach.) Household bleach, it explains, is a water-based solution containing six percent sodium hypochlorite, whose chemical symbol, NaOCl, is essentially table salt (sodium chloride, or NaCl) with a molecule of oxygen. That is, bleach comes from, and degrades into, salt. (You wouldn't want to drink it, but you wouldn't want to eat a cup of salt, either.) Moreover, the company points out, bleach's disinfectant properties are essential to public health — endorsed by the World Health Organization and others.
Some environmentalists warn against using bleach, pointing out that it is toxic and corrosive and can create suspected carcinogens in the water supply. Suffice to say, Clorox refutes this. "The bleach cycle — from production to use to environmental fate — is simple and sustainable," it maintains.
So, can The Clorox Company become a green brand leader? I spent some time last summer talking with the company about Green Works, part of a small consulting project. I was asked to help Clorox think through how it was positioning both Green Works and the company itself in advance of the product launch. I met with the Green Works brand and marketing managers, as well as the company's corporate responsibility staff — a relatively new function there.
What I found was that the company — whose brands include Glad, Formula 409, Liquid-Plumr, S.O.S. Pads, Kingsford charcoal, Ever Clean kitty litter, Brita water filters, Hidden Valley salad dressings and, as of about ten weeks ago, Burt's Bees personal care products — had a relatively blank slate from an environmental perspective. It did not have any significant skeletons. It enjoyed a solid compliance record, has joined several voluntary programs to reduce waste and emissions, and has received modest recognition for its performance. Except for concerns about bleach, it has been largely off activists' radar. From an environmental perspective, it was neither a leader nor a laggard.
Under CEO Don Knauss, who joined the company in 2006 from Coca-Cola, Clorox began to recognize that environmental and social sustainability are of growing importance for the company. By the time I showed up in July, Clorox had undertaken efforts to reduce its packaging and had begun to inventory its carbon footprint across its North America operations. (Among other things, the company is working to make the Green Works manufacturing process carbon neutral.)
Green Works seems to have potential to be a breakthrough brand — a line of cleaners competitive, environmentally speaking, with the leading green brands like Seventh Generation and Method, effective enough to wear the Clorox label, priced less than other green cleaners, and enjoying widespread distribution; Wal-Mart, for one, will be featuring the products in its stores. If one of the goals of the green consumer revolution is to get brand leaders to create greener products at affordable prices, this seems a significant step in the right direction.
Green Works' roots go back about three years, when a small group of individuals within the company began investigating the green-cleaning market and conducted market research. Through a market-segmentation exercise, they identified a slice of the consumer market they dubbed "Chemical Avoiding Naturalists," consumers who wanted greener cleaners but felt the incumbent products didn't work well, came from brands they didn't know or trust, were too expensive, and weren't always available where they shopped. These are the folks who want strong, effective cleaners, but worry about their health effects — the ones who say, "Let's open the windows and send the kids outside — we're going to clean now!"
As the team developed and tested products with real consumers, they recognized they had a potential hit. "We were actually in a perfect position as a company," Jessica Buttimer, Green Works' director of marketing, told me last fall. "We have the Clorox brand. We have these distribution channels and great relationship with Wal-Mart. We have the science to make an efficacious product. And we have the scale to charge just a 20 percent premium, not a 100 percent premium." Moreover, Buttimer and her team found that consumers trusted the Clorox brand and the fact that a greener cleaner was coming from a company they'd known for years.
But the kicker was that the product actually did what it was supposed to do. "We did blind testing versus the market leaders," says Buttimer. "We were at parity or better in performance, which as a chemical company, you can imagine, was a huge surprise — that these things, with 99% or more natural ingredients, work as well as Lysol, 409, and Pine-Sol."
Time will tell whether Green Works will be a game-changer — whether it will make green cleaning more affordable and accessible to the masses. But the potential is there. Clorox doesn't launch a new brand unless it sees a $100 million or greater market opportunity.
But there's a potentially bigger story here. Clorox — a 95-year-old, relatively stodgy company — seems to have discovered its green gene. CEO Knauss has identified sustainability as one of three core consumer trends with which he wants to align Clorox products. The combination of Green Works, Burt's Bees, and Brita give it a toehold in that market space, a foundation on which it can build more offerings. Already, additions to the Green Works line are being planned.
All of which has invigorated the company, says Buttimer, a thirtysomething mother of two who has become the corporate face of Green Works. "I can't keep my calendar clear of associate marketing managers, our entry-level positioning and marketing people, asking, 'How do I work on this project?' Or people coming to me and announcing, 'My parents are members of Sierra Club.' Everyone wants to be involved."
Moreover, she adds, "What's really exciting is that we're building knowledge and confidence within the rest of the company that we can do the same things with a lot of our other product lines."
A green Clorox? Anything's possible.
January 13, 2008 in Business Practices, Green Marketing | Permalink | Save This Page | Comments (18)
Gary Hirshberg: Changing the Culture and 'Stirring It Up'
I've long been an admirer of Gary Hirshberg, the idealistic and iconoclastic "CE-Yo" of organic yogurt maker Stonyfield Farm, which he co-founded in 1983. I first met Hirshberg a decade later, in 1993, when researching my book about corporate social responsibility, Beyond the Bottom Line. I recall being impressed at the time by his passion and commitment, but also his humbleness and honesty. "I think whatever your definition is of social responsibility," he told me at the time, "if the message is, 'Look how great we are,' then you're missing the boat." It was a refreshing change from so many companies' arm-waving, self-congratulatory approaches to social responsibility, both then and now.
Hirshberg not only didn't miss the boat, he caught a wave, becoming the market leader in organic yogurt, the third best-seller after Dannon and Yoplait, with steady annual growth. In 2001, Stonyfield hitched a ride with a much bigger vessel, the French food conglomerate Danone, which subsequently took controlling interest in the company but left Hirshberg firmly at the helm. Indeed, in the deal, Danone ended up with about 80% of the company, but Hirshberg ended up with majority control of his board.
