The Wall Street Journal reported today that Xerox has developed a new copy paper which, they say, uses half as many trees, fewer chemicals and energy to manufacture, and weighs 10% less (reduced shipping energy and cost). See Xerox press release. Apparently it uses a process closer to the one that creates newsprint, using more of the tree. On the down side, the paper isn’t quite as white and apparently yellows “badly” (says the Journal) over time.

Is this another example of a green product that doesn’t live up to its regular counterparts? The yellowing sounds iffy. But a savvy analyst quoted in the article says the paper will likely be used “for transactions such as invoices and phone bills where people don’t care about long-term archiving.”

Just think about how much paper is not needed for very long – most, I would wager, ends up in the trash the same day. Much like the rising awareness of the craziness of using potable water to flush toilets, businesses and consumers are starting to ask questions about when virgin, high-end materials are really needed. Xerox’s innovation should help companies match the product to the need.

I’ve long thought the mantra of reduce, reuse, recycle was missing a couple of levels – redesign and re-imagine (see drawing below from Green to Gold that lays this out).

Xerox, it seems to me, has done its part by redesigning paper. The customers need to reduce (how about not printing that presentation to flip through in the meeting, or printing 2-sided?), reuse, and recycle. And Xerox, other document handling companies, and creative start-ups can work on re-imaging how we use information so we don’t need the paper at all. But for throw-away uses, which are a big part of the market, this innovation seems like a great incremental step. Bravo.

I’m incredibly excited about cleaning floors at the moment. Ok, stay with me. I spoke at a large convention last week, the International Sanitary Supplies Association. It may not sound like there would be much green action, but there is definitely cutting-edge innovation happening back in the supply chain hidden from view. I saw what appears to be a remarkable green innovation at this conference.

First, full disclosure: This story is about Tennant, a quiet public company that makes cleaning equipment, and they hired me to speak. But I can say that the industry gave Tennant the Innovation Award at this conference– so it wasn’t just me. I also checked this out with some of their test customers, so I’m really just reporting what I heard and saw.

So, here’s the big innovation: water. Tennant just launched a floor cleaning machine called Echo that uses no chemicals at all. The machine oxygenates tap water to split it into an acid and base (alkaline) that are safe to touch, then it sprays the two streams on the floor. In 45 seconds, the two polarized water streams mix and become plain water again. But in the process, the mixture grabs all the dirt off the ground. Sounds too good to be true, but it seems to work. Test customers included the Minneapolis Target Center (where the Minnesota Timberwolves play) and Unicco, a building contractor that services many malls in the Northeast.

I talked to Jay Souza from Unicco, which manages the janitorial services for the malls, and he said Echo actually cleans better than a chemical-driven machine. The floor also dries faster. Most importantly, there is absolutely no safety issue. The thing takes tap water so there’s no handling of toxic chemicals and no safety concerns.

The catch? It costs about $1,000 more (they’re $5,000 machines and believe it or not, there’s a $5B market for these things). The payback period from not having to buy chemicals is in the range of 1-2 years. When I talked to the purchasing guy from Unicco, Greg Zifcak, he said he couldn’t be happier to pay more to avoid all the safety concerns – the short-ish payback was not even that vital. The other small catch: it doesn’t clean every kind of surface or all kinds of dirt (oil-based things like brake fluid are created to resist water). But I got the impression that it cleans the same floors as regular machines. So, there will still be a need for chemicals for many uses…for now. But this innovation covers an awful lot of surfaces out there.

How did this all happen? The CEO, Chris Killingstad, arrived on the scene of this quiet 138-year-old company a few years back. He told everyone that they would no longer be a “non-residential service something, something” (I can’t even remember what their mantra was it was so nondescript). Now, he said, we’ll be an “environmental cleaning solutions company.” Ta-da. That created the mindset for R&D to run free. Borrowing the idea for the technology from other industries and countries (Japan apparently uses these ionized streams for things like cleaning wounds), came up with the idea to use the recombination step as a cleaning process, and went from idea in January 2006 to launch in less than two years.

This kind of innovation is sort of head-slapping in its obviousness – in retrospect. And enormously valuable to the company that can hit on it first.

World, meet the Prius of floor cleaning.

[To my blog readers, I've started writing for Huffington Post, so i'll be re-posting some of those here -- these entries will be a bit longer than my usual]

On Sunday, Virgin Airlines flew a jumbo jet from London to Amsterdam powered in part by coconuts (“a biofuel mixture of coconut and babassu oil” to be more precise). Some would say the applicable part of that sentence is “nuts.” Is this another wacky Richard Branson moment, or something legitimate and important? Or, as is all things Branson, maybe it’s both?

It’s easy to throw stones at Virgin’s attempt and call it a publicity stunt. But it’s pretty hard to chalk it up entirely to PR when Branson has pledged $3 billion, or all expected profits from his travel divisions, to battle climate change. But remember, this is Branson – PR stunts are his bread and butter, and they’re a legitimate form of marketing if you have something to say. In the environmental realm, it’s pretty important that what you say is real and credible though. So let me throw an important pebble before moving on to some positive thoughts on what Branson is up to.

The main problem is biofuels as a whole. I have no energy crystal ball – I have no idea which energy technologies will win. Nobody else really does either. But studies are showing that there are some real problems with biofuels when they’re created in most of the ways we currently have. Science magazine just reported on a very important study of the greenhouse gas impact of biofuels (see abstract here). In short, corn ethanol is just nutty (I’m paraphrasing the scientists a bit). It creates double the greenhouse gases of fuel since we have to clear land for the additional crops, and thus release carbon stored in the trees. I’d also add that burning our food when we’re heading toward 9 billion hungry mouths doesn’t seem that smart. Even fast-growing switchgrass, which President Bush has praised, apparently increases emissions 20%. So a shift to new kinds of fuels isn’t going to be easy. And it’s very unlikely that as Branson says, "This breakthrough will help Virgin Atlantic to fly its planes using clean fuel sooner than expected.”

But now for the praise and the good stuff. First, from an environmental strategy standpoint what Branson is doing makes sense. As every company should, Virgin is looking at its own (substantial) direct environmental “footprint.” Planes burn a lot of fuel. Going green in that business will be hard – since you can’t put a solar panel on a plane, there aren’t that many options.

So, second, we need experimentation. While money is being poured into working on all kinds of biofuels, we need parallel experimentation on what to do with that fuel. Demonstrating potential demand for new fuels will help speed the investment and development of new technologies. Now, we may discover that all biofuels don’t work from a life-cycle perspective, but until we know that for sure, trying out different combinations of fuels and vehicles is not a bad idea. As Branson put it, the flight would provide "crucial knowledge that we can use to dramatically reduce our carbon footprint.” Again, he’s probably ahead of himself a bit, but generating knowledge is a pretty good goal at this point.

