Joel Makower: Two Steps Forward

Why Doesn't Green = Better?

So many green products, so little progress. At least, that's how it seems most days. As we report in GreenBiz.com — and have for the past decade — the progress is undeniable: Companies are embracing green practices as never before, and doing so at a deeper, more holistic level. It's no longer just about "greening up." It's about doing better.

Better. It's a word I've been thinking about lately. And as I look at the landscape of sustainability, the green economy, and green marketing, I'm struck by how much of what's greener isn't necessarily better, at least not in the ways that matter to most people. And until "green" is synonymous with "better," it's destined to remain marginalized, incapable of fomenting change at the scale and speed necessary to address climate change and other pressing problems.

What does it mean to be "better"? Obviously, it means different things to different people, and the definition can shift depending on the topic, the day, and the circumstance. Here, in alphabetical order, is a decidedly incomplete list of attributes that could reasonably be deemed as "better":

• cheaper to buy
• cheaper to own
• enhanced features
• healthier
• higher performance
• improves my image
• innovative
• less wasteful
• more convenient
• more durable
• more stylish
• repairable
• reusable
• upgradeable
• uses less energy

. . . or just plain "cool."

I'm sure there are dozens more adjectives and attributes that could be added to this list. And most all of these focus on an individual's needs, and possibly that of his or her family or neighbors, but not much on one's community or beyond. Each of those is likely to have its own definition of "better."

Using whatever definitions you choose, I defy you to scan the green marketplace — the products, services, companies, communities, jobs, government policies, and other things that claim some environmental attribute — and see how they measure up to your list.

Think about green cleaners, clothing, computers, cosmetics — whatever. How many definitions of "better" can you find? Are their price, performance, and other attributes truly an improvement over the status quo? Or is what's "better" simply the way they make you feel? If so, is that enough to justify their purchase?

How about green energy? Green vehicles? Green furnishings? Green appliances? Green light bulbs? While each of these has positive attributes, not many are demonstrably "better" from the standpoint of providing benefits or value propositions that most shoppers care about and can afford, in addition to their environmental benefits.

Some green things are better. Green buildings can be cheaper to operate, cheaper to build, more pleasant and healthful environments, and may contribute to happier, healthier, and more productive employees, students, or residents. Greener health care, too: Medical professionals that hew to principles that reduce toxic materials in their practices and are generally more efficient can produce better results for their patients. I'm sure there are other examples of products and services where green equals better. But these tend to be the exceptions, not the rule.

And some better things are greener, even though they may not be marketed as such. The iPod and iTunes, for example, represent a dramatic dematerialization of music, movies, and more. So, too, with Amazon's Kindle and books. They're decidedly greener, but that's not how they're marketed, or why people buy them. They're better — cooler, more convenient, higher performance, cheaper, innovative, and provide more capabilities than the technologies they replace. (True, they're not without environmental impacts; nothing is.)

Given the marketing and promotional materials I seen on a regular basis, not to mention the surveys I read about how consumers are absolutely interested in making green choices when they shop — I don't think many marketers understand the need for "better." They believe that being green is good enough. And that can work: Most committed green consumers, I suspect, go with the faith-based notion that "green" equals "good" — or, at least, "good enough."

But many mainstream consumers believe that "green" equals "worse" — that making environmentally responsible shopping choices means making a sacrifice in quality, affordability, convenience, or some other attribute. A relative few are willing to make such sacrifices in the name of a healthier planet or a better world. But not many are. And they won't do so until green = better.

I'll admit this is a very selfish view of the world. It assumes that most people, when making purchase decisions, don't think much beyond their own immediate needs, or those of their family. And while there are exceptions to that (and I'm sure that you, dear reader, are among those who always consider the greater good), the vast majority of consumers focus primarily on their immediate needs and interests. Which is why most green products remain niche products, and likely always will.

What will it take to change this? What does "better" look like in your company and industry? What will it take so that your products and services become the no-brainer choice — that they are better in any number of ways that directly benefit consumers as well as the environment?

I'd love to hear your thoughts.

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Moving...

Going forward, all of my blog posts will appear on GreenBiz.com instead of here. You can find the most current posts here.

Posts written between August 2004 and May 2011 will remain on this site (most also live on GreenBIz.com).

 

How Many Patents Does It Take to Reinvent the Automobile?