All of which further empowered Hirshberg to pursue, and align, his dual missions of commerce and environmental sustainability. His $300 million-a-year company — built with almost no traditional advertising — has been carbon neutral since 1996, the first company to do so, long before it became corporate chic. And it's not just by writing a check to offset its emissions. Over the past decade, the company (via the tireless efforts of Hirshberg's sister, Nancy, Stonyfield's VP of Natural Resources) has reduced its facility energy use and the associated carbon emissions per pound of product by one-third. Stonyfield's products are 100% organic, and it has helped hundreds of family farms convert from conventional farming. The company has worked to minimize waste, going so far as to collect used yogurt cups and lids and recycle them into useful products. And it uses its product labeling for activism, devoting precious real estate on yogurt lids to advance environmental causes.
Hirshberg's company has been an ardent supporter of such causes. Stonyfield's Profits for the Planet program has given 10% of company profits to organizations "that help protect and restore the environment." Hirshberg got Danone to agree to maintain the program for at least 10 years after he leaves the company, whenever that is; he has no plans to do so. And he has funded his own campaigns, lately focusing on climate change. (I sit on the board of Climate Counts, which Hirshberg launched last year to rate companies on their climate commitment and performance. In 2006, I also co-wrote and executive produced a Stonyfield funded Internet movie on climate change.)
I talked with Hirshberg recently on the occasion of his just-published book, Stirring It Up: How to Make Money and Save the World. It was a wide-ranging conversation, focusing not just on his company but the larger worlds of green marketing and green business. (An excerpt from that interview can be heard on GreenBiz Radio.)
I don't usually care for books like this — the success stories of socially-minded entrepreneurs. There's been a steady stream of them over the years, and they tend to border on vanity publishing. So, I was pleased that Hirshberg's offering doesn't follow in this mold. It's an easy, enjoyable read, inspiring and informative, integrating his personal journey with insights and takeaways for others.
It's clear that Hirshberg's zeal goes well beyond yogurt, or organics, or climate change. He sees his mission in part to infect other businesses — both entrepreneurs and conglomerates — to help them understand the potential for producing products, and profits, while following the basic tenets of environmental sustainability and social responsibility.
Perhaps ironically, Hirshberg's entrepreneurial journey was inspired by the food giant Kraft: After touring a Kraft-sponsored pavilion on the future of food at Disney World's Epcot Center in Florida in 1982, he decided he wanted to build a company that was everything Kraft was not. He was struck by the fact that 25,000 people came through that exhibit every day — about the same number that visited the New Alchemy Institute, the nonprofit he ran at the time, every year. As he told me: "I said to my mom, who was the senior buyer down at the Epcot Center, 'I need to become Kraft, if I want to move my values and my ecologic proposition into the mainstream. I've got to have that kind of reach.' I wanted to become as efficient as they were in reaching the consumer."
Funny thing is, he pretty much did it. Fourteen years after that epiphany, Stonyfield passed Kraft in sales of yogurt, and has really never looked back. Its yogurt business is now five times Kraft's.
But there's an even more delicious irony. Kraft has recently begun making organic products: Macaroni & Cheese, Cheese Singles, Oreos, and more. Says Hirshberg: "The reality is that while I set out to be like Kraft, I'm now very pleased to tell you they've set up to be like us."
Talk about just desserts.
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(Postscript: I'll be conducting a one-on-one interview with Hirshberg on February 19, at the Commonwealth Club in San Francisco. Info and tickets here.
January 6, 2008 in Business Practices | Permalink | Save This Page | Comments (4)
Leadership Mindset and Sustainability Success
What is the stuff from which sustainability leaders are made?
It's a question that applies to individuals and organizations alike, and can be vexing for both. When one scans the landscape of companies seen to be sustainability leaders, questions quickly emerge: What do they have in common? How did they get there? What was the role of their leadership team, and of everyone below them, in achieving sustainability success?
And, perhaps most important: How successful, sustainability-wise, are these leadership companies? Do they stand a chance of "moving the needle" toward a more sustainable world, or are they simply tinkering at the margins?
A fascinating new study seeks to address such questions, and its findings underscore the challenges that face most companies seeking to demonstrate leadership in the sustainability arena.
The study (download here — PDF), by Atlanta-based Avastone Consulting, an international consultancy focusing on leadership and organizational effectiveness, resulted from one-on-one interviews with a diverse group of ten global corporations, representing metals and mining, high technology, foods, pharmaceuticals, industrial and consumer products, textiles, and chemicals. The companies had a mix of organizational histories, with legacies ranging from 25 to more than 200 years. All had a clear orientation toward sustainability. Six of the ten companies are listed on the Dow Jones Sustainability Index World and Global 100 Most Sustainable Corporations. The research was conducted with company officers, vice presidents, or directors of sustainability/corporate responsibility from each company.
Avastone first looked at the direction and the progress of these companies in the sustainability arena. Beyond that, "What we were interested in was what are the mindsets of the business leaders, and how do those mindsets influence where a business is heading, and how do those leader's mindsets help or hinder their progress," study co-author Cynthia McEwen, who runs the firm's sustainability and leadership practice, told me recently. "And so we started to explore the nature of mindsets in a way that's never been done in the sustainability field." (You can listen to an interview I did with McEwen on GreenBiz Radio.)
This isn't the first study to examine sustainability and leadership, but it is one of the more comprehensive and intriguing, as it delves deeper into both organizational behavior and individual "mindsets" than any other I can recall. And while the findings of this study trend a bit toward the abstract — McEwen acknowledges that the intended audience for the study is not your average worker bee — there are some good nuggets here for anyone interested in this topic.
Their study found that it isn't a lack of systems and activities that limit a company's success, but rather the scarcity of what it calls "higher capacity leaders" and the direct relationship between leader mindset development and the realization of complex sustainability outcomes. "Mindsets," explains Avastone, refers to "interior patterns of mind, or frames of reference, from which individuals see sustainability and its importance."