Third, Branson is pushing the boundaries in other ways. Of course his biofuels pursuit may be a blind alley. So it’s good that he’s taken some other ground-breaking steps (in addition to that very unusual pledge of profits). Look at the fairly fun announcement he made about a $25 million award (my previous blog here) for anyone who can take carbon out of the atmosphere (harking back to the prize set in the 1700s for finding a way to measure longitude — a great book on that story here).

When you look at the contest Branson started, at first it’s crazy, but then has some strong logic to it (much like many of his seemingly wild ideas that create giant new businesses). Since directly reducing the emissions will be hard, and a company called Virgin Air can’t go around promoting alternatives for having meetings – although don’t bet against a Virgin Teleconference business to do just that – then why not do something about the impact of the planes. Planting trees is nice, but a technology that pulls carbon out of the air could be a big business. I can’t say whether it’s feasible, but why not look into it?

Of course the greenest answer is not to fly at all, but that isn’t going to happen anytime soon (I’ll look at this in a follow-up post). But back to Branson. Given (a) how much innovation there may be to avoid flying, (b) the rising cost of energy that will drive some slow down in growth of flying, and (c) the responsibility Branson clearly feels for keeping his business and the planet healthy, isn’t a good thing that he’s trying to find ways to reduce the impact from flying?

Shouldn’t somebody?

[Posted at Huffington here]

It's pretty clear that the business world is facing dramatic change driven by environmental concerns. Over the coming years and decades, we're going to change the entire energy system and find new ways to design, make, ship, sell, and consume things. While it's uncertain if quality of life will suffer (and I hope not), the quantity of resources used will change dramatically - e.g., using a lot less energy, or at least carbon-driven energy, to power our lives.

And this change is becoming a business imperative regardless of whether you buy the climate change argument (and I really don't want to open that can of worms from my last post ). Just looking at the high price of everything from metals to food to fuels, the case for being radically more resource efficient is getting clearer every day. What's also clear is that the world can't currently provide for what will be nine or ten billion people who all want our lifestyle (the government of China has set a goal of moving half its population into the middle class by 2020 - that's 600 million people; if they all use oil at our rate, China alone will need more than the world produces by 2030 or so). At current technologies and modes of production, there isn't enough stuff. So there's a business need and a system overload requirement that we innovate and do more with less.

But don't just take my word for it.

The Wall Street Journal ran a stunning article recently that I've been mulling over for awhile and needed to get my head around. It was titled, "New Limits to Growth Revive Malthusian Fears." The shocking part of this article was the fact that it didn't malign the idea that we may run out of things, which Milton Friedman-esque business people have been laughing at for 200 years (since Thomas Malthus first drew an exponential population chart plotted against a geometric resource growth chart and said we'd all starve). Yes, those doomsayers have been very wrong in critical ways, mainly related to our ability to innovate and substitute out of products when we found new options (like from whale oil to kerosene to oil).

But the Journal was deadly serious, talking about resources like water that we can't substitute our way out of. The related point was that there's really nothing left to substitute to -- we know where pretty much everything is. Two quotes were fascinating: "Record highs in the prices for oil, wheat, copper...are signs of a lasting shift in demand as yet unmatched by supply". The "as yet" is a big qualifier, but it feels a bit like wishful thinking, especially given the second quote from ConocoPhillips CEO James Mulva: "I don't think we are going to see the [oil] supply going over 100 million barrels a day, and the reason is: Where is all that going to come from?" So even the oil CEOs are telling us there's not enough stuff.

So what does this mean for business and how is it connected to the green movement? First, rising prices for nearly everything mean we're entering the big leagues. Whether you call it "green" or "eco-efficiency" doesn't matter; either way, all the efficiency tools we have - such as total quality, lean manufacturing, six sigma - are going to be put to the test. If your company has a knack for cutting out waste and reducing resource use, it will survive and thrive. If you can't reduce your reliance on fossil fuels in your whole value chain - from sourcing to manufacturing to distribution - you may be in trouble.

Second, if you can offer a new "supply" to help bolster that side of the Econ 101 curves, you will have a giant market to satisfy (those billions of consumers). And I'm talking about smart supply growth, not the corn ethanol kind that actually exacerbates all of our problems. I'm talking new low-carbon energy, water saving technologies and processes, good design principles, building efficiency, and on and on.

The mad race for renewable energy technologies and the dramatic shift in car offerings are good examples. The venture capital money flowing to new technologies easily recalls the Internet boom. But is this one a bubble? It might be, but these entrepreneurs are working to satisfy existing multi-trillion dollar energy and resource markets, not trying to create new markets or needs. So money from the biggest, smartest names in Silicon Valley is flowing freely. This is a very good thing. There will be a shakeout, but some winners will win big.

As demand for resources outstrips supply, the Journal worried, what if countries just try to grab what's left in a big resource fight? Companies might go down a biggest is best path as well. But won't the best companies profit much more if they just find a way to need less? And won't the competitors that help their customers use less do extremely well?

[Originally posted here on Huffington]

Recently the U.S. Circuit Court of Appeals in D.C. upheld a ruling that our currency violates the law - it will need to change to accommodate the blind (unlike most currencies, the size of each U.S. denomination is the same so you can't tell by touch how much you're holding). Of course some commentators had to chime in about activist judges and express concerns about the cost to society in fixing this problem. Apparently there's concern from some business interests that there will be costs in making the change. Here's what an op-ed in the Wall Street Journal said:

"Varying the size of bills would impose substantial costs on individuals and companies in the private sector for replacement or retrofitting of vending machines, automated teller machines, wallets and purses."

Well, of course there will be costs - change costs something. But what are the possible upsides beyond the incredibly obvious social benefits (hey, call me soft on the blind)? Maybe there are other reasons to make a change that saves some money.

So I thought about this for like 30 seconds (nobody said blogging takes years of thought) and came up with another good reason to change vending machines - they use a ton of energy. For a few years now, the Natural Resources Defense Council (NRDC) has been advocating for changes in vending machines design. Here's the data from a paper written by Noah Horowitz from the NRDC and his partners at the EPA, American Council for an Energy Efficient Economy, and the DOE:

"In the U.S. there are about 2.5 million vending machines in the field and new machine sales exceed 250,000/year. Existing vending machines consume approximately 7.5 billion kWh/year and cost $600 million/year to power...Approximately 3.5 kWh/day can be saved per machine through refrigeration and lighting energy efficiency improvements alone...Over the ten year machine life, [each machine will save] 13,000 kWh, $910 in electric savings, and 10 tons of carbon dioxide."

First of all, $600 million...in vending machine energy. Wow. But my general point is not actually that changing money to accommodate blind people is the right thing to do (which I feel ridiculous even having to say), but that we need to get more innovative and flexible about finding ways around stumbling blocks. Some have pointed out that there may be solutions that don't even require changes to machinery (like raised dots on the bills), but even if they do, again, there may be other benefits. This isn't as narrow as the political view of "crossing the aisle" to explore compromises and opportunities. Perhaps it's more about crossing the hemispheres of the brain and thinking differently.

