October 22, 2007

BusinessWeek Moves the Debate

Well, it was bound to happen around now. Once every magazine had done a cover story on the wonders of going green (my previous post here), the media had to turn on itself and declare it all a sham. It's the normal course of things.

BusinessWeek's cover this week, "Little Green Lies," certainly tries to be incendiary. The subhead: "The sweet notion that making a company environmentally friendly can be profitable is going up in smoke." But dig in and the reality of the article is equal parts insightful and inane/obvious (a bit more of the latter perhaps). And it doesn't actually say anything all that different than green business writers/thinkers have been saying. If one of the main messages is that it's not so easy to go green, I can only say, no kidding.

And in a funny turn, BusinessWeek managed the feat of starting the cover parade in January and taking just 9 months to totally contradict itself. But let's look at a couple of the specific complaints.

First we have the repeated stories of eco-champion Auden Schendler at Aspen Skiing failing to get his management to green light green expenditures. The story seems to be that the ROI was not always enough. On this one, I couldn't agree more in part. Yes, any investment in a company competes for cash with all other options. And, yes, looking at pure ROI, some energy efficiency investments won't look great (they may take 5-10 years or more). But as a reader of Green to Gold knows, I don't believe that traditional cost/benefit analysis is doing a very good job. It doesn't take into account intangibles at all.

What's the value of reducing risk of energy spikes? (By the way, how do some of the ROI calculations from not that long ago when oil was $40/barrel look now?). What's the marketing value of walking the talk? How will employees feel?

The other point the article brings out is that it's tough to convince people and move a culture. Not everyone buys it — the story of one manager not believing the high ROI for a project is, sadly, not surprising. This is partly a legacy of green guys in a company not getting business respect. So, again, the idea that this is all hard is not shocking.

But a core criticism in the article — the attack on Renewable Energy Credits (RECs) as a way for companies to offset emissions — is a deeper and much more important question. It's incredibly complicated how or if RECs create real demand and generate renewable energy. Lowering the costs for wind generators (by paying them the additional value of the REC) should in theory drive growth (Micro Econ 101). But the article is fairly devastating on the scale of the REC vs. the cost of generation. One argument could be that the market for RECs has to grow much more so that the price rises (Micro Econ 101 supply and demand). That would potentially expand production. But the point that a REC today doesn't exactly mean less fossil fuel today is well taken.

But I focus on another lesson here: RECs and all offsets should be a last resort (no skiing pun intended). First, cut emissions through eco-efficiency. Second, generate renewable energy onsite. Then seek the highest quality offsets.

In the end, this article is a sign that we're evolving. The author may not realize it, but the piece is telling companies to look at the full value chain environmental impact (not just measure emissions at owned facilities, a mistake Nike makes, according to the author) and measure emissions completely before making claims. I couldn't agree more.

If I've learned a couple things (or strengthened some assumptions) in the year since Green to Gold came out it's this: we're just getting started, companies have a long way to go, and it's not easy. I started reading this article thinking it was so odd as a juxtaposition with the Wal-Mart meeting the other day that really was the starter's pistol on this movement: strange, I figured, that it's getting started in earnest right when BusinessWeek declares it over. But the reality is that this article doesn't match the aggressive title and sub-title — the content is actually a sign that all of this is for real. Only fundamental shifts in how business works cause this kind of scrutiny and warrant tough questions.

This piece is actually making the case for a main arm of the Green to Gold story: know your footprint, do things that actually reduce yours or your customer's, and then take credit for it. As the Aspen Skiing Company shows, getting frustrated with lack of progress — as Schendler so rightfully does — and getting some of those steps reversed, is a recipe for trouble.

We're at an odd junction in the greening of business. Millions of business people are just now coming to the table and seeking some easy wins. They're moving incrementally, or trying to skip steps entirely. At the same time, some "old-timers" who have been working hard for years are getting frustrated at the lack of speed. It's like they're finally not alone in the wilderness and they want to start running. The problem is that everyone else is just starting their training for the race. Like Schendler, the leaders are getting impatient and pushing hard. I'm not sure which force will win, but it's going to be an interesting battle.


On December 14, 2007 9:06 PM, Joyeeta said:

Excellent Article. I was just mentioning this apparent contradiction in B-Week's view-points the other day.

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