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235 Part Four Putting It All Together We’ve now covered all the pieces of a successful environmen- tal strategy. Once a company has developed the basic tools for focusing the environmental lens on strategy and begun to instill the Eco-Advantage Mindset, everything will run smoothly, right? Well, not quite. As we’ve said before, envi- ronmental initiatives quite often go awry.In Chapter 10, we review a core set of problems to avoid.

Our research suggests that companies can get tripped up by their own organizations or from misunderstanding the nature of the challenge, among other things. But we have found some solutions, and we also review those. As a stack of business bestsellers will proclaim, execution is everything. Likewise, gaining an Eco-Advantage is not just a thought exercise. Turning thinking to action, however, re- quires real work. In Chapter 11, we provide a plan of attack with speciﬁc guidance on short-, medium-, and long-term ac- tions. Finally, in Chapter 12 we provide an overview of the Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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236Putting It All Together Green-to-Gold take on environmental strategy. For readers who’ve read the whole book carefully, this chapter will be a review and might merit only a quick skimming. For those in a hurry and who’ve been skimming along up to now, here’s a good place to slow down.

In Chapter 12, we bring all the key concepts together in a concise way. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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237 Chapter 10 Why Environmental Initiatives Fail Ford’s factory on the Rouge River in Dearborn, Michigan, has a storied history. Built before the Great Depression, it held 100,000 workers in its heyday, but in recent decades, the plant was in decline. To signal a rebirth of the company, Ford Chairman Bill Ford, Jr., decided to remake his great- grandfather’s grandest factory. The redesign would also show the company’s environmental commitment and “transform a 20th-century industrial icon into a model of 21st-century sus- tainable manufacturing.” Ford hired star green designer William McDonough to re- think the giant plant entirely. After a $2-billion overhaul, the new factory promised to be a paragon of efﬁciency and environmentally sound design, including a ten-acre “living roof” of grass that captures rainwater and reduces the en- ergy requirements of the building. The site includes solar panels, fuel cells, and constructed wetlands. Sounds great, right? Well, yes and no. The green factory may indeed be a mar- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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238Putting It All Together vel. It doesn’t, however, begin to address the real environmental issue at Ford: gas-guzzling vehicles that contribute to climate change and local air pollution. From a life-cycle perspective, Ford’s environmen- tal footprint falls most heavily in the product use phase. Environ- mentalists won’t declare Ford a green company until it makes real and sustained improvements in fuel efﬁciency and greenhouse gas emissions from its vehicles.

So was the factory redesign a failure? Not entirely. But this initia- tive accomplished far less than Bill Ford hoped it would. The lesson is that no company can afford to focus narrowly on its ownissues— in this case, manufacturing processes—if this means ignoring the big concerns in its value chain. Failing to take seriously the reality of the extended producer responsibility movement stands as number one on the list of fundamental reasons environmental initiatives fail, as re- vealed by our research. A quick review of the literature on green business over the last ten to ﬁfteen years might lead you to think that life was all wine and roses. The published books, articles, and case studies almost exclu- sively tell stories of environmentally driven initiatives that paid off.

A casual reader might even be tempted to believe that corporate en- vironmental strategy offers win-win outcomes all the time. The reality is much more checkered. In many cases, eco-efﬁciency efforts and other environmental investments do pay off. But lots of initiatives fall ﬂat. Some don’t deliver the promised environmental gains. Others don’t work from an economic perspective. Some fail on both accounts. There’s nothing new about that, of course. New product launches come up short every day. Marketing campaigns often don’t boost sales. R&D investments yield nothing. As with these conventional failures, there’s a lot to learn from environmental missteps. As vast as the opportunities for Eco-Advantage are, successfully exploiting them is not easy. To pretend otherwise is foolish. That’s why we spell out below thirteen common reasons environmental initiatives fail, along with some thoughts on how to avoid these pit- falls. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail239 1. SEEING THE TREES BUT NOT THE FOREST Ford committed substantial sums of money to making the River Rouge factory green, but manufacturing is not the core environmen- tal problem in the auto industry. Instead, the company should have studied its environmental footprint and taken a hard look at its prod- ucts. While Ford focused on planting grass on the River Rouge roof, Toyota was rolling out its hybrid gas-electric technology and taking the auto world by storm. Instead of leading the charge, Ford now must play catch-up. It has licensed some of Toyota’s hybrid technol- ogy and has committed to producing 250,000 gas-electric vehicles a year by 2010.

We don’t mean to pick on the Ford Motor Company or on Bill Ford in particular. Missing the real issue is a common problem in corporate environmental strategy, and Bill Ford’s enthusiasm for green causes is admirable. If every CEO had his dedication, the world would be a far better place. Our point, really, is that enthusiasm is not enough. Thoughtful choices translate commitment into the kind of meaningful action that gives a company an Eco-Advantage. Consider Ford’s $25-million grant to help create Conservation In- ternational’s Center for Environmental Leadership in Business. It’s a noble gesture, but the NGO’s agenda centers mainly on promoting biodiversity, especially in tropical rain forests. Although a pressing environmental problem, biodiversity is not Ford’s central environ- mental issue. Ford and its new partner looked for ways to work on issues more in line with Ford’s environmental challenges, like climate change, but it never really came together. So someonewill beneﬁt from the money, but the company that gave it won’t be at the front of the line.

Solution: Know Thyself To avoid focusing on the wrong things, companies need to under- stand where they are environmentally vulnerable. Tools like Life Cy- cle Assessment and AUDIO analysis can help to bring the forest, not just the trees, into focus. Partnering with NGOs and experts to get outside perspectives on how the public perceives the company can also be very important. The basic principle is simple: Focus lim- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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240Putting It All Together ited resources on the issues most central to the company’s environ- mental footprint and reputation.

Compare, for example, Ford’s odd choice of Conservation Inter- national with Wal-Mart’s more recent partnership with the National Fish and Wildlife Foundation. The mega-retailer will spend $35 mil- lion to preserve 138,000 acres of wildlife habitat, equal to the area the company uses for stores, parking lots, and distribution centers.

This project goes to the heart of the congestion and sprawl problems that Wal-Mart’s critics focus on. That’s a good ﬁt. Don’t ignore the full value chain either. Remember how Unilever, merely a ﬁsh buyer, helped create the Marine Stewardship Council and has invested signiﬁcant resources in time and money to promote sustainable ﬁshing. Coca-Cola knows that it can’t escape responsi- bility for what its bottlers do, even though they are entirely separate companies. So it has a VP for Environment and Water Resources in Atlanta helping to coordinate water conservation initiatives all around the world.

2. MISUNDERSTANDING THE MARKET There’s a ﬁne line between being a step ahead of the pack and mis- calculating the marketplace. Interface Flooring tried to promote sus- tainability by “servicizing” the commercial ﬂooring business and renting carpets to its customers. The idea seemed to make sense:

Interface would lay the carpet and take it back as the product wore out, facilitating recycling. But, as we described earlier, this eco- friendly new business model failed—the market just wasn’t built for rented carpets. The company earned goodwill in the marketplace from this effort, but customers weren’t interested in paying for ﬂoor- ing annually out of the operating budget instead of in one lump sum out of the capital budget. Interface is not alone in having misjudged the marketplace’s read- iness for green products or services. Many big, successful companies have similarly tripped up. Unilever’s attempt to source its ﬁsh sticks from sustainable ﬁsheries has been slowed as consumers in some mar- kets balked at the company’s attempt to substitute a more plentiful white ﬁsh (called hoki) for cod. As frozen foods marketing executive Dierk Peters told us, “Some people call the UK ‘Cod’s own country.’ Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail241 . . . cod is the gold standard, so there was real consumer reluctance to buying the hoki.” Remember how misunderstanding the difference between the U.S.

and European markets brought biotech giant Monsanto to its knees in the 1990s. The company had great technology for genetically mod- iﬁed organisms, and CEO Robert Shapiro made sustainability the centerpiece of his business strategy. But the rollout failed miserably because Monsanto failed to pick up on a basic market reality: Eu- ropean consumers were deeply uncomfortable with the modiﬁed foods.

Solution: “Blocking and Tackling” It’s easy to get excited about a new environmental initiative. Eco- products hold up the promise of capturing new markets while making the world a better place. But the process for deciding whether a green initiative makes business sense should be fundamentally the same as for any other new product: What is the market need we’re ﬁlling? Is there a customer base? What will our cost structure look like? Are others already ﬁlling this niche? Is our Eco-Advantage protected through patents or other proprietary information, or will new com- petitors easily enter the market? In short, the initiative might be green, but the usual blocking and tackling still needs to be done. Be sure to think long-term as well as short-term. Consider intan- gible factors such as corporate image and reputation, regulatory bur- dens lifted (or taken on), and customer loyalty. To the extent possi- ble, put hard numbers on intangibles. What is customer loyalty worth? Start with the cost of customer acquisition. What about em- ployee morale? Start there with employee churn costs. Don’t avoid the basic process of evaluating probabilities of risk and reward just because it’s hard to put numbers on some beneﬁts.

3. EXPECTING A PRICE PREMIUM As we made clear in Chapter 5, selling products on greenness alone rarely works. Quality, price, and service remain critical to most cus- tomers. Patagonia sells green products that use organic cotton and Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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242Putting It All Together recycled materials. Customers would not stay loyal, however, if prod- uct quality faltered.

Sometimes customers will pay a premium for environmental qual- ities or a green image. Patagonia sells at the high end of its market, and Toyota’s Prius sells for $5,000 more than comparable cars. But these exceptions do not disprove the rule. In today’s markets, green products cannot regularly command a higher price. From Shell’s ex- perience with eco-friendly Pura gasoline in the Netherlands, to the many attempts to make compact ﬂuorescent bulbs palatable at up to ten times the cost of regular bulbs, green premiums are tough to pull off. Even products that savethe customer money over time, like energy-efﬁcient appliances, often struggle to ﬁnd a foothold. If they succeed, they are sold not on environmental attributes alone but on long-term cost-savings or durability. People simply do not like to pay more up front. As economists like to say, customers have an ex- tremely high “discount rate” on purchases. They see money in their pockets now as more valuable than money saved in the future. This fundamental customer truth makes the sale of green goods difﬁcult. For example, Timberland has found it hard to sell organic cotton T-shirts, which cost 25 percent more to make, at a proﬁt. The shirts offer customers no real functional improvement. The pitch is all emotional. So it’s challenging to induce customers to pay a pre- mium for an environmental feel-good moment. Patagonia has had some success charging more because it has built such extensive brand equity on its environmental leadership. But, frankly, it’s not a public company and cares much less about earning a proﬁt on every item.

Solution: Green as the Third Button As we’ve stressed, don’t pitch onlythe green attributes of a product.

Look closely at Toyota Prius ads and see the dual message. The car has an award-winning power train that will give you some zip, and it’s got cool technological features. It alsohelps to save the planet.

The environment is the third “button” pressed. Even the greenest companies, like Patagonia, don’t pitch only the environmental aspects of their products. They talk ﬁrst about quality. And after years of Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail243 delivering on that promise, Patagonia is positioned to deﬁne product quality to include anenvironmentaldimension.

4. MISUNDERSTANDING CUSTOMERS It’s no surprise that McDonald’s restaurants generate a lot of waste.

But who would guess that over 30 percent of their waste, by weight, is liquid? When landﬁlls charge by the pound, water is an annoying thing to pay for. Ten years ago, McDonald’s Sweden started asking customers to pour ice and beverages into a separate bucket from other trash. It worked beautifully. Over 75 percent of customers will- ingly sorted their own garbage. Waste weight went down 25 percent, saving McDonald’s millions of krona. But when McDonald’s tried the same thing in the United States, consumers didn’t go for it. Amer- icans just aren’t Swedes, and vice versa. When an environmental initiative depends on changing customer behavior, be careful. If the change doesn’t save people time or money—and sometimes even if it does—they may resist. Solution: Know Your Customers’ Limits Every coffee drinker on the go knows the problem. To keep your hands from burning, one paper cup won’t do the trick. Yet, giving everyone two cups seems wasteful. So Starbucks decided to tackle this conspicuous waste problem. The company designed a new cup with a built-in exterior insulating layer to keep ﬁngers cool. The cup cost more, but it contained more recycled content and customers would only need one—a real win-win for the environment and bot- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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244Putting It All Together tom line... except tests soon showed that coffee drinkers still wanted two cups. When executives ran the numbers, they determined that if more than 10 percent of customers took two cups (and Starbucks would not refuse a customer’s request), the environmental effects would be worse than the current situation. Starbucks knew that trying to re- form customer behavior can be difﬁcult. So the company found a middle ground, the now ubiquitous coffee-cup sleeve. The cardboard piece slides over the cup and protects customers but uses 40 percent less paper than a full second cup. Some environmentalists would call this story a failure, but it’s not.

Rolling out the environmentally preferable cup would have failed on ﬁnancial andenvironmental grounds when customers took two. Star- bucks made a hard decision to abandon an innovative solution, found a middle ground, and avoided failure. As Sue Mecklenburg, Starbucks’ VP of Business Practices, told us, expecting customers to make the right environmental choice often leads to disappointment.