General Motors received more clean-energy patents in the past year than any other company, according to data released a few weeks ago. The data comes from the Clean Energy Patent Growth Index, published quarterly by the law firm Heslin Rothenberg Farley & Mesiti (which also provides data for our annual State of Green Business report). In news reports on the findings, GM officials said its patents covered “hybrid electric vehicles, fuel cells and solar energy, with a focus on improvements to current and future technologies.”

That seemed both odd and interesting. Why was this venerable car company so focused on clean energy? True, GM had recently gone through a metamorphosis (not to mention a bankruptcy), around which it released a plug-in vehicle, the Volt, and made plans to produce other greener machines. But why was it racing ahead of other car companies like Honda, Toyota, and Ford, as well as other innovative companies, such as GE, Honeywell, Panasonic, Samsung, and Toshiba — all of which had fewer clean-energy patents than GM last year?

In search of answers, I dialed up Alan Taub, Vice President, Global Research & Development for GM. “We know the world is approaching one billion vehicles, and probably sooner than anybody thought,” he began. “The question is, can we do it sustainably?”

He answered his own question. “What we need to do is re-architect the vehicle and the personal mobility experience through the technology enablers that are converging in the next decade or two so that personal mobility can continue sustainably.” We spent the next 40 minutes or so parsing what that sentence meant.

Taub walked me through the problem statement. “Imagine the automobile was invented today and we were going to propose it to, let’s say, a venture capitalist. ‘Most of the time the vehicle is going to be carrying a single person, a weight load of about 200 pounds. I’m going to be putting that person in a 3,000- to 4,000-pound vehicle. I am going to power it by a single monogamist energy source — petroleum — and 80% of that energy is going to turn into heat, not into powering the vehicle.’ I mean, when you look at it that way, is that the personal mobility machine one would create?”

Of course not. But that’s what we’ve got. So, how do you go from today’s reality to tomorrow’s — the one where “personal mobility can continue sustainably”?

Taub recited the litany of changes underway. Lightweighting materials. Onboard energy systems, such as batteries and fuel cells. Sensors and controllers that ensure vehicles don't crash into things or people. More sensors and controllers that allow cars to drive themselves at times — “autonomous driving on demand,” in industry parlance.

“The way we see it playing out, you will always be able to [manually] drive,” Taub explained, waxing on about drivers’ “emotional attachment to a vehicle.” But, he added, “There are times where even a driving enthusiast would rather be doing email instead of driving. So cars will be autonomous when you want it, but you can take over the steering wheel when you’re in the mood.”

This isn’t just some cool way to get through your email in-box while driving. Smart, autonomous cars could help alleviate gridlock, congestion, and pollution in today’s and tomorrow’s mega cities, explained Taub, by keeping cars moving more quickly at closer range while not crashing into one another, or anything else.

Not (Just) Invented Here

All of this — “reinvention of the vehicle,” as Taub puts it — demands new and improved technologies — lots of them. Hence the push for patents. But there’s a bigger story here, too, about how GM is seeking and finding the innovations it needs to achieve its vision.

Ten years ago, General Motors had just one facility, in Warren, Mich., that housed researchers in science labs. Pretty much every innovation originated in Michigan. About 5 percent of its R&D budget was spent outside the company.

Ten years later, GM has eight labs located around the world, and nearly a third of its R&D budget is spent outside the company — collaborations and strategic alliances with universities, national labs, suppliers, and countless startups. “There’s no way all the technical challenges in a revolutionary period of technology development will be done just with the brilliant scientists inside GM,” says Taub. “Much has moved to an open innovation network. It’s become a team sport where everybody from academics to suppliers are working in collaboration.”

The Future Is … When?

I asked Taub when we could expect these innovations because — let’s face it — we’ve been hearing about “the car of the future” for decades. When will these lightweight, crash-proof, self-driving, clean-running, electric vehicles be hitting the showrooms?

“The end game is a revolution,” says Taub. “But the nature of the business is that each of these technologies will be implemented in various stages across initial vehicles and then cascade to fleets. I think this future is within the 10- to 20-year timeframe. We’re not talking about 2050. We’re talking about a lot of this coming to fruition in high volume in the marketplace between 2020 and 2030.”

Is GM on the VERGE?

I then shifted gears, as it were, to address the emerging convergence of vehicle, information, building, and energy technologies that my colleagues and I have dubbed VERGE. Is GM a VERGE company — that is, is it doing business in all four technologies? Clearly, the smart cars Taub and GM envision represent a mash-up of vehicles, information, and energy technologies. So I wondered about the buildings piece. I expected Taub would explain how homes would eventually house devices for recharging electric vehicles.