Examining mindsets fills a critical gap in understanding what makes some individuals and corporations sustainability leaders. As an increasing number of companies engage in an increasing number of environmental and socially responsible practices, we're beginning to see progress, however incremental, and the complexity of sustainability issues is becoming clearer. But, notes Avastone:
Missing, however, is a key dimension of the conversation that exists below the radar for most organizations. Few are focusing on the influence of patterns of the mind, which shape our capacity to understand the world and allow us to take effective action in support of it. Mindsets, the nature of their development, and the headway gained through the expansion of consciousness, are often overlooked in the larger sustainability discussion. While the myriad of shapes and forms of sustainability activity are under study, the acknowledgement of interior mindset development and its significance deserves a closer look.
The report offers several frameworks for examining corporate sustainability and discerning what is being done sustainability-wise by some of the best-known companies worldwide, and what can be learned from them. It also contextualizes their progress by connecting it to "the bigger picture of planetary limits and ecological overshoot."
Along the way, Avastone details the success factors critical to the ten surveyed companies' sustainability progress. Its findings demonstrate that, while technical and business systems may be necessary, they are not sufficient by themselves as drivers of sustainability success; subjective aspects like culture, shared values, and guiding principles are equally important.
The framework used in the study to assess company progress on their sustainability journeys is based upon the "Corporate Responsibility Gearbox" created by the U.K. consultancy SustainAbility, which describes the different approaches or "gears" that companies can take to corporate responsibility. Higher gears are associated with more substantive and systematic progress. Avastone describes the gears thusly:
- 1.0 Comply — The business case for sustainability is perceived with limited — if any — acknowledgment of wider societal issues.
- 2.0 Volunteer — The business acknowledges the sustainability agenda as legitimate and one requiring constructive responses.
- 3.0 Partner — It views "sustainability done well" as possible only with other players.
- 4.0 Integrate — Sustainability becomes increasingly strategic and integrated as the business links its competitive advantage and value creation to wider societal expectations.
- 5.0 Redesign — The business contributes to shifts in systems that root out underlying causes of non-sustainability. New opportunities are envisioned and realized through new paradigms.
"The 21st-century global landscape calls for leaders with mindsets that view all five gears of sustainability as relevant to the business, not simply the gears that are obviously required to move the business forward," says McEwen.
As I said, it can be a bit abstract, and some of this may be harder to access for those not steeped in organizational development and systems thinking. But that helps to underscore the point: We need more leaders to be steeped in such disciplines in order to move our organizations in the directions they need to go to adapt and thrive in the coming years.
Concludes Avastone:
We believe that as human beings, organizationally and individually, we are at a juncture that offers tremendous opportunity despite the complexity and challenges we face. Yet new manifestations of leadership are required. The fundamental nature of who we are as human beings offers opportunity for expanding our realities, our identities, and our worldviews.
This report seems to provide a good first step to help companies and their leaders get in gear.
December 9, 2007 in Business Practices, State of the Art | Permalink | Save This Page | Comments (5)
NBC's "Green Week": Not Media Business as Usual
This is "Green Week" at NBC Universal, a seven-day revelry of environment-themed content spread across the company's various TV channels and other properties. The 150 hours of programming — integrated into everything from news and sports to soaps and entertainment — is certainly a first for a major media company.
What, really, is NBC doing? Is this a one-off stunt intended to "green up" its image before it returns to, as they say, regularly scheduled programming? Or is this something more substantive, more integrated, longer-term — a milestone in the greening of the mainstream media? (Disclosure: NBC Universal, like its parent company, General Electric, is a client of GreenOrder, with which I am affiliated.)
I've watched the process unfold, reviewed strategy documents, and talked to the company about its efforts. My only-slightly-biased conclusion: There's more going on here than meets the eyeballs that NBC is trying to attract.
First, the basics. Green Week involves the full spectrum of NBC properties, including its eponymous TV network as well as CNBC, MSNBC, NBC News, NBC Sports, SciFi Channel, Sundance Channel, Bravo, USA Network, and Telemundo — plus Universal Studios and its related theme parks, and the company's websites, including female-focused iVillage. Dozens of shows will have environmental themes or messaging, from Sami and Lucas' green wedding on "Days of Our Lives," to MSNBC's examination of green issues in the 2008 presidential campaign, to "The Office" (based at a fictional paper company) considering recycled paper, to CNBC's broadcast from a clean-tech conference. Tom Brokaw, Matt Lauer, Bob Costas, and other heavyweight talents have been conscripted into the effort. Local NBC stations will incorporate green-themed stories into their newscasts and some will run a half-hour special on "Going Green at Any Age!" Universal Pictures will run environmental public service announcements as part of its online movie trailers and as ads in theater lobbies.
There's more. You get the idea. Suffice to say it's a full-court press.
The whole endeavor no doubt makes great fodder for cynics: What is the company's actual environmental commitment? Is it walking it's talk, or just preaching? Is this just another way to tap into the growing wave of advertisers' green(washing) pitches? Will consumers even care? And why only one week — shouldn't it be a year-round commitment?
In a nutshell: What's really going on here?
"The time became right to recognize that green is a rapidly growing cultural and business phenomenon and is presenting brand new opportunities and challenges," Lauren Zalaznick, president of Bravo Media, who heads NBC Universal's Green Council, told me last week. "And that, as a company, we should be the green media market leader, and be ready."
Zalanick says the company identified three key "customers" for this effort: consumers of its programs, movies, theme parks, and other properties; advertisers, of course; and the company's 16,000 worldwide employees. Regarding that last group, she says, "We want college grads coming into the marketplace — 80 percent of whom say they want a job with positive environmental impact — we want them here. We want to be best in class in every way as an employer of choice."
Interestingly, when I asked Zalanick where she anticipated the most push-back about Green Week, it was this same internal group. "There's no one more cynical than a disgruntled group of large conglomerate employees. They have had many, many, many mass e-mails and initiatives. The longer they're here, the more they say, 'I've seen things come, I've seen things go.' So we have a great challenge to be very real."
"Very real," explains Zalanick, includes various efforts to reduce the company's environmental impacts, including replacing a fourth of its vehicle fleet with hybrids by the end of 2007, evaluating its paper suppliers for environmental content (the company's office paper currently contains one-third recycled content), and conducting an environmental audit of its facilities worldwide. (NBC Universal will work with GreenOrder to provide an independent, quantitative analysis and verification of its environmental footprint.)