5. MIDDLE-MANAGEMENT SQUEEZE More than anywhere else in the organization, middle management is where the rubber meets the road in the drive for Eco-Advantage. It’s also where environmental efforts often break down. The senior ex- ecutive team hears the CEO’s call for an environmental focus, and line workers often welcome the chance to make their companies more eco-friendly. But middle managers are pulled in many directions.

They face critical trade-offs and hard choices on a day-to-day basis.

They’re told to increase sales and throughput, cut costs, fatten proﬁt margins—and now, be green as well. Incentives often aren’t aligned with green goals. End-of-year per- formance reviews generally turn on the company’s core concerns, not environmental targets. BP Senior Advisor Chris Mottershead de- scribes this issue as “a tension between business performance and environmental goals.” Mottershead’s boss, CEO Lord John Browne, committed BP to reducing its climate footprint, which meant cutting greenhouse gas emissions from the company’s reﬁneries. The easy way to reach the Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail245 goal was to cut throughput. But plant managers had production goals that conﬂicted with the greenhouse-gas reduction effort. “The stum- ble was that we told reﬁneries to chase volume andproduce cleaner fuels andlower greenhouse gases,” Mottershead told us. “Those three goals are notindependent—you drive for one and it has real consequences for the others.” We call this problem the Middle-Management Squeeze.

It’s very common, especially among companies making bold envi- ronmental commitments. CEO leadership and stretch goals are still success factors, but they can also cause irreconcilable conﬂicts for the people caught in between—the ones actually running the company’s operations and trying to meet sales goals, keep costs down, and hit proﬁt objectives. Layering environmental concerns onto that mix can lead to overload.

Solution: Incentives and Training Ignoring the Middle-Management Squeeze is a recipe for trouble. So deal directly with the multiple pressures on middle managers. Executives at this level almost always follow their incentives. If they don’t get signals that environmental success is part of their job, they won’t prioritize it. Writing environmental goals into a manager’s job description is one way to ensure focus. Hard cash doesn’t hurt either—so put environmental goals into bonuses if cultural pressure isn’t enough. Creating environmental metrics and making them part of the company’s key performance indicators is also helpful. And hold people directly and publicly accountable for their group’s re- sults—remember GE’s Session E review. Guidance from above must also be part of the package. At BP, the physics of reﬁning wouldn’t relent. So the company leaders did the only thing they could—they told the reﬁneries to operate as efﬁciently as possible, but to stop worrying about totalgreenhouse gas emis- sions. The reﬁneries’ job was to maximize economies of production and lower per unitgreenhouse gas emissions. Reductions, the exec- utives knew, would have to come from elsewhere in the system. Training is also a vital tool. As part of a seventeen-day Leadership Development Program, 3M’s environmental executives teach man- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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246Putting It All Together agers about some of the trade-offs they will face and pose some ques- tions: What should you do when the lowest-cost supplier seems to have no environmental standards? What do you do if you can either invest in a product line or ﬁx an environmental problem? Like middle-management everywhere, 3M plant managers deal with the conﬂicts as best they can. They’ve internalized the fact that they somehow have to hit cost, quality, and environmental goals simul- taneously.

6. SILO THINKING Classical mythology tells the story of how Hercules tried to kill the multi-headed monster Hydra. Every time he smashed one head with his club, two would grow back in its place. Environmental executives trying to combat pollution and other en- vironmental problems can sometimes feel like poor Hercules. Invest in a scrubber to reduce air pollution and you’ve got a waste disposal problem with the captured sludge. Store the sludge outside and you may develop a water pollution issue. “Our failures are usually when abatement goes wrong,” Intel’s Tim Mohin told us. “Waste treatment solves one problem and creates four others.” For years, all semiconductor companies have struggled with ways to reduce use of perﬂuorocarbons (PFCs). Used in the etching step of chip production, PFCs are up to 10,000 times more powerful than carbon dioxide as a greenhouse gas. Early attempts to reduce PFCs focused on capturing the gases after they were used. But a giant abatement system at Intel actually increased energy use and green- house gas emissions, and its recycling system created other airborne toxics. “The side effects were worse,” said Mohin. Both Hercules and the managers at Intel were trapped in what we call silo thinking. Instead of searching the whole barnyard for an- swers, they were focused on one narrow part of the operation. The solution didn’t fully solve the primary problem, and it created new ones. Silo thinking can also lead to missed upside opportunities. Take Fuji Photo Film’s experience with disposable cameras. Another ﬁrm, Jazz Photo, built a proﬁtable business refurbishing discarded Fuji dis- posable cameras. Jazz sold tens of millions of recycled Fuji cameras Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail247 before Fuji took it to court for patent infringement. But here’s the environmental strategy question: Why did Fuji miss this market op- portunity, leaving hundreds of millions of dollars on the table? Part of the answer is silo thinking. Fuji made good disposable cameras. It likely saw the used cameras as a waste product rather than as an input to a second product, a recycled disposable camera.

Solution: Design for the Environment and Value Chain Thinking Hercules solved his dilemma with the Hydra by looking at it in a different way. Instead of smashing heads that doubled each time he destroyed them, he had his nephew cauterize the neck stumps before the monster could grow new ones, thereby stopping the problem at its source.

Intel’s solution was a bit less dramatic. It established a Design for the Environment program. Twenty environmental professionals now work side-by-side with product and process designers, as well as the basic research scientists who explore ideas for production six or more years out. Together, they systematically identify and design out en- vironmental problems before they crop up. Toxic emissions are still a big burden. But they are down, and other environmental problems have been avoided entirely by life-cycle thinking. If pollution is a cancer on the earth, abatement is chemotherapy—a treatment after the problem exists.

Design for the Environment is like quitting smoking and eating right. It’s preventive medicine for environmental problems. It can’t eliminate every risk, but incorporating environmental considerations into product design goes a long way. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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248Putting It All Together 7. ECO-ISOLATION To make Eco-Advantage an everyday part of business strategy, com- panies need champions who are passionate and knowledgeable. But relying solely on a designated environmental team creates its own problems. As one executive put it, “Just saying, ‘throw it to the green guy’ doesn’t work.” We see three related problems that stem from isolation.

For starters, some worthy initiatives may die on the vine. FedEx Kinko’s has a real champion in Larry Rogero. For years, he’s been on the environmental case at the copy giant, taking on whatever role is needed, including “instigator, motivator, accountant, and some- times implementer.” For a long time, he was also a one-man band.

True, FedEx Kinko’s has achieved a great deal, including signiﬁcant renewable energy purchases and large-scale use of recycled-content paper. But the company is really just starting to bring environmental thinking deep into the core of the business. Some interesting initiatives, like the self-serve “green machines” that let customers make copies on 100 percent recycled paper, lost steam because they had limited support outside Rogero’s department.

After the test promotional period was over, individual branch man- agers assumed responsibility for offering the eco-product. Those that saw a real beneﬁt for employee and customer loyalty continued the program. But most didn’t. Why should a worthy eco-idea become nothing more than a short- term promotion? In part, the answer is eco-isolation. Because the idea bubbled up from an isolated environmental department, the organi- zation didn’t provide the broad support needed to determine whether there were lasting beneﬁts—in reputation, sales, or customer loy- alty—that might argue for making the green machine a permanent change. Leaving the ﬁnal decision up to individual line managers didn’t help either. In the absence of compelling incentives or goals, why would the managers choose an option that might cost them more upfront? This conﬂict is the essence of the Middle-Management Squeeze we discussed earlier. A second aspect of eco-isolation is overly tight budgets. We’ve seen big companies try to handle environmental issues on a budget so small that the environmental managers can’t get anything done. It’s Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail249 easy to underestimate what it takes to get these issues right. Eco- Advantage does not emerge out of thin air. Environmental strategies require good data collection and analysis, just like any other strategy.

Remember: Mishandled environmental issues can cost a company a great deal—in hard cash, reputation, customers, or employee morale.

Understafﬁng or underfunding the environmental group won’t gen- erate Eco-Advantage. Indeed, doing the work on the cheap may cost far more than it saves.

Finally, eco-isolation can lead to the classic problem of “one hand doesn’t know what the other is doing.” Toyota, for example, has joined in with other auto companies to ﬁght regulations that raise fuel efﬁciency standards, even suing California over their new laws.

We’re sure the company’s executives are aware of this action. But do the government relations people reallyknow that the lobbying efforts threaten to undercut all the good work that has been done on posi- tioning Toyota as an environmental leader? Frankly, given Toyota’s market-leading position on fuel efﬁciency, why wouldn’t the com- pany argue for more stringent standards? Companies are often pulled in two directions. Sometimes they pur- posely say one thing to one audience, and something quite different to another. But it’s also possible that these decisions are being made by two different groups that don’t communicate that often. Or per- haps the full strategy hasn’t been laid out for everyone. Eco-product design teams and the marketing staff are not often in the same room with government and regulatory affairs people. That isolation can come at a high price.

Solution: Top-Level Commitment and Integration Solo environmental champions almost always fail. Successful cor- porate environmental strategies build on thinking from across the company. Integrating the concerns, needs, and incentives of those on the company’s operational front lines into the game plan is essential.

Environmental managers can guide the process, but line managers must own the initiatives. Even the best-conceived Eco-Advantage strategy will ultimately ﬁzzle if it is not backed by CEO commitment and connected with the managers and workers who must imple- ment it. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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250Putting It All Together FedEx Kinko’s is working on tying its environmental vision more closely to operations. With CEO support, Rogero took the company’s top executives through sustainability training. He also launched a mission-setting process with a focus on environmental issues called “Six Flags on a Hill.” One executive told him, “It makes you think that this is about a lot more than just recycling, but I’ve had enough science ....what can we do?” This is precisely the reaction you want: engagement and eagerness to get going. FedEx Kinko’s created teams to focus on a core set of issues, such as energy and community involvement, and gave leadership roles to a spectrum of executives. One team explored how the company could help commercial customers become more sustainable. They found that customers were excited at the prospect of letting FedEx Kinko’s do more of their document management—cutting costs and reducing paper use. The “Six Flags on a Hill” team got more engaged in the pursuit of eco-initiatives when they saw the potential to drive cus- tomer value and expand sales. Showing executives how to look at issues through an environment lens can spur fresh thinking, but the larger goal has to be breaking down the barriers between environmental and business strategy. Ef- forts to promote cross-fertilization of line and environmental man- agers and cross-cutting initiatives, such as those we’ve observed at IKEA, 3M, and DuPont, all pay dividends. They tell the organization that environment is a central part of business strategy. 8. CLAIMS OUTPACING ACTIONS In the eagerness to be green, sometimes companies make promises before they’ve taken any action. NGOs will quickly jump in and cry “greenwashing,” but that’s overly simplistic. Real greenwashing is when a company claims to be doing something green and knows full well it isn’t. The failure we’re talking about here is one of action, not of intent. Commitments to reduce the environmental impact of your product line—before those products are even close to ready—fall into this category. Often it’s another failure of eco-isolation, where the mar- keting folks get ahead of the curve and nobody from the environ- mental side is close enough to the action to rein them in. It’s not an Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail251 unusual problem in companies. Execution often lags behind intent, but the stakes on environmental claims are especially high.

Solution: Do What You Say and Know Your Stuff The most straightforward—and blindingly obvious—way to avoid getting ahead of yourself is to make everything you say true. Public promises must be rooted in real design and process changes that gen- erate actual improvements in environmental outcomes. Ignorance about environmental impacts won’t ﬂy. More and more, companies are expected to have hard data to prove their claims.

The moral: Tread carefully and make claims you can meet. Put in place tools that help you check them, too, like 3M’s Marketing Claims Committee. Don’t think small or set your sights low. That’s admitting defeat at the front end. Market-changing innovation in products or processes remains a basic way to generate Eco- Advantage. And don’t stop setting stretch goals and living by the Apollo 13 Principle. With important issues like these, a company shouldn’t take no for an answer. But when you go public, make sure you know what you’re talking about.

9. SURPRISES: WASP STINGS AND UNINTENDED CONSEQUENCES Herman Miller’s facility in Holland, Michigan, called the Green- house, is one of the most environmentally sound manufacturing sites in the world. The building is efﬁcient, productive, and beautiful. And though you wouldn’t think a factory could be calm and relaxing, the Greenhouse pulls it off. The exterior reﬂects environmental sensitiv- ities as well, with landscaping that keeps wetlands intact and leaves local western Michigan plants and grasses in place. But nature presents challenges. Soon after the green manufacturing site opened, employees complained of wasps in the parking lot. It turned out that the ﬁelds of wildﬂowers surrounding the building were attracting the pests. It’s a small story, but a telling one. Making an environmental choice—in this case keeping natural landscape in- tact around the green building—can take a strange turn. This story has a happy, even environmentally sound, ending: The company re- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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252Putting It All Together alized that bringing in bees to pollinate ﬂowers would enhance the look of the ﬁelds, drive off the wasps, and reduce the total pest count.

Value chain and life-cycle effects can often be surprising. A new system to save water uses more energy. A product redesign to elim- inate a dangerous chemical changes the performance of the product in unforeseen ways. Don’t be surprised. Expect the unexpected. And when you come up against unintended consequences, see if you can turn them into opportunities.