That wasn’t where he went.

“I don’t’ know if you know this,” he said, “but the BTU level of the air conditioning system on your vehicle is on the order of that which you need for a 2,000-square-foot home. The reason is that cars require very fast cool-down.” Moreover, he said, most people end up spending more on the entertainment system in their car than on the one in their home, and their car seat probably costs more than their living room couch. “So is there a future where everything we put in a vehicle integrates into the living experience when you go into your home? Today, we consider them two distinct spaces.” Someday, he says, we could go that next step, where “the vehicle becomes not something you park and leave alone next to your home, but can it be integrated into the home. By the way, this has been an idea that we’ve been floating around lately.”

Which brings us back to the patents. GM’s labs have had a sixfold increase in patent filings over the past decade, says Taub. They include not just those related to advanced technology, two-thirds of which focus on energy, environmental, and safety. Some extend to the technologies that have enabled fully half of the company’s 140-odd assembly plants around the world to achieve zero-landfill status, and to other energy and environmental achievements that don’t necessarily show up in its cars.

Out-zipping Zipcar?

Finally, I asked Taub whether all of these whiz-bang technologies could actually reduce vehicle ownership and lead us to a shared-use system, the business model pioneered by Zipcar and its ilk. This, it turns out, is part of GM’s vision, too.

“We see a world where there’s ubiquitous connectivity and therefore things like sharing a vehicle where the system, which I’ll call the cloud back office, knows my calendar, knows where I want to go, and the world will be able to rent by the hour,” explained Taub. “Will the world go to shared ownership? Probably. To what extent is what we’re going to have to learn.”

But then he reverted to that waxing thing I’d already heard from him and from so many other car guys. “There is something about people’s emotional attachment to the vehicle they buy. In some sense, it’s a highly irrational purchase. Its use is maybe 15 percent of the day. Its lifetime is 12 to 15 years, though most first buyers don’t keep it that long. And yet people buy it and actually care what color it is and how it looks. So I think you’ll see a proliferation of vehicle models that will accommodate shared ownership. But personally, I suspect personal ownership will dominate for a long time.”

Maybe. But if the engineers — and the marketers — at GM and the other car makers really do their jobs, they’ll innovate their way to a world where there’ll be an emotional attachment to getting from Point A to Point B in a chic, green machine that we didn’t have to purchase, insure, maintain, park, or own.

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Henkel's 20-Year View of Sustainability Reporting

I got a PR pitch recently about a multinational company’s just-published sustainability report. Nothing new there; I get those dozens of times a year. They’re sometimes interesting, though only rarely newsworthy.

This one was for the Henkel, the German-based maker of brands and technologies for laundry and home care products, cosmetics and toiletries, and adhesives. Henkel’s report seemed solid -- the company’s sustainability performance was outpacing its targets, etc. No big deal. I prepared to move on to the next thing.

But one thing jumped out: This was Henkel’s 20th annual report. That puts the company at the head of the class. Only a handful of firms have issued such reports annually for 20 years.

Intrigued, I reached out to Uwe Bergmann, Head of Sustainability Management at the Dusseldorf-based company. I wanted to know what Henkel had learned about sustainability reporting over the past two decades.

Bergmann has been with Henkel since 2000, “so technically this is my eleventh,” he quickly pointed out. But he’s no stranger to reporting. “I did my first bachelor project on reporting in 1995 and included Henkel’s report back then, and then again in my master thesis later on.”

Henkel’s first sustainability report came in 1992, the year of the Rio Earth Summit. That event spurred a handful of companies -- probably no more than a couple dozen -- to publish reports on their environmental commitments and performance, among them Bank of America, Baxter, British Telecom, Ciba-Gigy (now part of Novartis), Dupont, and Shell. These weren’t the first companies to report -- a few others first issued reports in the 1980s, notably from the chemical industry, which was under fire by activists for toxic misdeeds.

At Henkel, the assumption was that its first report would be followed two years later by its second -- a pace other companies were taking. But, says Bergmann, “There was so much internal and external feedback that we decided that we were going to account for it annually.”

He recalls: “The first one was very much centered on Germany and the data was basically just the headquarters, our biggest production site. Over time, the number or production sites we included increased to the bigger international sites. Nowadays we cover [sites representing] 98 percent of the production volume.” The quality of reporting grew, too, to include more aspects of Henkel’s operations, and some of its suppliers’ impacts. Over the years, the scope of the report broadened from environmental topics to include safety and health (starting in 1998), and sustainability (starting in 2001).