The environmental challenges facing society and business are profound, and it will help if businesses and policymakers can think holistically about issues and see things through the green lens. Opportunities to kill two or more birds with one stone are all over the place.

I don't mean to pile onto a disaster in the making, but the demise of the "Big Three" automakers is hard to turn away from (like, yes, a car wreck). It also perfectly demonstrates the dangers, and opportunities, stemming from the green wave sweeping the business world. While Japanese companies prepared for a resource-constrained future, Detroit automakers did not...and they're running on fumes. As the Wall Street Journal declared a few days ago, "Wagoner Says GM Won't File For Bankruptcy." If your CEO has to say you're not bankrupt, it usually means you're darn close.

First, a quick tour of how bad it's gotten. In May, U.S. auto sales were down 11% year over year. GM, Ford, and Chrysler were down 28%, 16%, and 25% respectively while Toyota was down 4% and Honda and Nissan were up 16% and 8%. April was just as bad. More specifically, sales of large vehicles are plummeting - Ford's SUV sales dropped 55% in June - while small, energy-efficient (dare I say "green"?) vehicles are rising in a down market. July numbers are out in a few days, and it looks like Honda may pass Ford for the #3 spot after a tied-for-first GM and Toyota. GM's stock recently hit a 53-year low and its market cap is down below $7 billion, less than one-third of tiny First Solar's market value. Of course Toyota's market cap is down from its peaks as well...to $140 billion.

This mess is hardly just a case of bad luck for Detroit. True, the rise in the price of oil has been unprecedented and it was hard to predict perfectly. But some companies saw the future coming. In the early 90s, Toyota set out to build the "21st century car" and chose "environment" as a core principle (keep in mind that oil was less than $20 per barrel then). The result was the blockbuster Prius. Toyota looked at its strategy through an environmental lens and redesigned the car from the ground up.

In contrast, as late as 2005, GM's CEO re-committed the company to the then- profitable large vehicles. While the speed of the rise in oil prices has been surprising, it wasn't impossible to foresee - in 2005, oil company execs were already talking quietly about peak oil.

There's one interesting side note to this seismic change in the auto industry. In June, Toyota's sales actually dropped more than 20% versus the previous year. The company's sales have been hit hard for two diametrically opposed reasons: 1) unlike Honda, which is the big winner lately, Toyota emulated U.S. automakers by pushing its big vehicles as well; 2) the Prius and other small vehicles are so successful that Toyota can't keep up with demand - sales of the Prius actually dropped in June as Toyota sold out its inventory and fell behind on production (the company is retooling a Mississippi SUV plant to make Priuses instead).

So even Toyota makes mistakes. Its leaders fell prey to some of the short-termism that killed GM, and they didn't perfectly foresee the speed and scale of the shift toward smaller cars. But Toyota did look forward years ago, asked what an environmental version of its product should look like, and made it a reality. Very few companies or industries have made this switch yet, but things are moving fast now.

Where is your industry headed? What will your products need to look like in a resource-constrained world? Are you ready?

This post first appeared at Harvard Business Online.

As we all know, energy prices have skyrocketed. Organizations of all kinds are trying new ways of doing business to cut costs. Some ideas, like Wal-Mart putting doors on refrigerated cases and cutting energy use 70% in that aisle, are head-slappingly obvious. Even seemingly wacky ideas can seem downright wise once you run the numbers. One of my favorites is the UPS "no left turns" program. To avoid waiting to cross traffic - and thus wasting time, energy, and money -- UPS used GPS data to program new routes that basically go in concentric circles to the right. The company has saved about 28 million miles of driving and 3 million gallons of gas.

But other ideas to cut energy use just seem desperate or short-sighted. I've been thinking a lot about a recent story in Time Magazine last week about what schools are doing to deal with high gas prices. Some districts, particularly in rural areas, are going to four-day weeks. About 1 in 7 school boards nationwide are apparently considering this option. They're also eliminating field trips and extracurricular activities and even laying off teachers. While some schools and communities like the shortened schedule, most research shows that more school hours are generally better (the countries with longer school years seem to produce higher scoring kids).

Cutting school days as a way to get more efficient certainly sounds wacky at first glance. But unlike UPS's solution, this one is also wacky at second glance. Aren't there better ways for us to reduce fuel use and costs? Unless I'm getting the very simple math wrong, improving school bus efficiency by 20% would generate the same fuel savings as cutting a day of school. (Caveat: the schools of course save more energy than just gas when they shut down, but these districts are citing fuel costs specifically as the problem -- and it's not like schools stop being heated or cooled on off days).

There are solutions in the private sector, as companies focus more and more on logistics and improving efficiency (see one report on logistics here). Wal-Mart has enacted a range of efficiency initiatives for its fleet, from cheap "wind skirts" that streamline vehicles to auxiliary power units that reduce idling. (All idling in the US, by some measures, may amount to a shocking five percent of the country's energy use). Xerox put together a logistics streamlining plan that reduced fleet energy use 10%, including "right-sizing" vehicles to fit the load to using metrics and GPS. And office retailer Staples cut fuel use 15% (and saved $1.7 million) just by placing a 55 mph limit on its drivers. The trucks move slower, but stop for gas less frequently. The total delivery time is the same.

These corporate examples demonstrate that ideas are out there to help school districts, but I'm making a larger point about finding innovative solutions. UPS, Staples, Wal-Mart and many others are saving a ton of money through seemingly wacky ideas that turn out to be very wise.

So how do you know which is which? Here are a few signs that an initiative or idea is wacky and wise, not just wacky. The new idea or initiative...

- Seems obvious in retrospect, even if it seems a bit silly at first. "You mean if we slow down the trucks, or put doors on refrigerators, we'll use less energy?!"

- Reduces total footprint, even if that footprint is a strange shape. Sam's Club is selling milk in square cartons. Since they're a new design, they probably cost more to make. But the square shape means they stack a lot better, and without the crates. They pack much tighter, fitting nearly three times as many in every cooler, saving money and energy, and requiring 60% fewer trucks.

- Does not create other significant problems. Cutting school days means many parents have a day of childcare to deal with and pay for, one of those important unintended consequences. "Significant" is the critical word here. Extra daycare is significant. Getting used to pouring out of square milk cartons, which some customers complain about, is not.

- May actually solve other problems. School buses produce tremendous air pollution and health risks as kids sit in diesel fumes. Reducing miles reduces pollution and also shortens the time kids spend on buses (sometimes over an hour for what would be a 10 minute trip directly). And if school districts can raise the capital, larger solutions are available. Navistar, the big truck manufacturer (disclosure: I spoke at an annual meeting of their dealers recently) has launched a hybrid school bus which nearly eliminates the local air pollution problem.