Solution: Walk Before You Run Although environmental thinking can lead to sustained and extensive competitive advantage, it’s helpful to start with modest expectations.

To maximize the odds of success in executing environmental strate- gies, keep a few key points in mind: First, walk before you run. Start with pilot initiatives. Unilever launched its commitment to sustainable agriculture by operating test farms on a few pilot crops to experiment with low-water and low- pesticide farming methods. Second, take a systemic view. Analyze in advance the life-cycle consequences of a new initiative. When you pull a lever here, under- stand what happens elsewhere in the value chain. Will saving energy within your walls somehow mean more energy used by customers? Third, be careful about forecasting potential gains. Unilever’s eco- friendly farms are generating good results. But they vary across crops and geographies. So the company is not claiming that all the beneﬁts will be easily rolled out in all crops worldwide.

10. PERFECT IS THE ENEMY OF GOOD Here’s a tale of two companies, The Body Shop and McDonald’s.

The Body Shop set out from its founding to be a different kind of place. As its website will proudly tell you, the company is against animal testing. It supports community trade, seeks to “activate self- esteem,” defends human rights, and protects our planet. The Body Shop published its ﬁrst environmental statement, “The Green Book,” way back in 1992 when such ardent and open commitment to en- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail253 vironmental issues was very rare in the corporate world. It phased PVC plastic out of its products years ahead of the competition.

No doubt about it, The Body Shop is a green company. Until re- cently, however, it was not a gold one. Pursuit of its environmental and social mission in a manner that was inattentive to economic realities kept the company from consistently turning a proﬁt. That’s changing, but getting there has been a long, hard road. In a very fundamental way, sustainability depends on long-term economic success. It’s the only way to fund whatever degree of environmental commitment a company chooses to make.

McDonald’s can claim some deep green roots, too. The company has been working to reduce the impact of its packaging for over ﬁfteen years, constantly looking for ways to reduce its environmental footprint. But McDonald’s is also a company that keeps economic realities squarely in mind. A case in point: A few years ago, in Europe, the company tried three new options for its McNuggets package: a polystyrene con- tainer, a cardboard box, and a paper bag. It considered the options against cost, environmental impact, and the three main criteria of user experience, function, look, and feel. The polystyrene was solid on user experience (it kept the chicken warm) and it was relatively cheap, but it was the worst environmental choice and thus was un- acceptable to McDonald’s customers in many countries. The paper bag was the best option for the environment, but customers didn’t like the experience—the McNuggets cooled quickly and the paper felt ﬂimsy. The middle option, the box, satisﬁed customer needs but used a lot more material and took a greater toll on the environment. Confronted with no perfect answers, McDonald’s could have con- tinued to search for the Holy Grail of low-cost, high-functioning, eco- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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254Putting It All Together friendly packaging. Instead, the McDonald’s packaging team chose to settle for something less than perfect but better than what they had already. The company adopted a paper-based clamshell that worked as well as the box but used 30 percent less material (see ﬁgure).

McNuggets Packaging Options: Performance against Key Criteria Paper Bag Cardboard Box Polystyrene New Clamshell Environment Cost User Experience CRITERIA PACKAGE OPTIONS Ve r y Good Poor Good Neutral Ve r y Poor A perfect solution? Far from it. The clamshell used more material and cost more than the paper bag. Confronted with the same range of choices, perhaps the old Body Shop would have kept on looking— or gone with the greenest solution, the bag. But sometimes close is good enough. No business can be sustainable if it pursues environ- mental purity without regard to business consequences. Solution: Prepare for and Accept Trade-offs Flawless solutions are few and far between. WaveRiders know this.

They don’t search solely for win-win answers because they know that the quest for perfection too often leads to inaction. Like McDonald’s, successful companies often ﬁnd incremental solutions that steadily Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail255 IS ROHNER A FAILURE?

Our research suggests that Swiss fabric manufacturer Rohner Textil would rank near the top of any list of sustainable companies. Its products are nontoxic and biodegradable, and its manufacturing is state-of-the- art and low in every kind of pollution—water, air, even noise. But in the ten years since Rohner produced the most sustainable textile in the world, the company has not become a titanic success. Rohner has not dominated the textile marketplace. Toxic dyes are still the norm in the fabric industry. In fact, Rohner has priced itself out of most markets, almost ensuring it will stay small. So is Rohner a failure?

The answer lies in the eye of the beholder. Rohner broke new ground but found only a limited market for its eco-friendly fabrics. It has not grown substantially. Yet Rohnerisproﬁtable, and it provides well for its customers, employees, community, and the Earth. improve environmental performance, while minimizing the burden in other areas. Some progress is much better than no progress.

“There are messy trade-offs in anything,” a Herman Miller exec- utive told us. It’s a corollary to the “wasp stings” problem: Trade- offs are the norm, not the exception. No company can jump on every opportunity and sometimes the costs of going green are just too high.

But often partial wins are possible. It helps to look broadly at the costs and beneﬁts of any strategy decision—upstream and down- stream impacts, short- and long-run implications, concrete gains or losses, and intangible effects. Sometimes new options emerge. As Timberland’s Terry Kellogg told us, “Often the trade-off is not busi- ness win vs. not-business win, but short-term vs. long-term business win.” This “take what you can get” strategy may seem to ﬂy in the face of the Apollo 13 Principle (“no is not an option”) we discussed earlier. But it’s not so. McDonald’s did notaccept that environmen- tally sound packaging would cost too much or diminish the customer experience. In that sense, its leadership team didfollow the Apollo 13 Principle. They accepted some cost increases to achieve the brand quality and environmental goals—a good, but not perfect, out- come. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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256Putting It All Together 11. INERTIA Corporate culture and traditional ways of doing things in a company help to ensure consistency, excellence, attention to quality, and other virtues. But these same positive attributes can lead to inertia and make it hard to incorporate environmental concerns into strategy.

As Stephan Schmidheiny, GrupoNueva founder and former head of the World Business Council on Sustainable Development, tells it, After the 1992 Earth Summi t...Iwasexcited about putting my big new company on a sustainable, eco-efﬁciency footing, so I explained it all at a meeting of my key executives. They were supportive, excited; they came up afterwards and told me so. Of course, nothing happened. The strongest force on Earth is inertia, deﬁned by some cynics not in physics terms but as “people resistance to change.” Environmental initiatives often ask people to step outside their comfort zone. Maybe designers have never been asked to minimize environmental impact before, or engineers have never been asked to optimize for waste reduction, not cost control. Moving people into a new way of thinking won’t happen without a healthy push. Solution: Vision, Both Big and Small Overcoming inertia comes in two steps. We’ll let Schmidheiny con- tinue: “It was not my people’s fault; I had done absolutely nothing a leader must do to cause change except to describe a vision—and this is only the ﬁrst step ....Then the leader must break the vision into ‘bite-sized chunks’ of objectives, action plans, and measurable results.” The vision is critical. Where does the company want to be in one year? In ten? What environmental goals should the company shoot for? But every sweeping vision needs to be brought down into ac- tionable steps. If the goal is to cut greenhouse gas emissions 30 per- cent, what needs to happen ﬁrst? Perhaps it’s a life-cycle analysis on core products or process mapping to ﬁnd out where the emissions happen. In Chapter 11 we lay out one plan of attack in the short-, medium-, and long-term for developing broad, effective environmen- tal strategies. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail257 12. IGNORING STAKEHOLDERS In 1968, geologists found a gold mine (an actual one, along with copper and silver) in Flambeau, Wisconsin. A subsidiary of Rio Tinto jumped on the opportunity and got to work digging up the valuable metals...in 1993. What happened during that missing quarter of a century? Well, the company failed to get the permits it needed. It badly mismanaged relationships with regulators, the community, and other stakeholders. The original site plan was standard fare for the 1970s: an open pit mine with a holding area for toxic waste (called tailings). After the mine was played out, Rio Tinto would ﬂood the open pit and create a lake. As Rio Tinto executive Dave Richards retells the story, “Local community reaction was negative in almost every respect.” Dug-in opponents can delay a project like this for a long, long time. Finally, the company changed the plans to include a range of more sensitive actions. It would shrink the acreage of the site, rebuild the mine afterward to create recreation areas, and monitor the vegetation and groundwater for forty years. Digging started in the 1990s, and the site recovery plan is in effect today. This may seem blindingly obvious by now, but we’ll say it again.

Stakeholders matter. Rio Tinto ran into some familiar problems. As we discussed earlier, Alcan misunderstood native and environmental community opposition and stranded $500 million in sunk costs on a half-built tunnel. Shell’s well-known experience trying to dispose of the Brent Spar oil platform represents an even starker case. Companies, especially multinationals, need permission from soci- ety, employees, regulators, and many others to grow—even to exist.

Failing to get buy-in—or what we could call “letting the license to operate expire”—can cause problems with a range of stakeholder groups. Starbucks had problems when it rolled out a “preferred sup- plier” program to encourage conservation on coffee plantations. The ﬁrst attempt had unclear guidelines and didn’t address small farmers well. After some helpful feedback from a range of stakeholders, Star- bucks developed ﬂexible guidelines and best practices, all laid out in a hundred-page manual. Companies can’t just go about their business or launch new initia- tives without buy-in all along the value chain, and even outside it. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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258Putting It All Together This is a networked, interdependent world. Going it alone is a doomed strategy.

Solution: Map the Stakeholders and Get Them Involved Knowing your stakeholders is essential. Start by mapping out which groups focus on particular issues, as we discussed in Chapter 3. And build relationships with NGOs and others so that you’re not trying to open a dialogue when a crisis is at hand. Don’t be afraid to sit down with even the harshest critics. It will pay dividends to build connections and develop understanding of their concerns and prior- ities.

The bottom line is simple enough: Listen to outside perspectives.

We must offer two quick caveats. First, you can never satisfy every stakeholder interest. Sometimes NGO concerns are misplaced. So don’t be shy about pushing back a bit. When Greenpeace leaned on shoemakers to reduce PVC use, Timberland questioned the level of pressure. The company was starting to phase out PVC in its shoes already, not to mention that the shoe industry was a very small player in the PVC problem. So Timberland refused to be intimidated. Why spend all your energy on the shoe companies, company ofﬁcials asked Greenpeace, when the construction industry uses dramatically more PVC? Shouldn’t the campaign focus at least some of its attention there? From Greenpeace’s point of view, shoes have big, customer-facing brands, and the construction industry does not. As Timberland’s Terry Kellogg recalls, “They came to our industry because they hoped to get traction on the issu e...anditworked.” But companies should push back if they have good reason. Of course, NGOs have exten- sive knowledge, but if you know your life-cycle issues better than they do—and you certainly should—they might listen. Address the real environmental problems, and most of the NGO community will get it, appreciate it, and potentially make a big public display of support. A second caveat: Don’t focus so much on stakeholder feelings that you forget to address real problems. It’s not all about buy-in and communication. Shell has gotten so enamored with stakeholder re- lations that it can sometimes fall prey to this problem. After Shell’s Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Why Environmental Initiatives Fail259 SAPREF crude oil reﬁnery in South Africa “signiﬁcantly” underre- ported air emissions, the company focused initially on the community and communications failures. These issues were real and important, but what about the actual emissions problems? Yes, feelings are facts, but sometimes facts are facts. HEAPING FAILURE ON FAILURE Some companies seem to have missed the lesson from the famous John- son & Johnson Tylenol scare in the 1980s. When seven people died from poisoned pills, the company immediately recalled millions of bottles, took responsibility, and refused to put Tylenol back on the shelves until it had developed tamper-proof packaging. In comparison, ExxonMobil has been battling in the courts over damages from the Valdezoil spill for almost two decades. Likewise, when a tanker run by French oil com- pany Total sank in 1999, the company mismanaged public perception badly. As an industry trade magazine said, “In the immediate aftermath, it seemed as if TotalFinaElf did not feel it was responsible. Six months after the accident took place, Total put out television adverts trying to tell people what they were doing. They went down badly ....Thedam- age to public opinion within France had already been done.” Waiting too long to say “mea culpa,” even when it’s unclear who’s at fault, can be much worse than being right. 13. FAILING TO TELL THE STORY Recently, a well-known company made a big public announcement about a new environmental policy—including a bold assertion that henceforth all employees would make decisions differently. But when we e-mailed a friend at the company and asked her how her job would be affected, she said, “This is the ﬁrst I heard of it.” Oops.

Is forgetting to tell the story internally a failure? You bet. How about missing the chance to tout your good deeds in general? Yes, a minor one, but it is a lost opportunity. Like the proverbial tree falling in the forest, does an initiative accomplish much if nobody knows about it? Eco-Advantage comes from taking action—and getting credit for it. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Solution: Storytelling and Green Marketing Companies need to tell their own employees what they’re doing. Ed- ucated employees ﬁnd even more opportunities for Eco-Advantage, and they inspire customers. Green marketing to the outside world also has its place and is a vital tool in the arsenal. If the actions are signiﬁcant and the environmental beneﬁts justiﬁed, then let everyone inside and outside the gates know about it.Many companies tell us that they don’t want to say something if it brings too many questions. Remember Levi’s silent switch to 2 percent organic cotton, with no marketing? The company was con- cerned that people would have questions about the other 98 percent.