What about consumers? Will the typical viewer of college football care that next Saturday's Air Force vs. Notre Dame match-up will include a segment featuring Notre Dame student's and faculty's quest to capture carbon dioxide from power plants?
Zalanick believes they will. She cites research conducted last month in which NBC Universal measured viewers' environmental awareness, habits, and expectations. "We heard loud and clear that there was a very high expectation that consumers have about companies. Over two-thirds believe that businesses have some responsibility for the social good. That's a lot." She says the company plans to track audience awareness and actions over time. "We'd like to hear back that we've had an actual impact — that we caused viewers to buy a hybrid, to not buy plastic water bottles, to turn off their power strip instead of the on-off-standby switch. We want those kinds of activation results." It will be a big challenge "activating" mainstream consumers, as most environmental groups and others have learned over the years, but every little bit helps.
Green Week will no doubt rankle some critics as, variously, being too commercial, not green enough, not serious enough, not entertaining enough, or whatever. Says Zalanick: "We're going to be under a microscope. We're going to plead for a lot of attention, and we're going to get it, and we're really going to try to do everything right. What I hope is that the shoutdown of our perceived imperfections doesn't scare anyone else from trying to do it."
Viewed in its entirety, NBC Universal's approach, imperfections and all, strikes me as a substantive — and welcome — contribution from the mainstream media: a synergy of internal programs to reduce the company's footprint and engage its employees and talent, with an external focus on the company's massive, hydraheaded audience reach. And to do so in a wide range of styles, voices, and depth. One internal document positions the approach as "hopeful, empowering, and pragmatic, not moralistic or preachy." Sounds about right.
A big question, of course, is what happens after Green Week is over. Zalanick agrees that environmental content "should become part of the fabric and rhythm of our every day" and that this, indeed, will be the company's long-term goal. (Internally, this has been described as a "multi-year, ongoing initiative.") "I think it's like any pro-social initiative that starts with some particular mandate," she explains. "It starts out as something conscious, something you have to point to. And the road is filled with potholes and cynics. It would be like saying, 'Was our goal in 1987 to hire a woman, then never do that again?' No, the goal was to have it become the fabric of medical schools and law schools and board rooms and everything in between. The goal was to stop talking about it, for it to be part of the everyday."
No one says it will be easy. "We're learning how to walk," admits Zalanick. "In a few years, we won't have to think about walking any more, and our commissaries are going to be right, and our lighting is going to be right, and our corporate car fleet is going to be right. And we're going to know how to do it. What I found is that we were already doing a tremendous amount of stuff that, for a media company, we were not particularly good at communicating. We never took it on as something we needed to prove to the world. I actually think we were incorrect on that."
Will Green Week help position NBC Universal as "the" green media company, attracting new viewers and advertisers, delighting its employees, and luring the next generation of talent along the way? How will all this affect, or infect, its competitors? What will Wall Street think? The rumor mill has GE selling off its media business in order to better focus on its core industrial products. Will being seen as green enhance NBC Universal's market value?
As they say on TV: Stay tuned.
November 4, 2007 in Business Practices, Green Marketing, Trendwatching | Permalink | Save This Page | Comments (9)
The Greening of Travel and Tourism, from Asia to Alabama
My travels over the past month have included speeches to two very different audiences on the same topic: The future of travel and tourism, as seen through an environmental lens. Based on these and other calls I'm getting, it seems that this industry is starting to pay attention . . . but only starting.
The two speeches -- in Bangkok, to the Incentive Travel & Conventions, Meetings Asia/Corporate Travel World conference; and in Gulf Shores, Alabama, to the Gulf Coast Convention and Visitors Bureau -- were striking as much more for their similarities as differences. Both audiences are just beginning to come to grips with a new reality on travel and tourism.
That reality is this: Up to now, the conversation taking place on the environmental front has basically to do with "the impact of travel and tourism on the environment." Increasingly, however, it's turning around: there's a growing awareness of "the impact of the environment on travel and tourism."
(The New York Times wrote on a similar topic this week, in an article on climate change and tourism.)
Indeed, both of my audiences' regions had experienced the tragic ravages of nature: Hurricane Katrina, which swept through the Gulf Coast (though 2004's Hurricane Ivan made more of a direct hit on Alabama's coast); and the 2004 Indian Ocean earthquake and tsunami. Both events decimated their respective tourism industries for a time, and both regions are still grappling with lingering effects, including a more cautious tourist market sensitive to disruptions born of natural disasters.
The two events at which I spoke were different in one key respect. The Asian conference was more business-to-business -- the audience included airlines, hotel operators, corporate travel buyers, meeting planners, and the like, mostly focused on conferences, events, and the "incentive travel" industry -- while the Alabama event was more consumer facing -- Alabama's Gulf Coast attracts largely families and retirees from the South and Midwest, with relatively few conventions or business meetings.
Those differences are significant, and they mirror what's going on in the larger marketplace of green goods and services. There's far more, and more substantive, action on the B-to-B front, as companies in most sectors are leaning lean on upstream suppliers and service providers to reduce costs and environmental impacts and offer their downstream customers less-toxic, better-packaged, and more energy-efficient goods and services. Corporate and some government policies are mandating venues and travel options that include at least some environmental considerations, and a growing number of conferences and meetings are calling themselves "green," whether from reduced waste, lower carbon footprint, or other activities.
Meanwhile, the green consumer marketplace is more of a slog, as I've noted in the past, with fewer genuine success stories among environmentally improved products and services. With the exception of ecotourism -- tours and travel packages that combine some sort of ecological theme, often aimed at well-heeled travelers -- green leisure travel hasn't yet caught on.
As I said, the industry as a whole is just waking up to the realities of a more eco-conscious world. And, to a large extent, they seem to have at least one foot firmly planted in denial that their world will somehow be affected by the world's environmental woes.