I plied Bergmann with questions to garner some of the lessons Henkel has learned from all these years of reporting. Following is an edited summary of what he shared.

Is the report an end unto itself or a tool for continuous improvement?

I would say it’s the end of a process. I mean, we report about our progress of the previous year. So, whatever is in there we have done and conceptualized. But the discipline of writing the report obviously gives some rationale to continuously work on your systems, on your coverage of reporting systems and gives the whole exercise an element of discipline.

You have to separate between the sustainability report and our internal reporting tools. We have tools to report our data from the sites and they do a quarterly reporting on their environmental data. And you have occupational health and safety reporting tools where you track any accident that happens.

Who is the principal audience for the report?

There are a number of expert audiences, especially in the socially and ethical investment community, and they will spend a lot of time reading it very intensively. Also universities. Internal audiences or customers won’t be reading it as intensively back-to-back but will be going through picking out interesting stories. So it’s basically a Swiss Army knife.

We try to write it in a way that it’s understandable for interested lay people, and there’s a lot of them around. They can be working for our customers. They can be working for authorities, or they can be interested teachers in the community or just interested consumers. So, they have to be able to understand it. It also has to be relevant and substantial enough for the expert audiences social and ethical investment specialists or even sustainability specialists, such as customers who assess their suppliers.

So, we try to cover all of those. And the feedback so far has been that we’re doing fairly successfully by having a pretty compact format, having the relevant examples, but pretty understandable language.

One of the challenges about reporting is length and depth versus brevity and readability -- that a long credible report isn’t readable, but a short readable report isn’t credible. Where do you find the balancing point?

In 1998 or 1999, we decided that we were not happy with their report, or with the reception to the report based on a stakeholder survey. We discussed with stakehoders the length, and it was that 40 to 50 pages was their ideal length. And consecutive surveys have reconfirmed that. So, that’s the length we’re working with. That’s where we feel you can get a good balance between readability, brevity, and substance.

Over the years we’ve moved some environmental data into the Internet. So, if you’re interested in our sulfur dioxide emissions you can look them up on the Internet. They don’t necessarily have to be in the printed report. So, you shift topics that are important to a few stakeholders, but are important for overall credibility into the internet. About six years ago did a survey of people who’d contacted us via the Internet, and sent out questionnaires to find out how they’re using our website. We found out that some were spending basically up to an entire day on our website. Those were people from the socially investment community.

I think brevity also comes from a level of understanding of the topic, being clear on strategy and what you want it to achieve. So, obviously there is a limit to brevity, but length doesn’t always make it better.

Many reports I read are not written by the people within the company. They’re written by outsiders, so they find it much harder to focus on the relevant aspect. They don’t have the same in-depth understanding of the strategy and the connections.

What have you learned doing this that would help other companies just starting out?

The key is finding out what really are the relevant topics for your audiences, and for your company. What should you be talking about? Because if the contents in your report are not important to your stakeholders and not important to your business, then why should anybody read it?

It’s also understanding your business world. That’s always been one of our strengths. We understand our business pretty well and are engaged with all those people delivering that information. So we discuss with our marketing people, with our IT people, what the sustainability contributions of our products are, what their sustainability characteristics are. It helps you to get the story relevant and down to the point.

If you get an external agency that goes out and talks to your R&D people, talks to your marketing people and later on writes an article, all that knowledge moves out of your direct sphere of control. And you haven’t gained much in the company. You need to build a relationship of mutual trust with people who will start feeding interesting stories to you. And then you’re much better adapted explaining those topics to outside audiences, as well as asking than inside audiences or your information providers the right questions.

People need to take the time to find their own way. Today, there are a lot of consultants and reporting frameworks. Our advantage in a way was that all that information wasn’t easily available and there weren’t many consultants when we started reporting. So, we had the time to find our own opinion.

But, nowadays it’s easy to have a consultant that will write you a report and that might actually be fairly similar to a report he wrote for another company, because they have their view on the world. And they will help you express things very smoothly and quickly and in a language stakeholders will like, but it doesn’t really carry the DNA and the convictions of your company.

Where is Henkel’s sustainability report headed? What’s the next evolution?

The data on factory operations are very well established. So, now things will get more interesting on the product level. How can you report quantitative data on a product level? If you’re an auto maker it’s fairly easy, because you’ve got average fuel consumption. So, the first challenge is aggregating that over your different product categories. But if you have a broad portfolio, such as ours, adding that causes some interesting challenges to having the right balance between examples and an overall storyline.