In some cases, this concern is justiﬁed, and we’ve cautioned many times to avoid public statements that you can’t back up. But com- panies need to leverage clear wins. That’s how you build morale and momentum toward sustained Eco-Advantage. 260 Putting It All Together Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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ECO-ADVANTAGE BOTTOM LINE No set of strategies can guarantee success. Many environmental initia- tives, no matter how well designed and focused, will fail. But looking out for the pitfalls highlighted here will maximize the odds of success. Below, a quick review of the 13 Failures and the recommended solutions from the Eco-Advantage Toolkit. Failure Solutions and Tools 1. Seeing the trees but notthe forest — Know your own issues (AUDIO, LCA) — Data and metrics — Partnerships and outside perspectives 2. Misunderstanding the market — “Blocking and tackling” 3. Expecting a price premium — Green as the third button 4. Misunderstanding customers — Know customer limits and drivers 5. Middle-management squeeze — CEO commitment and guidance — Incentives — Engagement and training 6. Silo thinking — Value chain thinking — Life Cycle Assessment — Design for the Environment 7. Eco-isolation — Broad-based executive commitment— Ownership at the operational level — Cross-fertilization between environ-mental and line managers 8. Claims outpacing actions — Data and veriﬁcation — Internal vs. external goals 9. Surprises: Wasp stings and unintended conse- quences — Value chain thinking — Pilot programs — Conservative estimates of wins — A sense of humor 10. Perfect is the enemy of good — Anticipating and accepting tradeoffs — Extended perspectives 11. Inertia — Vision — Execution in bite-sized chunks 12. Ignoring stakeholders — Stakeholder maps— Partnerships — Know that feelings are facts 13. Failing to tell the story — Storytelling, both external and internal— TrainingEsty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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262 Chapter 11 Taking Action The plays, the mindset, even the tools for building Eco- Advantage mean little until they are translated into action.

Many companies have pieces of an environmental strategy in place, but few are systematic about driving environmental thinking into their approach to business.Because no two businesses are the same, every company has to plot its own Eco-Advantage path. We’ve found, how- ever, that the pace of progress is greater if certain things get done ﬁrst. In this chapter, we spell out an implementation plan and suggest a program of action. Broadly speaking, the agenda is:

• Short term: Find out where you stand and launch pilot projects.

• Medium term: Track performance and build an Eco- Advantage culture.

• Long term: Drive environmental thinking deep into the business strategy. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action263 SHORT-TERM ACTIONS: WHICH BALLS ARE IN THE AIR?

Lifting corporate environmental strategy to a higher plane begins with clarifying where the company stands and what needs to be done.

The Big Issues Business executives today must handle a wide range of competing concerns. Globalization, the spread of the Internet, outsourcing, cost pressures, competition from everywhere and anywhere—the list is getting longer and executives’ tenures shorter. In the environmental realm alone, the number of balls in play increases every day. In Chap- ters 2 and 3, we outlined ten big environmental problems and twenty players that can dramatically affect a company’s fortunes. Both lists are expanding, not contracting. Without some attempt to understand the issues and players, managers can quickly feel overwhelmed. They know they’re juggling a lot, but they aren’t sure which issues are just balls and which are ﬂaming chainsaws.

The short-term agenda, then, is to discover where to focus atten- tion. To get started, we recommend undertaking three kinds of anal- ysis centered on:

• the environmental issues that touch the business • what stakeholders think about the environmental performance of the company • whether the company has the capabilities it needs to address its environmental challenges 1. audio analysis: issue spotting To ﬁgure out which way to go, you have to know where you are.

Let’s go back to the AUDIO tool we discussed in Chapter 2. This grid has major environmental issues on one axis and ﬁve dimensions to explore on the other—Aspects, Upstream, Downstream, Issues, and Opportunities. AUDIO helps the company “listen” to the busi- ness and understand the concerns that must be managed up and down the value chain. Like a traditional “SWOT” analysis (strength, weaknesses, opportunities, and threats), AUDIO is a tool for spotting downside risks and upside opportunities. But the addition of the Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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264Putting It All Together value chain perspective represents a signiﬁcant reﬁnement on that basic tool.

To conduct the analysis, start quick and dirty. Begin by bringing a small group from across the company together and sketching a picture of the company’s portfolio of environmental problems. Start with internal people who have environmental responsibilities, but in- clude representatives from operations, design, marketing, purchasing, and customer service. Try, in just a couple of hours, to ﬁll out the AUDIO matrix. Don’t worry about the details or getting it all right.

Educated guesses are ﬁne. First, companies should ask themselves what Aspectsof these is- sues affect their own operations. Do we produce greenhouse gases?

Use a lot of energy? Pollute the air or water? Use a species of plant or animal in our products that might be threatened? Consume a great AUDIO Framework Challenge Aspects Up Down Issues Opps 1. Climate Change 2. Energy 3. Water 4. Biodiversity 5. Chemicals,Toxins, and Heavy Metals 6. Air Pollution 7. Waste Man-agement 8. Ozone LayerDepletion 9. Oceans andFisheries 10. Deforestation 11. Other Issues (industry-speciﬁc) Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action265 deal of land? Then, getting more granular: Which particular product lines have toxic elements? Do some divisions produce more of these effects than others? And so on.

Next, ask the same questions about each environmental problem looking Upstream from your own operations. Do our suppliers use a great deal of water? What primary materials are we ultimately sourcing from sub-suppliers, and which issues are pressing on them?

Look as far upstream as you can. Then look Downstreamand ask questions about customer use and the end of the product’s life. Is our product an energy hog? Does it pollute? What happens to our prod- ucts when customers are done with them? The next step is to look for vulnerabilities you need to address.

Walk back through all of the items highlighted under Aspects, Up- stream, and Downstream, and ask which elements create particular Issues or challenges for the company. Do some facilities or products depend on a steady supply of water? How will droughts affect those businesses or a supplier’s business? Are some lines of business highly energy dependent? What would happen to costs if U.S. greenhouse gas emissions were legally capped and the government imposed a carbon tax or trading system? Do we use hazardous substances in our products or production processes? What would happen if a state or federal government banned these substances? Asking yourself these types of questions protects you against surprises—forewarned is forearmed. Finally, brainstorm about the Opportunitiesthat these pressures give rise to. Are you the most energy efﬁcient producer in the market?

Or would controls on greenhouse gas emissions create opportunities for you? Can you help customers deal with the issues theyface?

Remember that every problem or challenge presents opportunities for someone. DuPont made money selling the substitutes after CFCs were banned for damaging the ozone layer. Champion Paper sup- ported spotted owl protection, knowing that its competitors had far more exposure to lands being taken out of timber production than it did. AUDIO is not meant to be a one-time tool. Companies need to regularly reexamine the environmental balls in the air. Issues evolve, and as they do, you need to rethink the implications for your busi- ness. Every time you go through the exercise, you’re likely to pick Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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266Putting It All Together up new issues or see new twists on old ones. In some areas, AUDIO will create more questions than answers. When that happens, bring in concrete tools such as the Life Cycle Assessment (LCA). Looking at key products along their value chain can highlight new concerns or conﬁrm the topline thinking from the AUDIO analysis. Either way, you’ll be wiser.

At their heart, AUDIO, LCA, and all the “lay of the land” tools help to establish the Eco-Advantage Mindset. They position managers to look at their work through an environmental lens and create sensitiv- ity to both challenges and opportunities. In a world of extended pro- ducer responsibility, they break a company out of its box and focus at- tention up and down the value chain, where environmental problems and opportunities can start. Use them to stretch thinking over time, across boundaries, and beyond the usual set of payoffs.

2. stakeholder mapping: what do outsiders think are the key environmental issues for the business?

It’s great to know the facts, but as we’ve shown, feelings matter, too.

You can do all the AUDIO and LCA analyses you want and still get blindsided if you’re not in touch with stakeholder concerns. Who are the key players you face? Figuring that out is a critical ﬁrst step. So we suggest creating a stakeholder map that will track:

• Rule-Makers and Watchdogs : NGOs, plaintiff ’s bar, regulators, and politicians.

• Idea Generators and Opinion Leaders : Media, think tanks, and academic institutions.

• Business Partners and Competitors : Industry associations, B2B buyers, competitors, and suppliers.

• Consumers and Community : CEO and executive peers, consumers, “the future” (kids), communities, and employees.

• Investors and Risk Assessors : Shareholders, analysts and the cap- ital markets, insurers, and banks.

Start by listing all the players you deal with now—or might want to connect with in the future—who fall into these categories. But think hard about groups or individuals that might be ﬂying under your radar. Next, prioritize relationships across this playing ﬁeld.

Which groups have the biggest impact today? Which might emerge Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action267 in the future? Follow that up with a few key questions: How much effort do we put into understanding the priority groups? Are there key individuals we need to get to know? Are we prepared for any concerns they might have?

Be sure to watch out for the classic battle between the urgent and important. It’s easy to get swayed toward the squeaky wheels. But in focusing on the urgent, you might miss some stakeholders who could torpedo you down the road if you’re unprepared. For example, banks may not seem vita l...right up until the moment they decline to fund a project because of environmental concerns or liabilities. Likewise, beware of inertia. Just because you’ve had a relationship with a par- ticular environmental group doesn’t mean they are the right NGO to work with.

Players Inﬂuence Map CURRENT LEVEL OF FOCUS HIGHER LOWER WEAKER STRONGER POWER AND INFLUENCE OF PLAYER RIGHT LEVEL OF ATTENTION • Media • NGOs • Plaintiff’s Bar • End Consumers (EU) • Government (U.S.) OVERRATED GROUPS • Shareholders • End Consumers (U.S.) RIGHT LEVEL OF ATTENTION • Industry Organizatons • Competitors • Institutional Investors (SRI) • Peers, Kids UNDERR ATED GROUPS • Employees • Banks • Insurers • B2B Buyers • Government (State, Local, Global) Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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To help you avoid these kinds of problems, we’ve developed a tool to help prioritize the stakeholder world (see ﬁgure). In this example, we’ve taken a cut at mapping the players for a hypothetical business.

First, array the players on two dimensions: (1) the power and inﬂu- ence they wield on your company and industry, from weak to strong, and (2) how much investment you’re making in understanding them and managing the relationship—the worry level, if you will, from low to high. Then group the players into four categories. In the upper right are the players deserving focus. They’re inﬂuential and they’re getting attention. The lower left shows the opposite: They’re not very pow- erful, and they’re not getting much attention. These two groups are being handled correctly. The other two groups are important. The upper left quadrant highlights groups that may be growing more powerful or to which you have previously under-attended. They need more focus than they’re currently getting. Groups in the lower right corner have been overrated and may be sucking time and resources away from more important relationships. No map of this sort perfectly portrays the playing ﬁeld for all companies, but it can help you to develop a big-picture view of which players are most urgent, which are important, and which can be put on the back burne r...fornow.

The short-term focus is systematic analysis. Clarify who and what you’ve got to think about in the environmental realm. Gap analysis—knowing what you don’t know— can be a big ﬁrst step. 268 Putting It All Together Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action269 3. core capabilities assessment: what can we do to improve the environmental proﬁle of the company? what are we best positioned to handle?

How does a company keep from getting bogged down when multiple environmental issues are vying for its attention? By focusing on the issues that matter most—and then determining what capabilities the company can bring to bear. For example, building on its technolog- ical strength, Toyota has emphasized the design of fuel-efﬁcient cars.

Moreover, Toyota has prioritized being the leanest manufacturer in the world. Pursuing excellence in the “Toyota Way” produces eco- efﬁciencies as a matter of course, without launching any special green manufacturing initiative.

We’re not saying that companies shouldn’t tackle issues beyond their normal scope. But they should do it in a smart way that lev- erages their talents. If the issue is tangential but still matters, look for partners. All the members of the Paper Working Group buy a great deal of paper. For some, like Time Inc. or Staples, paper policies are a real business risk. Working with other companies, they have a shot at changing the market. For other group members, such as Bank of America or HP, paper is an important but secondary issue to the core business. For those companies, partnering with others saves enormous time and resources. The bottom line: Know yourself—your strengths, your weaknesses, and your resources for change. Then match that self-assessment with the environmental issues most pressing on your business. Only then will you know where you can score the most points.

First Actions After the basic analyses have been completed, visible actions must follow quickly. It’s important to put some quick points on the board to build momentum. We recommend three steps to focus everyone on successful execution.

1. ceo statement Companies with no history of environmental thinking—and even those with some track record—need a statement from the boss com- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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270Putting It All Together mitting the company to environmental values and goals. Upfront commitment plants the seeds of an Eco-Advantage culture, which the medium- and long-term action items will harvest.

Pushing the message out across the company is also important.

This process often starts with a CEO conversation with top manag- ers. Successful rollout then generally requires a broader statement to all employees, laying out an environmental vision and listing speciﬁc goals. A public statement should wait until real action is underway in the medium- or long-term. When companies get this backwards, they can look pretty dumb.

2. priority action plan If you’ve followed our action plan so far, you should know what environmental issues most touch your company, what outsiders are thinking about your eco-proﬁle, and what your internal strengths and weaknesses are. Now is the time to develop short-term action plans to address the most pressing matters and to ﬁll critical gaps in the company’s environmental capacity. Setting out a clear and tight time- table of no longer than six months for this phase will help to gal- vanize action across the company.