They couldn't be more wrong, of course. As the Times made clear, everyone from ski resorts to dive shops are feeling the heat, as it were, from climate change, as tourist-attracting natural wonders -- snow-packed slopes, vibrant coral reefs -- shrink or disappear altogether. In the developing world, where a much greater portion of the economy depends on tourism, this can be particularly devastating. As the Times noted, "In much of Africa, for instance, tourism is the major source of income and often the only source of foreign currency."
It's not just ecotourism spots that are vulnerable. Any destination that depends on visitors arriving by air -- whether tourists or business travelers -- could be hit hard, especially more remote locations like Australia and New Zealand, as well as U.S. hotspots like Las Vegas and Orlando, Fla. Droughts could be another factor crimping the industry, if water rationing limits showers, pool use, water park operation, etc. Don't even think about another SARS-like outbreak of infectious disease, which, some experts say, will be another all-too-frequent manifestation of climate change, and which could dampen people's willingness to travel for both business and pleasure.
Here's one small but significant example of what we're up against. In Bangkok, I gave an hour-long keynote speech that, among other things, challenged the Pacific Rim travel industry to consider how it will remain competitive in an eco-conscious or carbon-constrained world, especially as destinations in Europe and North America increasingly embrace recycling, energy efficiency, sustainable foodservice, carbon offsets, and other practices aimed at reducing the impacts of travel, meetings, and events.
For about two minutes of that hour I spoke about how some companies are starting to use a new, improved generation of teleconferencing technology as a means of reducing business travel, if only by a fraction. For example, I told them, Vodafone has adopted a policy in which employees are now required to justify why they need to fly somewhere, as opposed to using one of the company's 200 teleconferencing centers (or, presumably, simply telephoning). The policy reduced the company's air trips by 20 percent in one year.
"How do you compete in a world in which a portion of business travel is replaced by teleconferencing?" I asked them.
Simply asking, it seems, was a no-no. "Makower Raises Delegate Ire at IT&CMA Meet", trumpeted one industry publication, noting that
His speech prompted a walk out by two Jet Airways executives and upset other suppliers, many of whom were there representing hoteliers and airlines.
Lianne Kelly-Maartens, marketing manager for Sun International in India, said it was the wrong audience for a reduced travel argument. She said she couldn't believe her ears when he started to advocate reduced travel and more video conferencing (with its implied reduced role for hotels) as the way of the future.
“I am well aware of the need to embrace change for the sake of the environment but many people in the audience sponsored the keynote speakers’ attendance through their delegate fees,” said Kelly-Maartens. “It’s like the Rifle Association presenting at a gun control convention.”
Did I mention denial?
(Quick aside: Was it my imagination, or has it been reported that airlines are starting to create teleconference centers inside their major hubs as a nifty means of accommodating both travelers and telecommuters? I swear I'd heard that, but can't find a reference. Anyone?)
It strikes me, as I told both the Asian and Alabaman audiences, that amid these challenges lie opportunities. The Alabama Gulf, fiercely competing with a host of Atlantic and other Gulf beach destinations, might create a competitive advantage by forming a regional commitment to green excellence. That would likely be appreciated by, among others, the growing Boomers population frequenting its towering condos. The region is well on its way, with impressive recycling, biodiesel, land use, and other initiatives already taking place. Such efforts might even help to create new markets for green weddings, business meetings, and other events they're not yet attracting. Meanwhile, Pacific Rim countries, needing to attract Japanese, Australians, and North Americans to remain economically viable, have similar opportunities to compete among themselves to create more environmentally conscious hotels, exhibition halls, and the like, which these travel buyers have increasingly come to expect.
Of course, none of this may stave off the devastation some regions may face in spite of their greenest efforts, should nature wipe out their prime attractions, or should energy markets crimp long-distance travel. Even without an apocalypse, the industry could be in for a tough time.
November 2, 2007 in Business Practices, Climate Change, Green Marketing, Trendwatching | Permalink | Save This Page | Comments (2)
Wal-Mart and the Greening of Fayetteville
One of the pleasures of my recent visit to Bentonville, Arkansas, was meeting Dan Coody, mayor of Fayetteville, the "big city" (population: 67,000) about twenty-eight miles down I-540 from Wal-Mart's headquarters. Fayetteville, it seems, is becoming a hub of green business activity. As the Washington Post put it several weeks ago: "A wave of start-ups developing the technology to help suppliers prove their green credentials has swept into this sleepy college town, half an hour from the company's headquarters in Bentonville."
I sat down with Mayor Coody to find out why.
"Well, it wasn't by accident," Coody began. "It's a combination of factors. The chief driving force here is, of course, Wal-Mart and their big push for sustainability, coupled with the University of Arkansas." Wal-Mart and the university's Sam M. Walton College of Business teamed up to create a Center for Applied Sustainability, to which the retailer donated $1.5 million in August. According to the announcement, the center:
will work with a wide range of partners for the rapid development of sustainable business practices and to promote their application across the retail and consumer goods industries.
Over the next year, the center plans to study ways to reduce carbon in products and identify key sustainability issues in agriculture. The center will also hold a speakers series, help train buyers for Wal-Mart, and fund student research.
But that's not the entire reason for the green business surge, explains Coody. "Fayetteville has always been an environmentally conscious town, but we've been elevating the dialogue and attracting a lot of businesses that want to do their start-ups in Fayetteville because of our quality of life, the four seasons, and the location."
Coody calls Fayetteville the "Berkeley of Arkansas," though he also refers to it as "Green Valley" and "Silicon Holler." By whatever name, he says, "We have a lot of creative folks. A lot of folks wanting to take advantage of the Wal-Mart sustainability initiative but who want to live in a town like Fayetteville. So we have the best of both worlds."
The 55-year-old Coody, a carpenter by trade, became mayor six years ago, sweeping out an entrenched and, from the sound of it, pretty corrupt and inefficient bureaucracy that had ruled for years. "I saw what the good old boys were squandering," he told me. "It was the opposite of what I thought we should be."