Also keep in mind that wise ideas depend on context. While cutting school days is counterproductive and possibly disastrous for learning, cutting workweeks to four days to save employees on commuting expense can be very smart. In business, we can shift workloads effectively or work at home if need be.

The best innovations always strike you as odd the first time you hear them. Then they get you thinking. Then you wonder how you could've ever lived without them.

This post first appeared at Harvard Business Online.

Sometimes I think the Wall Street Journal editors are phoning it in. In a piece titled, "The Environmental Motor Company: Making Detroit a subsidiary of the Sierra Club," the Journal complained about those horrible Democrats in Congress that want to tie the $25 billion in loans to Detroit to "green retooling." I guess pushing U.S. automakers to make cars that get much higher gas mileage, and thus will sell better, is a bad idea.

The Journal also makes the ludicrous statement that the real problem for Detroit has been those awful fleet fuel-efficiency standards (the CAFE rules) "that force the companies to make cars domestically that are unprofitable." To add to the absurdity... the same day, in the same op-ed section, GM's CEO Rick Wagoner explains "why GM deserves support" and talks about the super-fuel-efficient cars GM will make with the loan. So even GM is saying it needs to make different cars.

We're seeing an amazing act of willful ignorance here. The knee-jerk response in some circles seems to be that these poor companies were just burdened by bad regulations (not to mention big bad labor). This crazy idea comes on top of the general fiction -- which Wagoner is pitching -- that Detroit is reeling because of the credit crunch and the economic downturn. But the proof on this one is in the data.

The U.S. automakers were having very serious problems months before the financial meltdown.

Let's look at May '08 sales in the United States, when high energy prices forced Detroit's hand. While the Fall has been the real Armageddon for U.S. auto sales, the spring year-over-year comparisons told a scary story. The overall car market was down 11%. But Ford was down 16%, Chrysler down 25% and GM down 28% (which in retrospect looks pretty good compared to GM's nauseating 45% drop year-over-year in October). But how did the other guys do in May? Toyota was also down after making some mistakes and trying to sell some big vehicles also, but only dropped 4%. Nissan was up 8% and Honda sales were up an astonishing 16%. Let's repeat that: Honda sold more cars this spring than the year before. If you look at total sales through October, the difference between U.S. and Japanese performance isn't quite as bad (only Suburu is up for the year). But the companies that sell smaller, more energy-efficient cars are doing ok.

My favorite media moment on this topic came on one of the 24-hour news stations yesterday. While covering the Congressional hearings with auto CEOs, one story explained that U.S. automakers spend an extra $1500 on each car (vs. competitors) to pay for pension and health care obligations. To be sure, these costs don't help Detroit. But the news anchor went on to say something like, "so Detroit is struggling because of that $1500...and the fact that it's known for making low-quality cars." Oh, just that little problem of making bad products.

The business guru Jim Collins, in his fantastic book Good to Great, focused on the importance of "Facing the Brutal Facts." Pretending that evil regulations are the primary cause of Detroit's fall does not help our automakers. Acknowledging that they were making the wrong cars at the wrong time is at least admitting we have a problem (in whatever 12 or 200 steps Detroit needs to heal).

The predicament that Detroit has found itself in is an American business tragedy. Let's not make it worse by lying to ourselves.

This post first appeared on Huffington Post.

It's always fun to predict what's going to happen. The risk of being spectacularly wrong is very high, but that's what makes the exercise so entertaining. 'Tis the season for dwelling, quickly, on what we learned last year -- de-leveraging is really painful and when gas prices are high, people want smaller cars -- and for pontificating about what to expect in 2009.

For my predictions, I'll stick to my area of knowledge, the greening of business. Over the past two years "green" has become part of nearly every serious business discussion. But what will happen now in this damaged economy? It would be silly to suggest that the intensity of the focus on green will continue unabated. But we'll see a form of what I'll call "light green" this year.

Some of the green pressure on companies will lessen, but I believe that the underlying forces driving the green wave will continue over the coming years - from volatile commodity prices (which will rise again aggressively after the recession) to a rise in transparency to tougher questions from key stakeholders (such as your business customers, consumers, and employees). Those big picture trends will continue over years, but here now are a few specific predictions for 2009.

"Light Green" will focus primarily on cost reduction...

Going green drives innovation and creates value in four fundamental ways: cost reduction, risk mitigation, revenue growth, and brand value enhancement. But for 2009, the top priority will be the first one, lowering costs (primarily through so-called "eco-efficiency"). Few companies will have the stomach for deep investments in R&D to create new green products.

...but, companies (and banks in particular) will also broaden the definition of "risk"

If we learned one thing in 2008, it's that the business and financial communities are not so great at measuring and accounting for risk. It's in our nature to overestimate some risks and drastically underestimate others (like the possibility that housing prices could actually drop). On climate change, we're realizing that the risk of inaction is too great.

Citigroup, JP Morgan and Morgan Stanley launched the Carbon Principles early in 2008. In short, this agreement committed the companies to look very hard at any coal investments and ask tough questions about how climate change and a cost on carbon would affect the risk profile. And at the end of '08, other financial and insurance giants -- including HSBC, Munich Re, Standard Chartered, and Swiss Re -- created the Climate Principles. These guidelines are admittedly aspirational, but they also increase awareness of the impact of climate change on all aspects of their businesses, including their investment portfolios.

Leading companies (read: Wal-Mart) will continue pressing suppliers.

To be a bit cynical for a moment, greening the supply chain is perhaps the easiest path to take in hard times. After all, you basically push the problem and cost onto others, and if you're as big as Wal-Mart, you get your way. To be less cynical, the companies that have learned to take a value-chain perspective have discovered real value in lower costs and better products. So why go back if you've discovered a better way of doing business? Wal-Mart and others clearly believe that reducing environmental impacts up and down the chain creates value for all. The retail giant convened a historic meeting in Beijing, China in October 2008 (see my first-hand account of the meeting here). Wal-Mart's top execs made it very clear that the green agenda was not going away and, in fact, that it was accelerating. Of course global recessions can put a damper on anyone's plans, but there are few indications the big guns are pulling back on supply chain pressure.

Innovation will become even more important.

This may sound like a contradiction to my "cost reduction will rule" prediction. But innovation is about more than just flashy new products; it's also central to reducing costs in a smart way. But beyond getting lean, 2009 will be a good time to truly rethink business models and ask new heretical questions. Innovation guru Clayton Christensen recently told the Wall Street Journal that the economic downturn "will have an unmitigated positive effect on innovation." Say what? By his counterintuitive logic, tight times "force innovators to not waste nearly so much money."

So use 2009 to seek out green innovation opportunities. Find ways to drastically reduce energy and other resource use both in your own operations and through your products (that is, help customers reduce theirfootprint). Even if investment dollars remain scarce, be ready to run with good ideas when cash frees up. We may look back at the end of 2009 and see that staying green during the recession, at least in mindset, not only drove creativity, but even saved some companies.