3. pilot projects In 2004, Citigroup and Environmental Defense joined forces for a ﬁve-week test of some new paper policies. In a handful of ofﬁces, the company bought 30 percent recycled paper for printers and made double-sided copies the standard. The test alone saved ten tons of paper, $100,000, and twenty-eight tons of greenhouse gases from reduced energy in paper making. Numbers like these make en- vironmental initiatives much easier to pitch to the whole organiza- tion. Pilot projects also provide a good way for a service business to enter the environmental fray. For many of them, pollution control and natural resource management issues can seem remote. But a well- designed “get your feet wet” exercise can help to highlight the com- pany’s connections to environmental challenges—and get people into the spirit of Eco-Advantage. We’ve seen companies executing these pilot projects at all scales. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action271 Small initiatives like Citigroup’s recycled paper project can rack up early successes. Medium-term investments are useful for vetting ideas that require big ﬁnancial investments. IKEA and Wal-Mart, for ex- ample, have both created model eco-stores that try out energy-saving techniques. Other pilot projects can take years. Unilever runs test farms all over the world with key crops such as peas, palm oil, and tomatoes. The company is experimenting with low-impact farming methods, with very encouraging results. Some farms have doubled their yield while cutting pesticide use by 90 percent and water use by 70 percent. Armed with on-the-ground experience, Unilever can gauge the investment needed and expected returns—laying the foun- dation for a broader rollout.

MEDIUM-TERM ACTIONS:

EMBEDDING AN ECO-ADVANTAGE MINDSET While the short-term focus is on understanding environmental risks and opportunities, the medium-term agenda lets you leverage what you’ve learned and execute on it. In this phase, companies embed environmental thinking across the business. They advance their Eco- Tracking Tools and build an Eco-Advantage Culture. Remember the proverbial ﬂywheel in Jim Collins’s Good to Great? Here’s where companies start leaning in, pushing hard, and gaining momentum.

They develop a strategic approach to environmental issues, which makes spotting opportunities for Eco-Advantage a more natural part of the business. During this critical middle period, implementation should center on ﬁve areas: eco-tracking and management systems, employee own- ership, communications to and from the outside world, internal ed- ucation, and over-the-horizon scanning.

1. eco-tracking and management systems Once you make the environment a business focus, eco-tracking and measuring progress become essential, as does development of a good environmental management system. Start by ensuring that you track compliance with all relevant laws. Recall GE’s PowerSuite, which keeps an eye on a full range of issues company-wide, or by region, Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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272Putting It All Together country, division, facility, and even production line. Be sure you’re tracking regulatory requirements. Then move beyond compliance to track outcome metrics, such as greenhouse gas emissions, air pollut- ants, water use, and waste. Finally, add indicators that ﬁt the com- pany’s culture to provide benchmarks and drive performance. Du- Pont’s “strategic value added per pound of product” helps the company focus on how to create more value with less stuff.

The medium-term is also a good time to start collecting available information on supplier performance and building a materials data- base for key products. As most companies know, effective large-scale database projects can take years, not months, and usually cost more than what’s budgeted. So start sooner rather than later. Data-driven environmental management is becoming the norm.

Companies that use indicators and information technology strategi- cally stay a step ahead of the competition. They know where the real life-cycle impacts are, where their weaknesses and strengths lie, and where to ﬁnd opportunities to help customers. Good data lays the foundation for generating Eco-Advantage.

2. engagement and ownership When we gauge a company’s progress toward an Eco-Advantage Mindset, one of the ﬁrst things we look for is accountability. Do executives up and down the line feel ownership of environmental goals? Does their environmental performance affect their compen- sation? The bonus and performance review system should reﬂect environ- mental thinking in some way. As we’ve noted earlier, many Wave- Riders tie compensation to environmental key performance indica- tors. Up to 25 percent of a manager’s bonus can ride on these KPIs.

The exact amount isn’t vital, only that it’s a noticeable part of the equation. A few leading companies ﬁnd their cultural commitment to environmental issues so strong that they don’t need to make it a part of the monetary reward system. But even in those cases, job reviews and career prospects reﬂect commitment to the company’s values—you get promoted only if you “get it.” Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action273 WaveRiders structure incentives to advance environmental strategy. They build environmental elements into job descriptions, regular performance reviews, bonuses, and awards. 3. external communications Regular communications with outside advisors and critics can keep a company abreast of environmental developments. Experts will highlight some of the issues that are on the rise or should get more attention in the AUDIO analysis. Reaching out to people beyond your comfort zone will give you a ﬁrst-person heads-up on com- plaints before someone launches a nasty protest or hostile web cam- paign.

NGO contacts and independent perspectives do more than control downside risk. They can help companies benchmark their perfor- mance, ﬁnd Eco-Advantage opportunities, and develop creative so- lutions to problems. Consider setting up an Environmental or Sus- tainability (or Stewardship or Corporate Social Responsibility) Advisory Board. When Coca-Cola ran into a series of high-proﬁle environmental problems over water use in India and refrigerants at the Olympic Games, one of us (Dan) helped then-CEO Doug Daft to create such a board. The group included energy maven Amory Lovins, green design expert Bill McDonough, and other experts from nearly every continent. The members meet twice annually to review Coca-Cola’s environmental performance and help the company scan the horizon for emerging issues and concerns. Learning from outsiders helps to ﬁll the in-box with ideas, but companies need out-going messages, too. An environmental or CSR report is one step. For big enterprises, such reports are essential, but even for small and mid-sized companies, the exercise of producing one can help to focus attention, highlight issues, and bring oppor- tunities for Eco-Advantage to the fore. The report should cover key Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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274Putting It All Together metrics over time, both in absolute and relative terms. Paper copies are unnecessary if a company does a good online version, with the added advantage that an e-report can be continuously updated.

Finally, regular communications with some speciﬁc stakeholder groups is vital. Dell now has quarterly meetings with key players in the Socially Responsible Investment community. Chairman Michael Dell or CEO Kevin Rollins personally attend at least annually. These meetings mirror the long-standing practice in publicly held compa- nies of holding quarterly analysis calls. Likewise, Northeast Utilities hosts an annual NGO day when they invite prominent environmental and community groups in for lunch and conversation.

4. internal communication and education Of the twenty stakeholders in our players wheel, the most signiﬁcant might well be employees. They make or break not only environmen- tal initiatives, but the company’s future in general. To succeed they need inspiration, information, and the right set of tools. Most WaveRiders do a good job of “knowledge management.” Whether it’s an intranet with examples of eco-efﬁciency from facilities around the world or more formal multiday training sessions, they spread the word on best practices. Companies like 3M and Northeast Utilities also help middle management deal with the pressures they face with special training on “hard choices.” Niche communications to a narrow internal audience also can be extremely useful. Dell, after taking it on the chin for a few years, has ramped up its stakeholder engagement efforts from virtually nothing to world-class in short order. Executives realized that part of the company’s challenge stemmed from a general lack of knowledge within the company about these outside audiences. The solution was a quarterly newsletter sent to internal departments, as well as outside interests, describing the objectives, activities, and tactics of different stakeholder groups. Spreading this knowledge widely, Dell believes, will help its employees make better business decisions that keep stakeholder needs in mind. Don’t forget to encourage employees to read your environmental and CSR reports. Workers enjoy seeing what the company is doing right and hearing an honest appraisal of what’s not going well. Giv- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action275 ing employees something else to feel good about drives passion and morale in the workplace.

5. over-the-horizon scanning Shell’s Scenarios group is perhaps the most famous example of cor- porate long-term thinking. These people think big thoughts, ask about alternative futures, and map out what the world might look like in the hydrogen economy or if geo-politics go sour. Very few companies need a group of this scale and breadth of perspective. But most companies could beneﬁt from some formal process for looking over the horizon.

At the very least, a company should periodically pull together peo- ple from all over the organization and think about the big picture.

In particular, managers working abroad often know about regula- tions and other trends that may change the global marketplace. Mar- keting executives may spot evolving consumer preferences. And pur- chasing managers may have a perspective on what’s going on with suppliers. All this vital intelligence will be for naught unless some- body is given the responsibility for pulling it together. The scanning exercise should address any issues highlighted in the AUDIO analysis but also consider longer-term pressures and market dynamics. AUDIO focuses speciﬁcally on direct impacts on the com- pany and its value chain, while the over-the-horizon analysis looks for business drivers, trends, and developments that could shift entire industries or remake markets. What you’re shooting for is advance warning about new issues and a rough assessment of the impact these variables could have on the company’s markets, ﬁnancial position, and assets. What might cli- mate change do to our competitive position? Are we contributors to the problem or possible solution providers? In 1996, mining giant Rio Tinto held the ﬁrst of many planning sessions on business drivers, which, as Dave Richards says, “could hurt us if ignored and be our friends if we manage them well.” The team identiﬁed a series of growing problems that could constrain company growth—including water, human rights, and biodiversity— and launched Rio Tinto’s efforts to mine with a lower impact on the land. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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276Putting It All Together Scanning can take a company to some potentially surprising places.

Remember McDonald’s and the mercury button batteries. The ﬁrst meeting where someone mentioned those as a potential problem for a company famous for Big Macs must have seemed a bit odd. But the long-range thinking helped McDonald’s avoid a public relations nightmare. Or take Dell, where top managers were blindsided by the intensity of an aggressive NGO campaigning against e-waste. Never again, they vowed. So they’ve started exploring seemingly secondary issues, such as the environmental effects of the mining that produces the precious metals in their products.

In over-the-horizon scanning, look for items on the public agenda that seem to be increasing in intensity, even if they are only tangential to your business.

Tracking second- and third-order connections can help you spot emerging business drivers. Brainstorming about how to respond to these trends can stoke innovative thinking about cutting costs, reducing risks, launching new products or services, and increasing intangible value. LONG-TERM ACTIONS: MAKING ENVIRONMENT A CORE ELEMENT OF CORPORATE STRATEGY As an Eco-Advantage Mindset takes hold, a few more steps emerge that can carry a company’s thinking to a new level: (1) supply chain auditing, (2) rethinking products and reexamining markets, and (3) building partnerships with key external stakeholders. These three steps drive environmental thinking deep into business strategy and sustain Eco-Advantage for the long haul. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action277 1. supply chain auditing A lot of big companies review their supply chains for environmental and social issues—or so they claim. For many, the “audit” is little more than a formality that creates paperwork for suppliers. The au- ditor asks a few basic questions, often narrowly focused on whether the suppliers are complying with the law, and that’s where the review ends. Yes, pressure back through the chain to make sure everyone is following the law is a good thing. But focusing on compliance isn’t enough today—and certainly won’t generate Eco-Advantage.

As we described in Chapter 7, IKEA has one of the most thorough supplier audit programs in the world. The company dedicates dozens of employees and millions of dollars to diving into the supply chain and asking detailed questions about environmental and social per- formance. For IKEA, the IWAY program not only serves to ﬂag brand-threatening risks, it also helps managers understand their busi- ness better. Auditing the supply chain is a challenge. Unless you have real mar- ket power, it’s hard to get all the information you’d like. But as efforts on this front heat up, smaller companies have an opportunity to piggy-back on what the big brands are already doing. If a company buys from an IWAY-compliant supplier, for example, it can be sure that company has been checked out thoroughly.

2. rethinking products and reexamining markets In the long run, making your own operations as eco-efﬁcient as pos- sible could be the margin of survival in a cost-conscious world. Con- centrating on eco-efﬁciency almost inevitably raises fundamental questions about markets, products, and services. Can we storm the marketplace by taking advantage of changing environmental circum- stances or regulations? Can we create breakthrough products to cut our customer’s environmental burden or capture new green custom- ers? Or entirely reconceive the way we operate to improve resource productivity and slash costs? The answers to those questions are what Eco-Advantage is built on. But let’s face it—sales growth is what gets CEOs and shareholders excited. New products with an eco-twist can grab customer attention Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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278Putting It All Together and move the top line. WaveRiders have learned that you can turn green into gold when you cross-breed environmental awareness with good design.

In this spirit, Intel co-located designers and environmental pro- fessionals as an innovation strategy. At a more mundane level, IKEA developed a simple graphic of four life-cycle phases—raw materials, manufacturing, use, and end-of-life—which it calls the eWheel.

IKEA product designers use a list of twenty-ﬁve key questions fo- cused on these four stages, such as: Did I minimize use of chemicals like glue and paint? Can we make this with suppliers who are rated the highest in the IWAY supplier program? Is the product easy to disassemble? Similarly, Herman Miller guides its designers toward eco-friendly results with its simple “red, yellow, green” system.

Based on the materials they choose, each product gets a total score—more points for green materials—which gives designers something to shoot for. Going past redesign to reimagination can be even more exciting.

3 M’s famous “work on what you like for 15 percent of your time” rule is the kind of organizational guideline that helps. Google has picked up on this tactic, and has its own 10 percent rule for following “unrelated projects” and wild, out-there ideas. It’s clearly working for them. Giving employees these open spaces to rethink how the company, industry, or world works is a great way to push through boundaries and inspire employees. It takes time to build a culture that spurs innovation, but it’s almost always worth it.