Once on solid footing, Coody set out to make Fayetteville "the center of the sustainability movement," as he so modestly puts it. The green agenda came naturally. "I've been an environmentalist since I was a kid and I think that one of the reasons I ran for mayor is so I could push the environmental envelope in Fayetteville." Along the way, he's hoping to give cities like Portland, Seattle, Austin, and -- well, Berkeley -- a run for their money, banking on Fayetteville's lower cost of living, mid-continental locus, and small-town charm.
Fayetteville does seem to be on a roll of late. It was ranked eighth on Forbes Best Places in America for Business and Careers. Inc. magazine's annual survey of the nation's boomtowns, which focuses on job growth as an indicator of economic vitality, ranked Fayetteville 13th. Expansion Management, a magazine focusing on company relocation activity, named Fayetteville third among "top mid-size metros for recruitment and attraction." And U.S. News recently named Fayetteville among the "best places to retire."
Meanwhile, on the green front, the university is constructing its first green-built dorms. Coody has signed the U.S. Mayor's Climate Protection Agreement, one of only three Arkansas cities to do so. His city government has begun using biodiesel in its fleet. Fayetteville boasts the first public sustainability coordinator in Arkansas. The city is taking food waste from Sam's Club and composting everything from apples to zucchinis.
All of which is attracting green business. "We have several companies, maybe 32 small start-ups, that are reaching the point of commercialization," says Coody. "And a lot of them are focused on the sustainability movement. We've had a lot of people coming into Fayetteville from East Coast and the West Coast, from New York, that want to be in an environment like what we have in Fayetteville." For example, he says, there's BioBased Technologies, which makes agro-based polyols for the polyurethane industry, intended for use in a wide range of applications including insulating foams, rigid foams, flexible foams and CASE — coatings, adhesives, sealants, and elastomers.
Fayetteville is hardly the first town to build an industry around a dominant local employer. But Wal-Mart isn't just another local employer. It's the largest company in the U.S., with 60,000 suppliers, aiming to transform its operations, products, and services in a greener direction. "It has changed my world," says Coody. "You don't get more business-oriented and more bottom line than Wal-Mart, and when they got behind the environmental push, the sustainability push, that gave my position more credibility."
After listening to Coody talk about his town's transformation, I told him, "I get a sense that of all the things that this has changed most, it's you."
He agreed. "I have never been so excited in my life about the environmental movement. There's such attraction going on with trying to save the planet. It is an exciting, exciting time in history and to be right here in the middle of it. I couldn't have been a luckier person in the world than to be mayor of Fayetteville right now."
And I'm pretty sure Fayetteville is lucky to have him, too.
October 29, 2007 in Business Practices, State of the Art | Permalink | Save This Page | Comments (5)
Green Business, in the Land of the Prius
If you had asked me even a week ago whether Japan or the United States was further along in the greening of mainstream business, I'd likely have answered Japan. That country is, after all, the birthplace of the Prius and other eco-efficient vehicles and advanced technologies. It's the homeland of Sharp, the world's largest manufacturer of solar panels. It is a society known for longer-term thinking -- quarters of a century, not quarters of a year -- and for imbuing its citizenry with a sense of national purpose and commitment.
But after my visit to Tokyo over the past few days, meeting with companies and thought leaders in the green business sphere, I'm not so sure. Japanese companies, like their counterparts in the U.S., are engaged and involved in environmental issues like never before. But the conversations I had were strikingly similar to those I have regularly with American firms. Japanese companies are struggling to make the business case for integrating sustainability into core business activities, often working ardently to make what appear to be only incremental improvements. They're frustrated at the lack of government leadership on the topic and trying with only moderate success to turn green commitments into competitive advantage in the marketplace, encountering consumers who say overwhelmingly that they are deeply concerned about the environment, but who seem less than willing to channel that concern into purchases of greener products and services.
Sound vaguely familiar, Americanos?
During my brief visit to Tokyo (en route to Bangkok for a speaking engagement), I had the opportunity to sit down with representatives of Panasonic, the electronics manufacturer, and Sekisui Chemical Co., which makes among other things makes eco-friendly pre-fab modular housing. Both companies are engaged in some form of green marketing campaigns. I spoke at a meeting of the Frontier Network, a consortium of some of Japan's leading corporations working jointly on sustainable supply-chain management and other "frontier" issues, operated by the consultancy E-Square, my Tokyo host.
And I met with two of Japan's green business thought leaders: Tachi Kiuchi, formerly CEO of Mitsubishi Electric America and now chairman of Future 500 and CEO of E-Square; and Kazunori Kobayashi, co-founder of Japan for Sustainability, an NGO promoting Japanese companies' green initiatives, as well as a consultant to many of these companies.
As in America, interest in the greening of business in Japan has accelerated over the past year or so. Al Gore's movie seems to have played a leading role: Just about everyone I spoke with brought it up. "The movie changed the whole atmosphere," Kobayashi told me. One global food company based in Tokyo made it required viewing for all company executives, he said. "They said that those ninety minutes were more important than all of the lectures they'd be hearing for years."
I was six thousand miles from home, but I could have been anywhere in the U.S., given the stories I was hearing. The company efforts and struggles sounded very familiar. One technology company (the Frontier Network event was off the record, so I can't name some names) had developed an e-learning module on environmental issues that it was rolling out to its employees worldwide to make the issues personal and relevant, but the company hadn't done any studies to determine whether the program was having an effect. A financial services firm had launched a socially responsible investment fund, but was struggling to define what stocks should qualify. Panasonic described an "Eco Ideas" label it was applying to its green products, claiming that more than ninety percent of its products qualified. (Katsumi Tomita, from Panasonic's Environmental Planning Group, told me that the company will be rolling out the label in the U.S. in the coming weeks.)
Japanese consumers, for their part, sound just as confounding as Americans. A survey released last week by Accenture -- based on responses from more than 7,500 consumers in seventeen countries in North America, Europe, and Asia -- showed the Japanese even more concerned with environmental issues than the carbon crazy Brits. Accenture asked, "Are you concerned by climate change?" Ninety-five percent of Japanese said they were "extremely" or "somewhat" concerned, compared to 81 percent of Brits (and 73 percent of Americans). Panasonic told me their research found 77 percent of Japanese saying they'd like to buy from environmentally responsible companies, comparable to U.S. numbers. But, Tomita said, while Panasonic's research showed that Japanese consumers are more aware of environmental issues than those in most other countries, his company was uncertain about whether and how much environmental concerns weigh on Japanese purchase decisions.