Yes, 2009 will be a tough year. But the Green Wave, albeit a bit diminished, will roll on. The smartest companies will continue to pour the foundations for a new form of capitalism - one that takes into account the resource constraints we face. After this recession, when capital is more readily available, green investments will begin in earnest again. Sustainable business will no longer be a side pursuit, but the core focus of successful companies.

This post first appeared at Harvard Business Online.

Can a plane fly with no jet fuel?

Ridiculous, right? But the aviation industry is starting to ask itself this very question. In early 2008, Virgin Airlines and Boeing launched a test flight where one engine ran partly on biofuels, in this case coconut oil. I've done some work with Boeing and heard their environmental execs tossing around ideas like these for a plan they call Project Heresy. I love it.

Imagine creating space for disruptive innovation where no question is dumb. It's the "no-left turns" approach (after UPS' catchy phrase for its GPS-enabled route minimization that included avoiding left turns to save idling time). Of course, now might not seem like the best time to look for next-generation ideas, given the economic climate. But even if the focus in the green realm turns mainly to getting lean this year, there is still opportunity for rapid innovation. Here are a few more heretical questions:

Can we send no waste to the landfill?

What a pain that sounds like. It's so much easier to just cart it all away. But Subaru and a few others have found that they can reduce landfill waste not just a lot, but to zero. The last trip to the dump from Subaru's Lafayette, Indiana plant was May 4, 2004. It's a longer story for another time, but through the old "reduce, reuse, recycle" mantra, the company has easily paid for the effort through savings, brought toxic emissions per unit down 55%, and reduced CO2 per unit by 20%. All these benefits stemmed from a focus on getting lean and reducing waste and from asking a seemingly wacky question.

What does our business look like if oil goes to $500 per barrel?

At first, the idea of a ten-fold increase in the price of oil sounds ridiculous. But we went from $14 to $140 in less than 10 years, so it's possible. We're facing a medium and long-term constraint on energy and other basic resources. Some diehards are holding onto the notion that there will always be enough, but the Wall Street Journal and other sober business sources have been hitting a theme very hard all year - supply will not keep up with demand in the coming years. That means we either substitute out (by asking, "Can we drive or fly without oil?") or deal with very high prices, which brings me back to my heresy about $500 oil. But whether or not you believe prices will rise again, asking the question makes you think differently, perhaps creating the mental space for real innovation. If your products can help your customers reduce costs or avoid environmental challenges, you'll find a market. Which brings me to...

Can we clean the floor with no chemicals?

Ok, this one is a bit more particular to a specific industry. I'm referring here to the question that the mid-sized commercial cleaning company, Tennant, asked itself a few years ago. It's a story I've been telling a lot, but in short, Tennant developed a process that allows their floor-cleaning machines (the small Zamboni-like machines you see janitors pushing around) to use just tap water. The technology works and avoids chemicals. Instead of just getting more efficient, Tennant found a way to avoid the chemicals entirely, thus allowing customers to avoid a major environmental and safety concern.

Heretical ideas have swept industries many times. If someone in the advertising, television, or music businesses had asked 10 years ago, "What if people stop watching commercials?" or "What if people think music should be free?" they would've been laughed out of the room. Then Tivo and Napster asked those questions. Of course, one turned out to be illegal, but their innovations laid the groundwork for others, like iTunes. And the television business is in the middle of a painful transformation away from traditional 60 second spots.

Environmental pressures will force much bigger changes than these in many industries in the coming years. Are you ready? What's your heresy?

This post first appeared at Harvard Business Online.

[This post appears on Harvardbusiness.org in my new weekly column/blog...]

I recently went to the Fortune Brainstorm Green conference in California — a who's who of green business leaders, thinkers, and practitioners. One of my favorite sessions included the dream team of Ray Anderson (Interface Inc.), Paul Hawken (author of the seminal Ecology of Commerce and Natural Capitalism), and Janine Benyus, the real focus of the session. Benyus is famous for coining the term "biomimicry," which I'll let her describe: "Biomimicry is a practical methodology to solve problems by looking to nature." But what does this really mean?

Here's one quick example that I use in my talks: the Speedo swimsuit that Michael Phelps and other Olympians won medals with in Beijing is called the "shark suit," and for good reason. It was designed to mimic the way sharks move through the water. At the panel, Benyus mentioned that Airbus planes also mimic sharkskin to cut through the air more efficiently. She has many more examples of products we use in our lives every day that are borrowed from the 3.8 billion-year-old laboratory of nature.

I believe that biomimicry is one of a small handful of very important ideas that will change the way business is done. And it seems to be catching on. Benyus pointed out that any investment in this kind of research was mainly from the military or aerospace sectors until recent years. But, she said, in one study of worldwide patent databases, between 1985 and 2005, inventions inspired by "biomimetics" increased by a factor of 93.

So how do companies apply this thinking?

See the rest of this blog here...

[From my column on Harvard Business Online]

At a recent executive education program on sustainability, I spoke about the many tactical ways to reduce environmental impacts and save money quickly in areas such as facilities, fleet, IT, telework, and waste (these are the main topics in a free special report I put out recently on green cost cutting). To fit the current economic climate, my focus was specifically on short-term, quick wins. After I finished my talk, an interesting challenge came from one of the program faculty: Given the scale of environmental challenges we face, shouldn't we be talking more about systematic, disruptive changes in how we do business?

After the session, one of the attendees, Mike Desso, Head of the Operations Environmental Sustainability Council for Nestle USA, told me he wanted to ask the group a simple question: "Has anyone here done all the things Andrew suggested?" His point was basically that there are still many simple things companies can do — so why debate whether we're doing the "big" things when we haven't even acted on all the "small" ones yet?

The whole discussion got me thinking a lot about the perceived trade offs between incremental and systematic approaches or, similarly, between incremental and disruptive change. The question is not an idle one given the legitimate concern about whether traditional eco-efficiency approaches will be enough to tackle large-scale environmental challenges.

It would appear on the face of it that incremental approaches won't get us there. So after some thinking, I come down conclusively and firmly...in the middle. In essence, none of these ideas of change and innovation — incremental, systematic, or disruptive — are independent. Instead, they're pieces of the same strategic and tactical puzzle. Arguably, the concepts are inextricably linked: Don't incremental changes spur thinking about — and if they save money fast, perhaps even fund — the larger shifts we need?

See the rest here.

[My new column on Harvard Business Online]

We're in the midst of the worst decline in auto sales history — yet Toyota can't make the newest model of its hybrid gas-electric Prius fast enough. According to the New York Times, the world's largest automaker has received 80,000 pre-orders already, one-fifth of the company's Prius sales goal for the year. On the heels of the depressing GM and Chrysler bankruptcies and layoffs, Toyota has instituted overtime production in its Tsutsumi plant in Japan.