There’s also the challenge of how to report on your broader impact along the value chain -- the Scope 3 reporting and supplier data. It’s easy to invest a lot of energy too without getting very meaningful data. So, we still have to find approaches.

The biggest challenge overall is finding some way to aggregate all the different individual indicators into a meaningful message, or maybe into a meta-level indicator measurement. Because you say, “Well, you’re making some progress on carbon and some on heavy metals here and there, but how does it all up? What does it really mean?” We need to provide that kind of context.

Finally, I asked Bergmann, “Does reporting get easier over time?”

“It’s always a struggle building up the data systems,” he responded. “But once a process starts running more smoothly, you can focus more on content and then things start get more interesting. And you get more output for your input, so to say. So, it does get easier, but never easy.”

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The Emergence of VERGE

This week, GreenBiz Group is unveiling a new initiative called VERGE, focusing on the convergence of four technology sectors: vehicles, information, buildings, and energy. It represents an exciting new dimension for us, and I’m pleased to share the vision and the plan.

Over the past few years, I’ve been watching — and speaking about — this convergence, and its potential for business, society, and the environment. VERGE is about an interconnected world, in which this technological mash-up yields a diverse array of products and services that aren’t just greener — with potentially dramatic reductions in energy, water, and materials use as well as in waste and emissions — but also better.

We’ve witnessed other such technological mash-ups in recent years. In fact, most of us now carry around the fruits of the convergence of computers, telephony, media and commerce. It’s called a smartphone. And its emergence not only has transformed the technologies that underlie these products, and the companies that make them, but also all of us who use them.

VERGE has this potential, in spades. Relative to smartphone technologies, VERGE technologies are far more capital intensive — energy plants, vehicles, and buildings. The product cycles — the amount of time it takes to go from concept to market — is years longer than most IT products and services. And their life-cycle — their time in productive use — can range from a decade (for a car) to a century (for a building). Because they are infrastructural, expensive, and long-lasting, their convergence, while slower in coming, will potentially transform how we live, work, shop, travel, and play.

To help define and accelerate the VERGE opportunity, we’ll be convening three high-level roundtables on three continents. On June 21 and 22, we’ll follow the sun, with consecutive events held in Shanghai (hosted by Rob Watson), London (hosted by Marc Gunther), and San Francisco (hosted by me). Our lead sponsors for the events include Autodesk, IBM, PwC, and SAP.

The events will be livecast in local times, starting with Shanghai and London on the 21st, culminating in a full-day virtual event on the 22nd, hosted in San Francisco. (More in the coming weeks on participating in the virtual event.)

At these invitation-only events, we’ll be assembling executives, policy makers, and thought leaders to bring to light the vision of VERGE in their respective organizations, the products and initiatives already underway, and the pathways to success. We will address the barriers participants face — for example, a lack of policy, industry standards, or customer demand — and how they might be overcome. By the time the sun sets in San Francisco on June 22, we hope to have a roadmap, or at least the milestones for one.

What’s struck us over the past year that we’ve been envisioning and designing these events are the companies that, implicitly or explicitly, already hold the VERGE vision. Indeed, it seems there are dozens of large companies, and hundreds more smaller ones, that are in the middle of a revolution not all of them yet clearly see. We hope to change that.

As we’ve begun to assess the VERGE market space, we’re also struck by how many companies already are playing in all four of these technologies — companies as diverse as 3M, Autodesk, Best Buy, Cisco, Eaton, GE, Google, Honda, IBM, Johnson Controls, and Schneider Electric. And many, many more are in three of the four technologies. Of course, this doesn’t consider the hundreds — thousands? — of startups. And many more VERGE companies yet to be born.

Many of these companies are, or soon will be, finding themselves in new business sectors, sometimes far afield from their original areas of core competence. We’ve already seen this in the IT revolution (Apple as music seller; Amazon as book publisher; Google as travel agent). So, too, in VERGE world: Microsoft as energy-management company; Boeing as solar company; Best Buy as EV renter). As the landscape shifts, the technologies mature, and the end-user applications grow, this blurring of traditional boundaries will accelerate.

All of this represents the first steps in what we anticipate will be a long and exciting journey to elevate the world of VERGE. I’ll look forward to bringing you more information in the coming weeks on what we’re doing and how to participate.

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