3. stakeholder management and partnerships More than one WaveRider told us that they started out with a dis- missive or defensive attitude toward NGOs and other outside groups.

Once they began to meet with stakeholders, though, they realized the value of reaching out and seeing their companies through the eyes of others. Partnerships with NGOs, communities, and other organiza- tions broaden understanding and provide a useful mechanism for feedback and learning. Despite the diversity of players in a Green Wave world, govern- ments remain a powerful force deﬁning the marketplace and the rules of the game. But the roles these ofﬁcials play are evolving, and smart companies are watching for new opportunities to engage. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action279 Connections to idea generators—academics, think tanks, and re- search centers—can also pay big dividends in a knowledge economy.

WaveRiders are launching joint ventures of all types with these play- ers, using these relationships as a source of new ideas, gaining in- sights into the direction technology is moving, and benchmarking their efforts against cutting-edge thinking. If problems are large scale, long term, or require a major invest- ment in infrastructure, industry partnerships might make the most sense. Sometimes it’s worthwhile to pool your clout and share knowledge. For example, German companies found it useful to work together to develop the Green Point system, a private waste collection infrastructure they needed to meet the country’s stringent take-back laws for product packaging. When the burden of handling an issue company-by-company will weigh down a whole industry, working together may be the right answer. There can be strength in numbers.

Steps to Develop a More Complete Stakeholder Strategy As challenging, and interesting, as our earlier mapping exercise may seem, it’s really only the ﬁrst step in a comprehensive stake- holder engagement strategy. Our two-by-two matrix is a way to brainstorm about who the relevant groups and individuals might be.

It forces a systematic review of the 20 categories to help identify gaps. A complete stakeholder approach goes much further. It starts by helping to alert you to the full range of groups and actors that could impinge on your business. It then provides a way to hone in on key entities to track more carefully and perhaps engage with more deeply.

And it offers a mechanism for identifying and evaluating potential partnerships. The following steps form a funnel that allows thinking to start broad and then narrow:

1. Brainstorming. As we suggested as a short-term action, it’s crit- ical to ﬁgure out which groups work on the issues you face. You want to identify friendly stakeholders—and those who are less so.

As silly as it sounds, Googling your company’s name can locate many pockets of concern. Has someone launched a website with a URL that reads something like [yourcompany]sucks.com? If so, who did it and what’s the beef? What are the major NGOs saying about you or your industry? Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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280Putting It All Together 2. Grading and scoring key stakeholders. To determine which en- tities or groups deserve focus, we suggest rating stakeholders, partic- ularly NGOs, on three dimensions:

• Power and inﬂuence • Credibility and legitimacy • Issue urgency both to you and the stakeholder 3. Stakeholder engagement evaluation. The most important stake- holders—those whom you grade highly on two or three of the di- Stakeholder Engagement Evaluation Matrix ISSUE INTENSITY HIGHER LOWER LOWER HIGHER POTENTIAL FOR COOPERATION COLLABORATE DEFEND MONITOR CONNECT Source: Based on Savage, et al. (1991) Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Taking Action281 mensions—require further attention. To determine how best to han- dle these entities, another simple two-by-two matrix may prove to be useful (see ﬁgure). It provides a way to map stakeholders based on: (a) how cooperative (as opposed to confrontational) the group is and (b) the intensity of your interest in the issues they address. This matrix clariﬁes what sort of engagement is optimal for each group.

Should you just monitor their activities? Try to connect with them?

Work to defend against them? Or take the leap and collaborate with them?

4. Compatibility assessment. The short list of organizations and people in that top right box provides a good starting point for think- ing about possible entities with which to work closely or even partner on a project. Before contemplating a full-ﬂedged partnership, how- ever, it’s useful to evaluate rigorously how compatible the group would really be. What is their over-arching vision? On what issues do they focus? What is their general mode of operation (conﬂict or collaboration)? Does their style and organizational culture match yours? Do their strengths complement yours?

5. Due diligence on potential partners. Once you’ve identiﬁed a compatible partner, you need to dig deeper. Is their leadership strong? Are their ﬁnances stable? Who funds them? Are they trans- parent about their funding and governance? How effective are they at achieving their goals? Do they seem like good people to work with?

6. Determination of partnership strategy. Before launching a part- nership, you’ll need to develop a game plan for success. What are the goals of the joint venture? Who will do what in the partnership?

Are responsibilities clear? Have the necessary resource commitments been spelled out? What does success look like? This may all sound a bit dizzying. There is, however, no real choice. Simply put, we live in a world of rising transparency and emboldened stakeholders. Corporate success now requires careful at- tention to a wide range of relationships. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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282Putting It All Together THE ECO-ADVANTAGE BOTTOM LINE We suggest breaking up the action plan to promote Eco-Advantage into the short-term (0 to 6 months), medium-term (6 to 18 months), and long-term (18 months and beyond). Short-term actions should focus on baseline analyses and ﬁrst steps toward developing an environmental strategy:

•AUDIO analysis—Issue spotting •Stakeholder mapping •Core capabilities assessment •CEO statement of commitment •Priority action plans •Pilot projects Medium-term actions should seek to embed an Eco-Advantage Mindset in the company culture:

•Setting up eco-tracking and environmental management systems •Promoting engagement and ownership •Developing external communications and outreach •Strengthening internal communication and education efforts •Over-the-horizon scanning Long-term actions should center on making environment a core element of strategy. This will require advanced Eco-Advantage tools and exercises:

•Supply chain auditing •Rethinking products and reexamining markets •Stakeholder management and partnerships Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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283 Chapter 12 Eco-Advantage Strategy In Michael Porter’s highly regarded strategy model, compa- nies gain competitive advantage by lowering costs or differ- entiating products. But today the traditional points of com- petitive differentiation are being squeezed on all sides.

Outsourcing—and the lower labor costs it promises—is available to almost any business, big or small. Other once unassailable sources of advantage, such as access to capital or low-cost raw materials, are disappearing as markets go global. Competitive advantages are becoming ever more dif- ﬁcult to establish and maintain.

This restructured landscape requires reﬁned business strat- egy. The capacity for innovation—bringing imagination to bear to solve problems and respond to human needs—lies at the heart of success. Companies must ﬁnd new ways to break out of the pack. Those that don’t will struggle to keep up in the marketplace. Environmental strategy offers just this sort of opportunity.

As a relatively new variable in the competitive mix and a Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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284Putting It All Together market-reshaping issue, the environment presents a lens through which to examine a facility, company, or industry—and a way to bring fresh thinking to bear. Careful use of the environmental per- spective can help to reduce costs and risks. But it also can drive upside gains, increasing revenues and the value of hard-to-measure but important intangibles such as reputation. Finding new market spaces, satisfying customers’ needs in new ways, and just plain doing the right thing—which many important stakeholders appreciate and reward—all have the potential to add real value.

The business world is waking up to an inevitable and unavoidable truth: The economy and the environment are deeply intertwined. All goods depend on the bounty of Nature and the services it provides.

Without careful stewardship, natural resource constraints will en- croach on a growing number of companies and industries. Concern about these trends is driving laws, rules, and expectations that will further restrain business. The environment thus ranks as a macro- issue right up there with globalization, the Internet, and the other megaforces that keep CEOs up at night. In this new, more compli- cated and interconnected world, environmental strategy emerges as a critical point of competitive differentiation. In the very near future, no company will be positioned for industry leadership and sustained proﬁtability without factoring environmental issues into its strategy.

Strategy no longer rests in the hands of narrowly focused planning teams. Today, every company’s ﬁnancial future depends on execu- tives who possess the ability for integrated thinking. The companies “in the barrel” of the Green Wave adeptly incorporate the environ- ment into their core strategy. They work with a dynamic and holistic vision of how a company operates and engage the full range of stake- holders who can shape the company’s future. They create enduring Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy285 Eco-Advantage Strategy ECO-ADVANTAGE SUSTAINEDVALUE HURDLES PLANNING ORGANIZATION ECO-ADVANTAGE MINDSET GREEN-TO-GOLDPLAYS SUBSTANCE ECO-TRACKING REDESIGN CULTURE PLAYERS NATURALFORCES COST RISK REVENUE INTANGIBLES Eco-Advantage by thinking differently, adopting tools to understand their companies’ environmental challenges and opportunities, and embedding attention to stewardship in their corporate values.

We see four foundational elements—an Eco-Advantage Mindset, Eco-Tracking, Redesign, and Culture—underpinning environment- driven innovation. In this chapter, we review how to develop these critical supports. We also explore the forces inﬂuencing companies, the Green-to-Gold Plays that offer a way to get ahead of the com- petitive pack, and the hurdles to avoid on the way to Eco-Advantage. We bring these elements together in a complete picture of environ- mental strategy (see ﬁgure). The adept use of the Eco-Advantage Toolkit drives successful execution of the Green-to-Gold Plays. Nat- ural forces and a range of players exert signiﬁcant inﬂuence on the process. Companies face many hurdles and risks of failure on the Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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286Putting It All Together way to Eco-Advantage. But those who persist and learn from expe- rience ﬁnd ways to innovate, create value, and build competitive ad- vantage.

THE PRESSURES: NATURAL FORCES AND PLAYERS We started this book with stories of companies at various stages of dealing with environmental issues. Sony, having learned a hard lesson with its PlayStation game systems, spent over $100 million building a supplier audit system to catch problems before they emerge. BP, while it was “looking for carbon,” found a range of efﬁciency gains and discovered an astonishing $1.5 billion in value waiting to be unlocked. And Wal-Mart, GE, and Goldman Sachs, in moves that the companies’ previous leaders might ﬁnd surreal, have launched major environmental initiatives. After years of neglect, considerations of the environment have grown in importance. So let’s return to our opening question: What’s going on?

In short, a Green Wave is sweeping the business community, pro- pelled by two fundamental forces: (1) environmental stresses and (2) a world of people who are insisting that the business community take action in response. These drivers are transforming market dynamics.

They are rendering old ways of doing business obsolete—and im- posing challenges that every company, from multinational corpora- tions to mom-and-pop shops, must face. But this realignment also creates opportunities for Eco-Advantage.

The Natural Forces Under the Wave lies an assortment of local, regional, national, and global environmental problems that constrain business choices and require management attention. Some of the issues in play, from water shortages to climate change, threaten to restructure markets (as well as the planet) in fundamental ways. Others will have smaller impacts. But all provide opportunities for those who respond most creatively. In Chapter 2, we presented ten critical environmental issues with which every executive must be familiar (see box for recap). Some, such as ozone layer depletion, are being managed pretty well already. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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TOP 10 ENVIRONMENTAL PROBLEMS •Climate Change : The build-up of greenhouse gases in the atmosphere threatens to lead to global warming and the accompanying rising sea levels, changed rainfall patterns, and increased intensity of storms.

•Energy : A carbon-constrained future will require a shift toward new modes of power generation and sustainable energy or new technologies for cleanly burning fossil fuels.

•Water: Water-quality issues and water shortages are threatening licenses to operate and constraining business activities all around the globe.

•Biodiversity and Land Use : Ecosystems play a critical role as life support for both humans and nature. Unmanaged development undermines this capacity through habitat destruction, loss of open space, and species decline.

•Chemicals, Toxins, and Heavy Metals : These contaminants create a risk of cancer, reproductive harm, and other health issues in humans, plants, and animals.

•Air Pollution : Smog, particulates, and volatile organic compounds pose a risk to public health, especially in the developing world where trends are worsening. Indoor air pollution is now recognized as an added problem.

•Waste Management : Many communities still struggle with the disposal of their solid and toxic waste, especially in countries that are industrializing and becoming more urban.

•Ozone Layer Depletion : Depletion has been substantially reduced by phasing out CFCs, but some substitutes continue to cause thinning of the Earth’s protective ozone shield.

•Oceans and Fisheries : Overﬁshing, pollution, and climate change have depleted ﬁsh stocks and damaged marine ecosystems across the Seven Seas.

•Deforestation : Unsustainable timber harvesting plagues many parts of the world, leading to soil erosion, water pollution, increased risk of ﬂooding, and scarred landscapes. Eco-Advantage Strategy 287Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Others verge on crisis. The most pressing issues, like climate change, promise to affect every business, large and small, in every industry.

Others are strategically important for business only in certain con- texts. And there are a dozen more issues with industry-speciﬁc im- pacts that could also be signiﬁcant.What makes these pressures a matter of business strategy is one simple truth: Our economy rests on the asset base of the natural world, not the other way around. Where resources are threatened, ripples will move through society and across the corporate world. These issues are complicated. The fact that the underlying science is often complex, even contradictory at times, makes the situation even more volatile and environmental policymaking highly contested.

Some public policy choices could drive whole industries into obso- lescence. Can the coal business survive in a carbon-constrained world? We can be sure that those affected will not go quietly. In fact, coal companies are struggling mightily to resist pressures for action on climate change. On the other side of the ledger are companies and industries that will be crippled if we don’ttake action to stem environmental losses.