This news comes on the heels of one of Honda's latest entries in the hybrid market, the significantly revamped Insight, becoming the bestselling car in Japan in April — not the bestselling hybrid, but the bestselling vehicle — racking up over 10,000 sales at $19,000 a pop.

The era of niche eco-vehicles is over. With Toyota and Honda experiencing their first losses in decades, the vast success of the green parts of their product portfolios must be very welcome — a life boat in troubled times.

It's educational to think for a minute about when the foundations of these successes were built. Toyota started development on the first generation of Prius, not one, but two recessions ago. Sixteen years ago, on the heels of the early 90s downturn, Toyota started designing what it thought would fit the demands of the 21st Century. Early in the process — and even though oil was only $17 per barrel — the team decided that a critical focus should be "environment." And while I can't say exactly when Honda decided to completely retool their earlier Insight model, how long after the early 2000s recession could it possibly have been?

[See the rest here]

[My column last week on Harvard Business Online]

In a tight economy, with companies spending much less on IT, the tech giants will take growth wherever they can find it. The Wall Street Journal reported recently that Cisco and HP are in a pitched battle for customers for their high-end teleconferencing systems. According to the report, it's "one of the few technologies that has benefited from the downturn, growing 30% from last year as businesses look to reduce travel expenses."

Cisco, HP, Nortel, and telepresence-focused players like Teleris have developed impressive, beautiful systems that make you feel like you're in the same room with your colleagues. The pitch is that you'll save money — but you'll also reduce your environmental footprint through reduced travel. These companies are cashing in on the business world's pressing need to get lean, while also appealing to the desire to get green. In my new book Green Recovery, I lay out five areas of a business that hold real promise for fast payback: facilities (lighting, heating, cooling), IT, fleet, waste, and telework. While companies are finding savings in all these operational areas, telework may be the most underleveraged of them all.

Just a few companies have made a concerted effort to reduce business travel through a combination of high-end telepresence systems and everyday technologies like WebEx. Most of the big users are, not surprisingly, tech companies that are acting in the spirit of "eat your own dog food." British Telecom calculated that it was saving $330 million per year on avoided travel costs and time saved, and Microsoft pegged its savings at $90 million. Non-tech leaders such as P&G and Deloitte have installed dozens of systems around the world — you need the network effect to kick in and make the investment worth it. They're saving millions every month on reduced travel expense.

It would seem that telework fits service and knowledge-based businesses best, but even companies with mostly hard assets see the value. David Ratcliffe, CEO of electric utility Southern Company, talked to the Journal in early 2009 about ways to cut costs in the downturn. He focused on two items: slashing $200 million from the capital expenditure budget by delaying some work on the physical plant and "more meetings with technology instead."

The business of telework is interesting to me on two levels. First, from the customer's side, even though the upfront investment is not small, it clearly saves a lot of money. Telework also represents a great way to show your most harried and valued employees that you care both about their life balance AND about greening your business.

But second, from the perspective of the suppliers of these technologies, the story has some interesting strategic angles. With their pitch of reducing travel, who are Cisco, HP, and the others truly competing against? The phone? No, they're going after the airlines — and targeting their best, most frequent, business-class customers. Do you think the airlines ever thought they'd be competing with IT companies?

[the rest of the blog is here]

Everything's getting faster these days—you've heard it before. Two mega-trends in particular are merging: rapidly accelerating technological change and rapidly evolving environmental issues and pressures. Lucky for us, the first change is going to save our butts from the second. Fast-evolving, smart IT will play a critical role in helping us navigate and profit from environmental challenges. The two trends together are combining to make for enduring change in how business is done, a movement to a permanently higher plane of green and tech-driven activity.

A recent Wall Street Journal op-ed, "Ten-Year Century," makes the well-known case that the pace of transformation in society is accelerating. More has changed, the authors say, in this decade than in the previous century. To be specific,

Changes that used to take generations—economic cycles, cultural shifts, mass migrations, changes in the structures of families and institutions—now unfurl in a span of years... Game-changing consumer products and services (iPod, smart phones, YouTube, Twitter, blogs) that historically might have appeared once every five or more years roll out within months.

The "Laws" of Technology that the authors highlight—Moore's and Metcalfe's—perfectly describe how quickly both computational power and networking capacity are growing (double the computing power on every chip every 18 months, for example). It's a "law" in the world of technology that things are steadily getting faster.

But this op-ed and other "tech is changing the world so fast" stories—and I'm a sucker for them—miss the another big shift that's moving just as fast: the degradation of the natural world and the resulting pressure to green society and business.

[The rest of this blog appears on Harvard Business Online here]

[This article first appeared on Forbes.com]

Ford is profitable again. General Motors is exiting bankruptcy much faster than anyone expected. It would seem that Detroit is recovering and that GM will limp through the rest of the recession. But the real question is whether the biggest of the Big Three will make the strategic shifts necessary to survive until the next one.

Early signs indicate it won't.

First, look at how GM got into this mess. The decline of the American automakers took decades, but one massive misstep lies at the core of what happened more recently. GM and its Detroit brethren missed a seismic green wave that swept the business world and society, a rising tide of real environmental challenges and growing public concern about those challenges. When GM was hit by a deadly combination of global resource constraints--which drove energy prices to historic highs--and changing consumer preferences, the already-weakened giant was unready. Indeed, former chief executive officer Rick Wagoner actually recommitted the company to big, energy-inefficient vehicles as late as 2005.

The frightening thing now is how many companies--not just automakers--remain overexposed to environmentally driven risks. Gas will not stay under $3 a gallon much longer. It already appears that China and India will soon resume their torrid growth, and when the full global economy recovers along with the rising East, the demand for fossil fuels will outstrip supply. Add to that the reality that governments everywhere will make fossil fuels even more expensive through legislation aimed at reducing greenhouse gases. Climate action is now a political and business reality. But how many companies are changing their products and strategies to deal with that fact?

The "new GM" certainly hasn't done so so far. As recently as last year, vice chairman Bob Lutz, who is now in charge of GM's communications of all things, called climate change "a crock of s--t." Imagine what sort of language he must have used to describe U.S. auto sales for the first eight months of 2008. During that crucial period of high fuel prices, sales at GM, Ford and Chrysler fell a bone-jarring 15% to 25% (year over year). Over that same stretch, Subaru, Honda and Nissan actually increased their sales. With gas prices at historic highs and consumers demanding more energy-efficient vehicles, the automakers with greener portfolios performed much better.

GM apologists will be tempted to make excuses by blaming the higher costs of producing vehicles in the United States, or even the credit crunch. But higher labor, pension, and health care costs affect profitability, not, necessarily, sales. And the deep recession came after those critical eight months. Only by putting those stale excuses aside can GM move forward.

What would success look like? GM could learn from other American giants that have proved adept at riding the green wave. Leaders such as Wal-Mart, General Electric, and DuPont have realized that "going green" is now a matter of survival. They're not scaling back their sustainability efforts because of the current downturn; they're accelerating them. They've realized that environmental strategy doesn't raise the cost of doing business, as many fear; it actually lowers expenses, reduces risk and drives innovation and sales.

