January 23, 2011

Ford's Impressive Sustainability Strategy

For years, Toyota has been the darling of the green business world. The hybrid Prius was a legitimate business home run (2 million sold), and it helped both differentiate Toyota's brand as the market innovator and propel Toyota to unprecedented profits. But now the company faces renewed competition for the title of green auto leader.

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In the last couple of years, every auto giant has launched alternative vehicles, which they've been touting aggressively at last week's Detroit Auto Show (see my newsletter on the different strategies the big companies are pursuing). GM's "extended range" Chevy Volt and Nissan's all-electric LEAF are potential blockbusters, with strong early sales and serious buzz.

But I want to focus on Ford. The company announced its own electric vehicle, the Ford Focus EV, at the recent Consumer Electronics Show.

Buried beneath the pizzaz of high-profile PR announcements, Ford has developed what appears to be a broad, well-thought-out sustainability strategy.

As I explored Ford's fascinating sustainability report (and how often do those words go together?) from last year, I noticed a number of unusual things. So I reached out to Ford's Director of Sustainability and Environmental policy, John Viera to help me better understand the company's approach.

Three key aspects of Ford's sustainability strategy strike me as critical, and show the company's real leadership:

1. It's based on hard science. Ford's in-house climate scientists - yes, you heard that right — have bought into an important global scientific consensus: humanity must keep CO2 levels in the atmosphere below 450 parts per million to reduce the odds of catastrophic, species-threatening climate change (many leading scientists have since lowered the goal to 350 ppm — and we've already hit 390 ppm).

Ford then worked back from this necessary future reality, determined the share of global emissions coming from Ford products (around 2%), and mapped out the fuel-efficiency levels required to meet the scientific mandate. As Viera said, "I can tell you 5, 10, 20 years from now, where we need to be." Relying on hard climate science to map out non-negotiable boundaries for your products is, to say the least, very unusual.

2. It tackles both long-term and short-term sustainability challenges. Given those science-based plans, Ford is investing in the long-term — the sexy, new EV market that everyone is going after — and rolling out a series of efficiency technologies in the existing, combustion-engine fleet. The 2011 Ford Explorer, for example, is using EcoBoost engine technology to improve fuel efficiency by 25%. Viera points out that the world may save more fuel between now and 2020 through these incremental improvements than through nascent sales of cleaner cars. "It's not as glamorous," Viera says, "but it makes sense number-wise."

3. It's heretical. In Ford's sustainability report, one statement stopped me in my tracks: "By 2050, there will be nine billion people on Earth...Putting nine billion people into private automobiles is neither practical nor desirable." This is an auto company saying that going after market saturation is not ideal for the company or the world (since cities would cease to function with that much traffic).

To explore the larger topic of "sustainable mobility," Ford worked on a pilot program in Toronto that encouraged people to use more public transit. Suggesting that people might — and should — use less of your product is an aggressive, tight-rope walk of a sustainability strategy. It's not easy, but it can drive real innovation and new thinking, as well as build customer loyalty that maintains or grows market share. (I discussed this idea, and give some examples of companies using this strategy to great advantage, such as Xerox, in my last book, Green Recovery.)

Even as they look at mobility more broadly, Ford is still pushing hard on cars of the future. The company is not missing the electric wave. Car guru Chelsea Sexton, who knows more about the market for EVs than nearly anyone, says the Focus EV demo seriously impressed her and other influencers. As Sexton told me, "It's the first time in my life that I've lusted after a Ford!"

In sum, Ford's sustainability strategy is to pursue a broad portfolio approach, making multiple bets on the future — a stark contrast to competitors that have really bet the farm on one technology. Improving the environmental profile of the current product portfolio while launching new leapfrog products is no doubt a tough balancing act. But it's very smart. The world is nothing if not uncertain; who can know whether policy, technology, and consumer whims will continue to drive adoption of electric cars?

Of course, as Sexton reminds me, strategy is one thing, but execution is another. She believes Ford is doing things for all the right reasons, but wonders how well they'll translate all that smart thinking into market success. In her opinion, the company has been late to the party on communications around electric vehicles (all the heat has been around the Volt and LEAF).

So will Ford develop — and build great brand stories around — the efficient or electric cars that people want? That's the billion-dollar question, and it's where, in this industry, the rubber really does meet the road.

Comments

On March 3, 2011 11:20 AM, Thomas - Electric Car said:

Very interesting. Especially the aspect of promoting public transports! Recently I read the same aspect in context with another big car maker from germany. It seems that the have recognized that the most effective way of reducing CO2 emissions is to let the car at home.

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