The skiing industry won’t suffer alone if global warming hits as hard as many fear. And everyone’s insurance costs will rise if reinsurers jack up rates to handle the growing claims from climate change– related natural disasters. The diversity of issues, variety of interests, and range of scientiﬁc uncertainties can be daunting. But executives can’t just throw up their hands in despair and confusion. Companies need to stay on top of these challenges no matter how complex, both to reduce risk and to pounce on emerging opportunities. SCIENTIFIC UNCERTAINTY After a CEO pow-wow on climate change, Cinergy CEO Jim Rogers said, “Forget the science debate. The regulations will change someday. And if we’re not ready, we’re in trouble.” He’s voicing a tough reality. Even without absolute scientiﬁc certainty, the list of issues that business can’t avoid is growing. The reality is that environmental problems will ﬁnd you whether or not you care to be inconvenienced by them. 288 Putting It All Together Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy289 The Players An evolving set of stakeholders who care about these issues and wield inﬂuence over corporate behavior are adding to the momentum be- hind the Green Wave. In the traditional B-school strategy, companies are led by charismatic leaders who make bold decisions, inﬂuenced by only a handful of actors: competitors, customers, “channels” (sup- pliers and distribution), and maybe government regulators. And all of these players are subservient to the almighty shareholder.

The balance of power hasn’t entirely changed, but CEOs have cause to feel like the ground is shifting beneath their feet. New stake- holders are asking tough questions about social and environmental performance. Civil society in general, and environmental NGOs in particular, have emerged as forces to be reckoned with. Coordinated action against irresponsible corporations has never been easier thanks to e-mail, the Internet, and other modern communications technol- ogies. And activist shareholders, including large mainstream invest- ment companies, have suddenly found their voice. Nervous boards now watch over the shoulders of CEOs like never before. As difﬁcult as it is, ignoring these drivers of today’s business reality is even more unwise. Sure, a few remaining corporate titans still think that most environmental issues are over-blown creations of some Birkenstock-wearing, tree-hugging fringe element. As misguided as this caricature may be, the truth is actually beside the point. The concern around these issues is broad enough that every director, ex- ecutive, and manager must pay attention to the Green Wave. Anyone who thinks he or she can avoid it risks being drowned by the growing array of legal requirements—like those laid out in the Sarbanes- Oxley law—that mandate attention to potential “material” issues, including environmental challenges. Our research has identiﬁed an array of twenty Green Wave players, some marginal for the time being, but many more growing in power and importance. These stakeholders break into ﬁve groups: Rulemakers and Watchdogs: NGOs, regulators, politicians, and the plaintiff ’s bar. The array of players in this category is expanding both “vertically” and “horizontally.” National regulators in many regions, particularly the European Union, are growing more aggres- sive. But down the vertical scale, regional, state, and local govern- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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290Putting It All Together ments are getting involved in environmental issues in ways they never have before. American states, for instance, are setting their own re- newable energy goals. And U.S. mayors are agreeing, on their own, to implement the climate change emissions reductions targets of the Kyoto Protocol. Go up the vertical dimension and you’ll see continent-wide regulations like the EU’s laws on chemicals and elec- tronics. At the largest scale, calls for global regulations on a range of environmental issues are growing.

On the horizontal dimension we see an increasing breadth of power centers. Companies must track not only the requirements of governments but also the demands of an incredible diversity of NGOs and other self-appointed watchdogs (like bloggers). These new play- ers can do great damage to a company’s reputation quickly. And the Internet only makes it easier to turn the slightest corporate misstep into an international incident. But the news is not all bad for com- panies. An explosion of partnerships has created dynamic alliances between former adversaries. NGOs are working with, not against , business like never before. Idea Generators and Opinion Leaders: Media, think tanks, and academics. In today’s innovation-driven world, being connected to those creating knowledge, launching ideas, and shaping the political dialogue provides a competitive leg up. To tap top thinkers, Wave- Riders have launched partnerships with academic institutions and research centers around the world. Business Partners and Competitors: Industry associations, compet- itors, business-to-business buyers, and suppliers. Businesses are now ﬁnding ways to work together for environmental gain and to get ahead of the issues. The trend started twenty years ago with the chemical industry and its Responsible Care program and has blos- somed since. Electronics companies have joined together to set supply chain standards. Big energy users formed the Green Power Market Devel- opment Group to encourage renewable energy development. A range of paper buyers, from Staples to Toyota, formed the Paper Working Group to coordinate the requirements they’ll ask paper suppliers to meet, in effect imposing a privately determined set of environmental standards. The pressure for change usually starts with big brands, but the Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy291 effects are felt on obscure midsized companies caught in the web. A few years ago, Home Depot changed its procurement policies to elim- inate products that originated in endangered forests. In response, the ﬂooring company Romanoff changed one of its products from ply- wood to renewable wheat straw. As President Douglas Romanoff said, “The Home Depot purchasing polic y...hasproduced a direct ripple effect that has resulted in a signiﬁcant change in the material we will use in the future.” Consumers and Community: CEO and executive peers, consumers, kids, and communities. When an environmental boycott works, it’s impressive. In the wake of the famous Brent Spar oil platform inci- dent in the mid-1990s, a million Europeans cut up Shell credit cards.

The company took notice and set off on a decade-long quest to im- prove stakeholder relations. And the list of those who might call you out is expanding. Investors and Risk Assessors: Employees, shareholders, insurers, capital markets, and banks. As every executive knows, in today’s knowledge-based economy, capturing the best and the brightest is not just helpful, it’s essential. Before the most talented workers invest their time and energy in a company, they increasingly ask what a potential employer stands for. They want to work for companies whose corporate values are in harmony with their own world- views. Traditional investors have emerged as the new 800-pound gorilla in the environmental space. Led ﬁrst by insurers and now joined by major banks, the ﬁnanciers have started to look hard at environmen- tal risks and liabilities. Over forty banks have signed on to the Equa- tor Principles, which demand thorough environmental reviews before loans are approved. But the Principles are just the starting point.

Goldman Sachs, JPMorgan, Citibank, and many others are wrapping environmental considerations into lending decisions in dramatic new ways. ABN AMRO, one of the founders of the Equator Principles, has developed a new way of looking at its portfolio of loans. The com- pany charts borrowers on a classic two-by-two matrix, with capacity to handle and mitigate environmental risks on one axis and com- mitment to do so on the other. In the near future, ABN AMRO hopes to graph all potential loans against these criteria. Upper-right quad- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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292Putting It All Together rant loans—with borrowers who “get it” and have the means to ﬁx any environmental issues—would be no-brainers. Deals falling in the upper-left or lower-right quadrants would require some work on the borrower’s part. Loans to those in the lower-left corner—the un- willing and unable—would not be made.

ECO-ADVANTAGE TOOLKIT To be successful in integrating the environment into business strategy, companies need to cultivate an Eco-Advantage Mindset backed by a set of tools, including Eco-Tracking, Culture, and Redesign.

Eco-Advantage Mindset During our interviews with dozens of companies, we looked for what made them effective at bringing environmental considerations into the mix with other business goals. We found an overarching set of ﬁve principles that guided their thinking.

1. Look at the forest, not the trees. WaveRiders think broadly about time, payoffs, and boundaries. They make decisions with the long- term in mind, positioning themselves for a tighter regulatory framework, rising consumer expectations, and market realignment driven by natural constraints. WaveRiders also include intangible beneﬁts in their payoff calculations. They put a value on things like lower risk, higher employee retention, stronger customer loy- alty, and bolstered brand value. Finally, they think beyond their own operations and look at the whole value chain, from raw ma- terials and suppliers to customer environmental needs and desires to product end-of-life.

2. Start at the top. All the WaveRiders have “C-level” support for their efforts to seek Eco-Advantage. Start with CEO commitment.

That alone won’t put you over the top, but no company will get far without it.

3. Adopt the Apollo 13 Principle. Don’t take no for an answer. Com- panies and industries have time and again shown incredible crea- tivity in solving seemingly intractable environmental problems.

WaveRiders focus on innovation and getting people to use an en- vironmental lens to think about their work in a new way. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy293 4. Recognize that feelings are facts. Leading companies know that they have to deal with what communities, NGOs, and other stake- holders feelthe big environmental issues are. Instead of blindly defending their own position or downplaying others’ concerns, they recognize the need to meet people where theystand. They don’t let outsiders dictate the agenda, but they do establish a dia- logue with friends and foes alike.

5. Do the right thing. It’s amazing how often we were told that a sincere belief in doing what’s right was behind WaveRider deci- sions. Values do matter.

Eco-Tracking The next element of the Toolkit is a systematic approach to capturing and using good information. WaveRiders use issue-spotting tools like the AUDIO analysis as well as Life Cycle Assessments to understand their environmental impacts. They look at the eco-consequences of their products all along the value chain, upstream and downstream.

These tools are most effective when they rest on a foundation of good data, careful planning, and an environmental management sys- tem. The best systems track dozens of metrics by region, division, factory, even down to particular production lines. And they track the same metrics globally. Alcan keeps a worldwide data warehouse on environmental performance. That way, all divisions work in a con- sistent way and are assessed against similar measures. Common data helps headquarters benchmark performance, set targets, and monitor progress closely. As we mentioned in Chapter 7, we recommend a core set of metrics that track results on energy use, water and air pollution, waste generation, and compliance. Companies also need outside perspectives to learn where they stand in the world. Many WaveRiders establish relationships with environmental experts. Some create advisory boards to “peer review” their environmental efforts and stay ahead of issues that could slam them. Some invite the fox into the hen house by partnering with NGOs and other critics. No one necessarily looks forward to spend- ing time around a table with those who have raked them over the coals in the past, but their feedback is a valuable form of Eco- Tracking. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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294Putting It All Together In the same spirit, WaveRiders also reach beyond environmental groups to work with communities, governments, other companies, and any other stakeholder than can provide them with credible in- formation on environmental issues and changing market conditions.

What gets measured gets managed. Knowledge is power. Trite phrases perhaps, but the leading companies treat these ideas not as throw-away lines but as calls to action. They leverage data and knowledge to generate sustained marketplace advantage. Redesign Tracking data helps deﬁne the playing ﬁeld, but companies gain an Eco-Advantage only when they understand environmental market drivers, use their knowledge to drive innovation, and change prod- ucts and processes. WaveRiders redesign their products, the spaces around them, and even their supply chains. Eco-design, the second point of the Eco-Advantage Toolkit, has helped companies like Intel and Herman Miller design out environ- mental problems before they arise, saving time and money down the road. Factoring environmental considerations into product design also means helping customers reduce their environmental footprints.

In a world of rising energy prices, for example, having the most energy-efﬁcient product on the market will often translate into rising market share. A number of leading companies have embraced green building as well. Why? Because well-designed, energy-efﬁcient facilities often save money, improve worker productivity, and send a signal about corporate values. A few companies such as IKEA are going beyond compliance au- dits and pressuring suppliers to change business practices. These best- Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy295 in-class companies are redesigning entire value chains to reduce en- vironmental and social impacts.

Culture The third leg of the Eco-Advantage support structure centers on building a corporate culture that promotes environmental thinking and innovation. While every business is unique, we found four com- mon approaches across WaveRiders:

1. Stretch goals.WaveRiders use targets that seem symbolic and even uncomfortable, but inspire innovation and a broad reexamination of how they do things. “The goal is zero” is one example. A few companies even discover that “zero” is not an unreachable num- ber.

2. Decision-making tools. Top-tier companies reﬁne traditional cost- beneﬁt analyses to allow for intangibles. They tweak internal hur- dle rates (or “pair” projects) to tip the balance in favor of some environmental investments. And they use Adam Smith’s invisible hand, through internal markets, to guide decisions.

3. Ownership and engagement. CEO commitment gets the ball roll- ing. Engaging other senior managers and all employees keeps it going. WaveRiders use various tools to make executives sit up and take notice of environmental priorities. Some are soft, like assign- ing executives to be “stewards” of an environmental issue. Other tools have a decided bite to them. GE’s Session E, most notably, asks plant managers to explain their environmental performance in front of bosses and peers.

WaveRiders also drive interest and engagement by cross- fertilizing environmental and line managers. At IKEA, 3M, Du- Pont, and many others, the top environmental ofﬁcials came out of line businesses. No division head can tell these experienced op- erational executives that they don’t get it. The credibility of the environmental goals is greatly enhanced by sending the right mes- senger. Money and incentives focus attention, too. Many leading-edge companies build environmental key performance metrics into bo- nuses. At some of the globe’s greenest companies—places like IKEA, 3M, and Herman Miller—deep cultural values, including a commitment to stewardship, motivate managers. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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296Putting It All Together Finally, awards, even if only plaques, go a long way. Many WaveRiders have annual environmental or sustainability awards.

Because the companies clearly treasure their green commitments, it’s a real honor to be singled out for environmental successes.

Whether through direct pay incentives or cultural pressure, WaveRiders ﬁnd ways to walk the talk and align their statements about environmental commitment with on-the-ground operational decisions. 4. Storytelling. Smart companies tell the stories of their environmen- tal goals, successes, and lessons learned to nearly anyone who will listen. The knowledge-sharing can happen through an internal in- tranet of best practices or public reports. These documents inform all stakeholders, but particularly employees, about what the com- pany is doing right—and wrong. For internal audiences, eco- training is an even more direct form of storytelling. Teaching line managers how to seek out eco-efﬁciency opportunities or taking middle managers through some what-if scenarios that demonstrate hard trade-offs can jump-start innovative thinking and better de- cisionmaking.