GM can also look to its direct competitors to see the benefits of having a longer-range environmental strategy. Toyota announced this spring that it had received 80,000 preorders for the new 2010 Prius, and that it had instituted overtime production to meet the demand. Meanwhile Honda's Insight was the bestselling car in Japan in April--not the bestselling hybrid, but the bestselling vehicle. These results must have been very welcome during the worst decline in auto sales in history, but they were not overnight successes. Toyota started developing its "environmental" car not one but two recessions ago.

It takes foresight, hard work and courage to get ready for a green and carbon-constrained future. For GM to survive--and for American taxpayers to avoid having to bail it out again--it will have to completely overhaul its portfolio. Developing one new green model, the much-hyped Chevy Volt, will not be enough, especially when the Warren Buffett-backed Chinese firm BYD has already produced a similar vehicle. No, GM's only hope is to design all its cars to reduce resource use in the supply chain, require less energy to manufacture, and of course, need much less or no gas to drive.

Missing the green wave cost GM dearly. The realities of higher resource prices, political action on climate change and changing consumer demand are poised to swamp it again. And unless we see big changes soon across the business community, GM won't be the only company to go under.

If you put an energy meter inside a home and show people total usage in real time, a miraculous thing happens: they use about 10 percent less energy. The simple act of placing data in front of people changes their behavior. Data makes people smarter and inspires them to make small changes to save money and energy. You can use this powerful tool in business not only to cut costs, but to drive innovation and revenues.

Some are calling this phenomenon the "Prius effect," referring to how people respond when they see real-time fuel-efficiency data while driving the popular Toyota hybrid. As the described it, the Prius effect "can change driving in startling ways, making drivers conscious of their driving habits, then adjusting them to compete for better mileage." Similarly, making footprint data more accessible to those managers that can do something about it can create real value. As they say, you can't manage what you don't measure. It's amazing how often I hear that phrase — and how often people need to hear it. Tech leaders will tell you that one of the best possible solutions to the rapid increase in energy use and cost in data centers is simple: Add the power bill to the CIO's budget!

You can put your green data to use in five ways that will help your bottom line:

1. Saving money — a lot of it. As we've seen, if you give your operational people information on resource use, they will be inspired to find ways to cut back.

2. Driving internal competition. Share footprint data broadly and transparently and you'll see how badly people like to win. When PepsiCo Chicago ran a floor-by-floor energy reduction competition, the results were staggering. In one three-month period, electricity use dropped 17% (and paper use 22%). Energy use on the winning floor plummeted 31%. Factory heads at a number of companies have told me that they'd rather miss their financial targets than their green or energy goals — it's just too embarrassing to be at the bottom of the list.

3. Answering your customers' pressing questions. Wal-Mart, along with many other companies, is asking suppliers and vendors very tough questions about their environmental and social impacts. Those that can gather their data and tell the best story will get the most shelf space and mind space (see my previous post on Wal-Mart's eco-ratings for more on this point).

4. Prioritizing initiatives. Resources remain very tight — you don't want to spend money on the wrong things. With all the pressure to go green, it's easy to get lost in the weeds and pursue avenues that may not yield the most benefit. When companies really look at their full value-chain impacts, they're very often surprised at the results. Green leader Stonyfield Farm discovered that 95% of the ecological damage from its packaging occurred during production and distribution. So the company has made light-weighting (which is what it sounds like) the top priority — use less stuff and the footprint goes down. Stonyfield has made the deliberate choice to not use a recyclable, yet heavier, plastic; this counterintuitive and seemingly non-green choice makes the most environmental and fiscal sense given the real data.

5. Finding new market openings and focusing innovation. Procter & Gamble went through a similar lifecycle exercise and made a similar discovery about its laundry products. The vast majority of energy use was not in sourcing, production, or distribution, but in the use of the detergent in homes. And the majority of that was not the washing machine turning, but heating the water. This insight led to Tide Coldwater, a reformulated product to help customers wash in cool water, using less energy and saving money. Coldwater is one of P&G's seven original "sustainable innovation products" that generated $2 billion in sales in the first year.

Operating your business without environmental and social metrics leaves part of your management "dashboard" blank. How well can you run your company without complete information? But don't worry — you're not that far behind if you don't have a perfect handle on your value-chain footprint, or even your direct impacts. It's getting easier and easier to gather this data, and you can accomplish a great deal with even "back of the envelope" calculations (more on this in my next post).

For a slightly longer take on this topic, see also my recent e-letter, or the full discussion in my new book Green Recovery

[This blog was originally posted on Harvard Business Online]

Yesterday was a sad anniversary -- it's been 25 years since the Bhopal disaster raised the specter of chemicals and toxics as a deadly serious environmental issue. In the late 60s and 70s, rivers catching on fire and dense, opaque air above cities forced our attention on solving the pressing, tactical issues of air and water pollution.

But perhaps no environmental disaster grabbed people's attention quite like the gas leak at a Union Carbide plant in Bhopal, India on December 3, 1984. Estimates vary, but at least half a million people were exposed to toxins and thousands died within a few days. Birth defects and other serious lingering effects still plague the population in the region, affecting hundreds of thousands of people. (See the Bhopal Medical Appeal for more info).

This one event drove awareness and contributed mightily to the momentum building to reduce human exposure to toxicity. It was the beginning of a quarter century of action. One of the first real industry-driven initiatives in any sector, Responsible Care, grew out of the tragedy. A few years later, the U.S. created the Toxics Release Inventory which mandates transparency on a range of industries. The measurement and disclosure of toxic pollution by facility has forced a lot of soul-searching and kicked off long-standing sustainability efforts at companies like DuPont (which discovered it was the #1 polluter in the first TRI reports).

The movement has evolved a great deal in recent years as part of the larger green wave that's swept business, especially the powerful trends of supply chain greening and transparency in all we do. Wal-Mart, never one to pass up a chance to increase pressure on suppliers on sustainability issues, quietly introduced a new tool, GreenWERCS, to assess products on its shelves on chemical composition. Companies like SC Johnson, Nike, and HP have made significant efforts, some for years, to reduce toxicity.

High-profile stories of lead in toys, toxic drywall, and melamine in milk products (all tied to Chinese supply chain practices), as well as concerns about chemicals like BPA leaching from baby bottles here, have also raised awareness dramatically. As the world contemplates vast policy action on climate, it's worth noting that government pressure has continued to rise on toxics, with a large number of powerful laws around the world. Regulations in EU over the last decade, such as RoHS and REACH, have changed the game dramatically (shifting responsibility to prove safety from government to business). The U.S. has gotten into the act in recent years as well, with bans on phthalates in toys, the controversial and stringent Consumer Product Safety Improvement Act, which targets toys in particular, and regional actions like California's new regs. Companies cannot avoid questions about what's in everything and how their products might affect human health.