And so it goes. The mainstreaming of green in Japan, as in America and elsewhere, is far from simple or easy.
Tachi Kiuchi told me how clean technology is on the march in Japan. It's no longer simply a matter of taking others' technologies -- such as American-invented solar panels -- and making them cheaper and better. Now, Japan is creating its own innovations. "From that standpoint, I'm pretty optimistic," he said. "In two or three years time, we'll have things other countries will want."
But Kiuchi isn't as optimistic about the greening of Japanese business. He said change inside companies is coming "gradually, very gradually. Our biggest obstacle is indifference. It's a gradual process and we have to wake them up."
He might as well have been speaking about companies in my country, and in many others.
October 21, 2007 in Business Practices, Green Marketing, State of the Art | Permalink | Save This Page | Comments (12)
Wal-Mart’s Sustainability Summit
Last week's Live Better Sustainability Summit, held just outside of Bentonville, Arkansas, was yet another in what seems to be an accelerating series of "whoda thunk" moments. Bentonville, of course, is hometown to Wal-Mart, which sponsored the event, a daylong conclave that brought together more than a thousand people to a nearby convention center. It was all part of Wal-Mart's latest crusade: to "drive profitable product innovation" into its supply chain.
I had the opportunity to attend, not as a participant but as an observer, one of a small handful of media and bloggers admitted to the event. (Another was Sami Grover of Treehugger, who's report can be found here.)
The event was divided into two parts: a meeting of about 400 chief executives of Wal-Mart suppliers, and an exhibit hall featuring tabletop displays from roughly seventy companies and organizations, mostly consultancies (BluSkye, Domani, GreenOrder, McDounough-Braungart Design Chemistry, Natural Logic), nonprofits (Alliance to Save Energy, Business for Social Responsibility, Organic Exchange, Rocky Mountain Institute, TransFair), and some corporations that have worked successfully with Wal-Mart (BP, General Mills, 3M, Interface, S.C. Johnson). It was remarkable seeing all these entities (see the entire list here) side by side, with relatively uniform exhibit space, somewhat more egalitarian than your typical exhibition floor.
The other part was a half-day conference, including a two-hour presentation and panel discussion led by Wal-Mart CEO Lee Scott, followed by breakout sessions on "engaging your organization in sustainability," "sustainability and product innovation," "making sustainability work," and "driving business value through sustainability."
What was the point? Wal-Mart, it seems, has discovered what a growing number of companies have learned. Being a greener business isn't just about being more efficient or increasing sales. It can be an engine for innovation in products and packaging, even delivery systems. And it wants to help its tens of thousands of suppliers move in that direction.
The context, of course, is somewhat more complex. As Wal-Mart continues down the road to environmental improvement, it needs help from its suppliers to meet its ambitious goals. And in the manner that only a $348 billion retail giant can command, Wal-Mart is pressing its suppliers to improve their packaging, reduce waste, reduce toxicity, and create offerings aimed at Wal-Mart's new mantra: "Save Money, Live Better."
Wal-Mart isn't exactly asking suppliers to think and act more proactively on the environmental front. It's using its considerable clout to create almost a competitive atmosphere around "green." In coming months, for example, Wal-Mart will be judging all of its suppliers on packaging, using metrics governing the quantity and environmental friendliness of suppliers' packaging as a buying criterion. Last month, the company announced that it would measure the energy use and emissions of the entire supply chain of seven product categories, with the likely goal of using climate impact as another buying criterion. And the company has integrated sustainability in the performance evaluations of the stores' buyers and their managers, which in turn help determine their raises and promotions.
It's all rather confusing, in the sense that one must keep reminding oneself that this is, after all, Wal-Mart (and Sam's Club, the company's other U.S. chain), the company with a reputation for squeezing suppliers until it hurts in order to achieve the goals of its old mantra, "Always Low Prices." Can these same companies now become effective partners toward the goal of reducing everyone's environmental footprint while bringing to the mass market a growing number of innovative, or at least improved, green products?
Lee Scott seems to think they can. Some excerpts from his remarks to the gathering of suppliers as well as executives from his own company:
Sustainability is here to stay. It is not a fad, it is not a marketing ploy. . . . It is in fact a part of what all of us are going to be doing with our businesses from here on out. It is not about higher margins and higher prices. It is about the elimination of waste. It is about making our businesses more effective. It is about transferring those benefits on to the consumer. And it is about taking chemicals and things we know aren't good for the environment and finding alternatives to those chemicals so we make products safer.
I think for Wal-Mart one of the key roles for sustainability is it is going to cause us to have better products. Because we're going to be thinking about the quality in those products: what is the defective rate . . . what are the life-cycle costs of that product . . . . Ultimately my view is that because of sustainability, we also will be dealing with the best companies. Let me talk about sourcing from someone who is willing to compromise on the environment -- maybe destroy waste in an inappropriate way, or use chemicals that they shouldn't. What in the world would make Wal-Mart think that the person who is willing to compromise the environment, knowingly, wouldn't also be willing to compromise on quality to meet a price point? . . .
My belief is that we're going to find that sustainability and all of these social context issues are all related and all end up showing up in the quality of the products. And that as we use sustainability as a driving force, we will have better suppliers . . . and it will enhance the reputation that we have as a company.
High-minded words, to be sure. And they will likely rankle Wal-Mart's many detractors, for whom the words "Wal-Mart" and "sustainability," used together, are simply discordant. The doubters are not irrational. For years, Wal-Mart has been an aggressive, sometimes arrogant, leviathan, seemingly out of touch with progressive social and environmental ideas and ideals. In its single-minded pursuit for growth and dominance, it played rough -- with competitors, communities, suppliers, politicians, and anyone who got in its way, notably (or especially) activists. How can this sudden embrace of sustainability be anything other than a cynical ploy?