GREEN-TO-GOLD PLAYS An Eco-Advantage Mindset, supported by the right tracking tools, a focus on redesign, and a culture of environmental stewardship, lays the foundation for turning green to gold. But the real action lies in the strategies that create value, the Green-to-Gold Plays.

Like any other business strategy, our Green-to-Gold Plays aim to reduce the downsides a business faces (cost and risk) or increase the upsides (revenue and intangible value). Unlike many others, though, these plays don’t sacriﬁce responsibility in the pursuit of proﬁt—or Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy297 proﬁt in the pursuit of responsibility. Our WaveRider companies of- fer proof every day that doing good and doing well can be symbiotic.

We’ve mapped the eight Green-to-Gold Plays drawn from our study of WaveRiders onto the two-by-two strategy framework we outlined earlier (see ﬁgure). Not surprisingly, most green business efforts to date have focused on the lower left box. Cost reduction is extremely low risk, easy to sell internally, and often pays back quickly. It can yield competitive advantage. But our research suggests that, by focusing solely on the cost side, many companies are missing chances to generate broader Eco-Advantage. Most companies have not yet executed all of the plays—they’re leaving money on the table.

Green-to-Gold Plays Framework Less Certain / Long Term REVENUES • Eco-design • Eco-sales and i iimarketing • Eco-defined i iinew market space Upside INTANGIBLES Build reputation and COSTS • Eco-efficiency • Eco-expense iiireduction • Value chain i iieco-efficiency RISKS • Eco-risk control More Certain / Short Term Downside trusted brands • Intangible value: Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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298Putting It All Together 1. Eco-Efﬁciency Cutting pollution and waste makes good business sense. Even highly efﬁcient companies have been shocked to discover savings they had previously overlooked. Over three decades, 3M continues to ﬁnd new ways to pare costs through its 3P program, Pollution Prevention Pays.

Many changes can be very simple. STMicroelectronics, for example, put in larger air-conditioner ducts, which allowed its air-circulating fan to run more slowly. The fan now uses 85 percent less energy. In just one year, with $40 million invested in changes like these, the company saved $173 million. Sometimes the search for eco-efﬁciency can leapfrog past reduction to outright elimination of a process or resource. Rohner Textil once produced its dyed, woven ﬁbers in the same manner as everyone else in the industry. To make the ﬁbers strong enough to weave, it would coat the yarn with chemicals, which had to be washed off later, cre- ating wastewater problems. While searching for a way to reduce chemical use, Rohner realized that humidity makes the ﬁber stronger.

So the company now skips the chemical coating and simply doesn’t dry the yarn quite as much, leaving moisture in the ﬁber. Rohner cut out one step, shortened another, eliminated the chemicals, reduced energy use, and cut costs. A pretty good day at the eco-efﬁciency ofﬁce. Rohner’s efﬁciency improvements have driven per worker produc- tivity up 300 percent over the last twenty years. During a vicious downturn in its industry, Rohner, unlike many other companies, re- mained proﬁtable. Eco-efﬁciency simply depends on cutting out waste and using resources productively. Businesses that run lean are more productive, proﬁtable, and less polluting. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy299 2. Eco-Expense Reduction Efforts to lower direct environmental costs such as landﬁll fees or regulatory paperwork can also return big dividends. DuPont has saved billions on pollution control, and that’s only the measurable cost of waste. In one case, the company cut rejects from the Lycra production line from 25 percent of volume to less than 10 percent.

That focus on reducing waste saved material, lowered landﬁll costs, and freed up $140 million in saleable product. It also meant the company could delay building another plant, saving many millions more in capital expense. The ripples from cutting waste and eco- expense can overﬂow and save money in many ways.

3. Value Chain Eco-Efﬁciency Companies that look broadly for environmental gains and use tools like Life Cycle Assessment often ﬁnd ways to reduce costs throughout their value chains. The play here is to try and capture that value, which can be a difﬁcult task. In Chapter 4, we talked about one area in which companies are quite effective—distribution. IKEA and oth- ers stuff their trucks through smart package and product design, and save money.

4. Eco-Risk Control With the rise of transparency, the risks to a business and its brand can come from anywhere. A substantial amount of goodwill is tied to corporate reputation. If a distant supplier dumps waste in a river or employs children, the major customer, with an international brand, may well be the one to pay the price. WaveRiders identify potential risks and act on them as early as possible. When McDonald’s pushes back on its supply chain to lower antibiotic use in chickens, or asks for documentation that ensures that cattle do not have mad cow disease, it’s lowering the risk of contaminating its brand. Intel spends millions to ship its hazardous waste from some developing countries to the United States so it can be disposed of properly. Why? Intel doesn’t trust the waste-handling Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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300Putting It All Together system in some countries where it operates. And company ofﬁcials know they’ll be blamed if something goes wrong.

WaveRiders get ahead of regulations before they get tighter. BP began its Clean Cities program and sold cleaner-burning, lower- sulfur fuels in part to get out in front of more stringent air quality laws. “The driver was that sulfur regulations would come,” BP’s Chris Mottershead told us. “Rather than deliver on a regulated schedule, we decided to go early and try for a market beneﬁt.” Anticipating regulations can put a company in a position to meet re- quirements at a lower cost than its competitors. Some companies have even obtained a competitive edge by lobbying for tighter controls. Re- member, it’s often the relativeregulatory burden that matters.

5. Eco-Design Redesigning processes and products to cut waste and pollution is a big part of Eco-Advantage. Keep in mind, too, that a great deal of potential gain might lie outside the factory gates. Helping customers reduce their environmental problems can strengthen customer loyalty and attract new sales. Reducing a product’s energy use or toxicity also can add to customer value. Like Johnson Controls, which sells entire energy management systems, companies that ﬁnd ways to lower customer burden can proﬁt.

6. Eco-Sales and Marketing Marketing the green qualities of products can drive sales. When Wau- sau Paper launched a new brand extension of “away from home” products—paper towels, toilet paper, and the like—it ﬁrst certiﬁed the product line with Green Seal, an NGO specializing in environ- mental product labels. The company then rebranded the product EcoSoft Green Seal, putting the certiﬁcation right in the name. In an industry growing only 2 to 3 percent per year, Wausau’s sales in this market leapt 44 percent in the ﬁrst two years.

In fact, Wausau took an unusual route by focusing its marketing pitch squarely on the environmental message. Products that scream “green” to the exclusion of other qualities often die on the shelves.

As Shell learned with its Pura gasoline, a product often needs to stand Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy301 on other attributes ﬁrst before selling the environmental story. Green, we’ve found, is often best used as the “third button.” 7. Eco-Deﬁned New Market Space Environmental vision can create new market space and value inno- vation. Toyota set out to redeﬁne the 21st-century car and has come pretty close. Many customers now seek a hybrid, not a midsized car, and they’ll pay a substantial premium or wait months for a Prius in particular. For these consumers, there is no substitute. Successful, long-lasting companies regularly redeﬁne themselves. Environment-inspired innovation offers companies a new and exciting way to ﬁnd fresh expressions for their capabilities.

Looking for environmentally deﬁned market space can seem to lead companies far aﬁeld. Take John Deere’s recent foray into renew- able energy. The tractor maker started up a business unit to help farmers harvest wind energy. Deere will offer ﬁnancial backing and consulting. This may seem an odd ﬁt, but we see it as an interesting play. A company known for providing farmers with the tools they need is offering to help them survive and ﬁnd new revenue streams.

That’s value innovation! 8. Intangible Value Most companies are worth more than their hard assets, and in some cases much more. Brand value—or corporate reputation, more gen- erally—can be worth many billions of dollars. Any threat to that value has to be taken seriously. From BP to GE to Wal-Mart, a grow- ing number of companies have launched campaigns to build a green element into their brand. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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302Putting It All Together HURDLES Executing a corporate environmental strategy is never easy. A range of hurdles can trip up even the most sophisticated company, making the quest for Eco-Advantage elusive. We’ve identiﬁed thirteen pri- mary sources of failure in environmental strategy (see table):

First we’ve identiﬁed failures of planning, where the focus of the environmental initiative isn’t well thought out or expectations are out of whack. Second, we see failures of organization, including com- peting demands placed on middle management and silo thinking, THE HAT TRICK GREEN-TO-GOLD PLAY AT ALCAN We’ve set up these Green-to-Gold Plays as if they were distinct strategies.

That’s the easiest way to think about them and ﬁnd business opportu- nities. But nothing says a company can’t do everything—lower costs and risk and drive revenues—at the same time.

Alcan, the $20-billion Canadian aluminum and packaging company, recently pulled off this impressive feat. Quick background: Producing aluminum is dirty work with large-scale environmental consequences.

The industry is one of most energy-intensive in the world, and mining and smelting produce large quantities of waste, including what settles at the bottom of the big pots they use in production. This toxic residue— not surprisingly called potlining—is scraped off, which is where the en- vironmental challenge comes in.

Nobody really knows what to do with this toxic slurry since it’s not easy to recycle. Mostly it just sits around, taking up space and creating liabilities. Alcan’s Dan Gagnier estimates that just his company’s backlog of potlining is over half a million tons. But that’s about to change. Alcan has developed an innovative new technology to turn potlinings into in- ert, recycled material. The company is investing $150 million in a pro- totype treatment facility. This breakthrough solves Alcan’s waste problem and may even leave the company treating its competitors’waste—for a price, of course.

As CEO Travis Engen says, “We wouldn’t have come to this without the framework of sustainability.” Alcan’s initial goal was to reduce an environmental burden. But executives are anticipating that the new pro- cess will end up lowering waste, reducing risk and liability, and gener- ating revenues. Alcan is building a real Eco-Advantage. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy303 which limits coordination and chills creativity. No wonder inertia is so often the by-product of organizational weakness. Third, failures of substance are wide-spread. Sometimes the problem can be traced to not leveraging environmental gains. In other cases, poor results come from trying to leverage claims that have too much hot air. All of these failings are common but can be overcome by building an Eco-Advantage framework and by equipping employees up and down the line with the right tools.

TYING THE FRAMEWORK TOGETHER There’s no single right way to assemble all the pieces of an Eco- Advantage strategy. Some of the elements in the framework we’ve provided will ﬁt an organization perfectly, while others may not.

Some are better than others at any given point in a product or com- pany’s evolution. While each has an independent logic, the major elements do work together.

The plays and tools are integrally linked and feed one another. To see how they ﬁt together, we’ve developed a summary table, which Eco-Advantage Hurdles Failures of . . .

Planning •Seeing the trees but not the forest • Misunderstanding the market • Expecting a price premium • Misunderstanding customers • Seeking perfection • Ignoring stakeholders Organization •Middle-management squeeze • Silo thinking • Eco-isolation of environmental professionals • Inertia Substance •Claims outpacing actions • Surprises and unexpected consequences • Failing to tell the story Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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304Putting It All Together is found in Appendix III. Collectively, these plays and tools reinforce each other to lower business risk and increase business value. Ex- ploring a company’s footprint with a Life Cycle Assessment, for ex- ample, will identify opportunities to cut waste and cost, which trans- lates directly into lower business risk. Looking downstream and identifying ways to lower a customer’s environmental burden also reduces everyone’s risk and improves performance along the value chain. And identifying new market spaces creates added value and diminishes the chance of the market shifting out from under you.

GREEN TO GOLD Eco-Advantage has a twin logic. On one hand, the strategic gains we’ve identiﬁed are based on hard-edged analysis. In a world of con- strained natural resources and pollution pressures, the business case for environmental stewardship grows stronger every day. Pressures on companies now come not only from screaming eco-radicals, but also from traditional “white-shoe” bankers and others asking tough- minded questions about environmental risk and liability. Those who offer solutions to society’s environmental problems both mute their potential critics and ﬁnd expanding markets. As Timberland’s CEO, Jeff Swartz, said recently about one of his company’s environmental initiatives, “I can now make the fact-based case to the hardest-nosed engineer in the world ....That’s not limousine liberal, not self- indulgent. It’s hard-nosed business. That is the innovation we seek.” In parallel, there’s a strong values component to the case for cor- porate environmental care. The WaveRiders we’ve studied have made money—lots of it—by reﬁning their business strategies to incorporate environmental factors. But as much as they are driven by proﬁts, they are also aware that their stewardship helps more than the bottom line. When short-term gains don’t justify green initiatives, they are willing to look for long-term value for themselves and their workers, for their communities, and for the planet. The gold they’ve discovered by going green is not only about money. More and more people in the business world see corporations play- ing a major role in solving the world’s environmental problems. Busi- ness, they know, is our most powerful mechanism for creating a functioning society and matching needs with goods and services. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Eco-Advantage Strategy305 Companies can and should be a force for good, leading the charge on caring for the environment and protecting our shared natural as- sets. Financialandenvironmental success can be achieved together.

With the right mindset and tools, companies can handle the hard trade-offs. New values-centered executives are creating companies that inspire employees and customers alike. In the end, Eco-Advantage is about a new way for inspired people—executives, managers, and workers— to build companies and industries that are not just innovative, pow- erful, and grea t...butgood too. Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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Esty, Daniel C., and Andrew S. Winston. Green to Gold : How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Yale University Press, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=3420338.

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