I'm pretty sure that it's not. In recent months, Wal-Mart has put itself out there in ways that few other companies have done. It is spreading the green gospel to its 1.3 million employees, teaching them how to live greener lives. It is inviting activists into its offices, and commanding suppliers to meet new, green goals, and parading its CEO in front of audiences and the press to talk the sustainability talk.
To the extent the cynics are right, it's that Wal-Mart's mission is to sell more stuff to more people in the pursuit of profitability and growth, an arguably unsustainable proposition. And that's a problem.
But along the way, the behemoth from Bentonville stands to move hundreds, perhaps thousands of suppliers toward a more sustainable path, and help to fuel consumer demand for things organic, nontoxic, and efficient, among other attributes. And, perhaps, engender everyday environmental habits among the citizenry in ways that even the most committed environmental activists have failed to do.
As Scott put it last week:
We have simply started. We make no claims of being a green company. We're not saying we're better than anyone, we're not saying we're doing it right. What we're saying is that we recognize an opportunity to make a difference in this world, make a difference for our customers, for our shareholders, for our associates, and it is worthwhile to do.
It's a messy affair, this sustainability thing. And Wal-Mart has made more than its share of the mess. But maybe, just maybe, that same company, in its dogged pursuit of productivity and profits, can create more than its share of the solution, too.
October 14, 2007 in Business Practices, Green Marketing | Permalink | Save This Page | Comments (8)
The Greening of the CIO
The notion of a corporate chief information officer is fairly new -- less than thirty years old -- but the CIO's role has grown in lockstep with the strategic importance of information and knowledge management inside companies. Their ability to think strategically about information technology can help a company innovate, grow markets, streamline operations, cut costs, and generally improve competitiveness.
Now, the CIO is poised to help companies be greener, too.
That's my takeaway from a two-day CIO Summit convened last week by Cisco, the $35 billion purveyor of Internet networking hardware, software, and solutions. The event brought together CIOs from about 120 large companies -- mostly Cisco's customers and partners. I was invited to moderate a panel of CIOs to talk about their role in the greening of business.
It wasn't a topic to which I had previously given much thought. What could a CIO do that would significantly reduce a company's environmental footprint? The one obvious connection had to do with the rising energy use of information technology equipment, as we've been covering daily on GreenerComputing.com and as I've written about in the past. For some companies, the energy costs of IT are becoming burdensome.
I'm not the first person to come to understand the potent power of CIOs. Simon Mingay, research vice-president at Gartner, recently told an audience in Cannes that "Defining the environmental value of IT will become a 'crucial business skill' for CIOs, as green concerns will increasingly weigh in on decisions about IT investments." Mingay defined "three degrees" of IT's environmental impact.
The energy use of computers and such is just the beginning. It seems there are other potentially powerful ways in which chief information officers can play a role in the greening of companies. Here are two brief examples:
As the electricity grid gets smarter and more Web-enabled, CIOs will be in a position to more closely monitor every aspect of their energy use across a vast campus or even a global chain of facilities. That, in turn, will enable companies to ratchet back energy-draining appliances (refrigeration units and HVACs, for example), or switch to alternative or back-up power, in order to avoid peak-power costs. The long-touted energy web will be a boon to the IT crowd, creating new opportunities for them to cut costs and streamline operations with an eye to save energy and reduce a company's carbon footprint. And such monitoring isn't limited to energy. It can be applied to water use and other resource flows.
Of course, all this can be done externally, too. For example, Southern California Edison, the large energy utility, plans to monitor five million customer meters every 15 seconds, yielding huge amounts of real-time data. Transforming that data to provide feedback to customers on how to optimize their energy use can provide valuable benefits to both parties -- saving money for customers and educing Edison's need to build costly new generating capacity.
That could change, thanks to expanding broadband networks and advancing technology. At the CIO Summit, I had the opportunity to demo Cisco's TelePresence technology, a videoconference service that's the next best thing to being there. TelePresence features a half-oval conference table that's mirrored life-size by one or more duplicate settings at various locations, giving the feeling of being at the same table (see photo). In my demo, there were people from four locations in the U.S. and U.K. "meeting." It's still not the same as being there, but it provided a pretty realistic approximation.
TelePresence isn't the only videoconferencing technology, but it's one of the smarter ones, and if it catches on it stands to make a dent in travel. Cisco says that since the start of the year, it has held 30,000 TelePresence meetings -- about 1,000 a week -- and that the utilization rate for its facilities is sixty percent, compared to six percent for its older teleconferencing facilities.
Teleconferencing won't replace all meetings, but if improved technologies like TelePresence can eliminate employee travel by just ten percent, that could provide a meaningful reduction in some companies' footprint. (As an aside, one CIO told me that his company's sales team's performance rose when they started utilizing videoconferencing, thus reducing travel. It turns out that salespeople are happier when they get to stay at home with their families, and happier salespeople tend to be more productive.)
I'm guessing that very few companies are thinking of their CIOs as strategic players on the green scene -- that most companies assume, as I did, that aside from the energy consumption of IT equipment, there aren't many other CIO linkages with their company's environmental performance. That's simply wrong -- and a lost opportunity. As environmental challenges and opportunities continue to spread across company functions -- well beyond traditional environmental departments to include every nook and cranny of business operations -- the information needs and capabilities will loom large. Along the way, CIOs will stand to become key players in the growing world of green business.
And maybe make their companies' sales team a little happier along the way.
October 8, 2007 in Business Practices, State of the Art, Trendwatching | Permalink | Save This Page | Comments (2)
Coke's Message in a Bottle
The Coca-Cola Company's announcement last week that it had set a goal "to recycle or reuse all the plastic bottles we use in the U.S. market," and invest $60 million in a recycling plant, was a bold, even audacious move, one sure to give the company a new green sheen. Sure enough, the announcement got the endorsement of the National Recycling Coalition, the industry-friendly group of recycling advocates.
I'm guessing that setting such an ambitious goal was no small matter for Coke. Consumer brands, especially leaders, understand that activists like to make an example of them. Think about the targets of the biggest corporate environmental activist campaigns of the past 20 years: Citigroup,