But what's really interesting is how the approaches companies take to handling toxics have been shifting over years from end of pipe solutions to pollution prevention to a new movement under the banner of "green chemistry." Rather than demonizing chemicals and chemistry -- when they continue to play a critical role in meeting human needs -- this new approach seeks a third way.

The leaders are starting to design chemicals and products in new ways to reduce toxicity. Do this right, the thinking goes, and avoid tons of regulation, liability, and health problems altogether. There's enormous upside potential for the companies that can innovate and find ways to create the same material or chemical properties that we need with much lower risk to humans and the environment. So this is not all about regulations and risk-reduction - it's about getting smart about your own products, and it's about profit.

With all the extensive, and justified, coverage of climate change and the Copenhagen Summit, it's easy to forget that there are other serious environmental issues out there. This anniversary today certainly reminded me. From water to biodiversity to waste, a range of other problems continue evolve and create pressing challenges, for society and for business. Of course most of these, especially water, have deep connections to climate change, so it's right that we make that a priority issue.

But the issue of toxicity and chemicals is one that lies somewhat separate from the climate discussion. While it gets lost in the shuffle sometimes, the pressure on companies to deal with it just keeps rising and rising. It's worth, today, remembering why.

[Originally posted on Huffington Post]

[If this was forwarded to you and you'd like to sign up for Andrew's blog via email, click here]

[A post from December from Harvard Business that i forgot to post here...but it's still timely!]

No matter what happens in Copenhagen, or in the follow up meetings in Mexico and elsewhere, the world is warming. It's happening today, and even the majority of skeptics seem to agree on that point (often the debate is whether humans are behind it and how much money we should invest in "fixing" the problem). But the very real changes we're already seeing are prompting many in the climate-watching world to talk about not just reductions in emissions but "adaptation."

What used to be seen as a dirty and defeatist word is now a central discussion point, even in Copenhagen. The G77 (the developing world) is demanding significant aid from the rich countries not to help them combat climate change, but to help them adapt to it. Just a couple weeks ago, President Obama said he sensed some consensus around mobilizing "$10 billion a year by 2012 to support adaptation and mitigation in developing countries."

Given the cold reality of a warming planet, adaptation is now a strategic issue for countries and companies alike (whether or not they realize it). The changing climate can mean many things, but includes, according to an important report from the state of California, threats to ocean and coastal resources and land, water management challenges, major changes to agriculture, and stress on transportation and energy infrastructure. In California alone, $2.5 trillion of assets will be exposed to extreme weather and wildfires, costing many billions a year.

For companies the same basic issues apply. Specific industries, such as agriculture, face massive change. But all companies will find impacts up and down their value chains from weather, changing water availability, and temperature shifts. But just laying out doom scenarios and risks doesn't help much. So let's look at a couple of excellent (and short) reports on adaptation and business.

Some big institutional investors, with the guidance of the consultant Acclimatise, recently released "Managing the Unavoidable" (register for free to download it here or get the similar 2008 report on similar topic here). A few key findings struck me as dead on and important:

1. Climate change adaptation is starting to receive more management attention but management systems and processes are much less developed than those for climate change mitigation. Basically, most companies are not thinking about this, with a few exceptions — Coke comes to mind since it's been mapping water availability for years. But they are in the minority.

2. There appear to be significant weaknesses in companies' risk assessment processes. They say that "incremental changes are being under-emphasized" (we all focus on extreme weather events rather than 'creeping' changes) and "indirect impacts on business models are being neglected" (we focus on risks to our own fixed assets and haven't looked at supply chain disruptions). Meaning, even if you don't think you rely on water in an arid region, someone in your supply chain might.

3. Companies are more concerned about risks than opportunities. While it may seem cold to talk about how to profit from a warming planet, it's a reality that there will be winners in this. More importantly, we actually need companies to pursue solutions to greatly reduce human misery. And, yes, there will be profits.

And this brings me to the second report that's worth a look. "The New Adaptation Marketplace" from global NGO Oxfam lays out some helpful categories and sample companies that stand to profit from the changes to come. These include, water management (Pentair, Siemens), energy supply (GE), insurance (Swiss Re), climate change information and consulting services (ICF International), and of course agriculture projects (CH2M Hill).

On the last one, consider one of my clients, Bayer, which has a sizable crop sciences business. In its last annual report, Bayer identified drought-tolerant plants as a major investment opportunity. Clearly, the world needs to keep food volumes growing, even on a dryer, warmer planet. The companies that can solve this kind of problem will grow and win share.

Or think of the more extreme needs that might arise and the entrepreneurial opportunities. As some smart people have pointed out, cutting carbon won't be enough — we'll need to drag it out of the sky. Imagine what new technologies we'll need to do that.

From my conversations with Oxfam, clients, and other corporations, I can tell you that most organizations — including ones that already have products that will help with adaptation — are not yet thinking clearly about the risks and opportunities from climate change. Are you?

Reality 1: Last year, the Toyota Prius was the bestselling car in Japan. On the back of innovations like the hybrid gas-electric engine, Toyota also became the largest car seller in the world by volume. Toyota is clearly the best, most forward-thinking auto company.

Reality 2: During the same period, a number of Toyota models developed (or exposed) a serious quality problem that has caused deaths and led to one of the largest recalls in product history. In its delayed response, Toyota has not won any prizes for openness and customer care. Furthermore its line of trucks took a huge hit when the auto industry collapsed. Toyota is clearly the worst, most slow-moving auto company.

F. Scott Fitzgerald once said that it takes "a first-rate intelligence...to hold two opposing ideas in the mind...and still retain the ability to function." But how can Toyota still be one of the best companies in the world and still make horrendous life-threatening mistakes?

In the green/sustainable business realm, this dichotomy is actually not so unusual. Wal-Mart is arguably the most important company in the greening realm, with its aggressive actions to reduce its own — and all its suppliers' — environmental impacts. But, according to a large segment of the population, it's also a force for thoughtless consumption and low-price-above-all. A consumer survey last year proved the point: Wal-Mart topped the list of most sustainable companies, and sat atop the list of the least sustainable as well.

Toyota itself has for years been prompting head-scratching about how green it really is. At the same time that the Prius was rising in popularity and winning the company accolades for a good chunk of the 2000s, Toyota was also embracing a big vehicle strategy and focusing sales efforts on its giant Tundra truck. Most pundits agree that Toyota's quality and revenue problems stem from trying to grow too fast — partially by putting a big push behind the Tundra. By pursuing truck sales, Toyota grew, but it also found itself in the same whirlpool of anti-big vehicle sentiment when oil prices peaked in 2008.

But it's not just that Toyota grew too fast. Comparing figures from the first eight months of 2008 vs. the previous year, it's clear that Detroit was already hemorrhaging sales before the economic collapse because they had missed the green wave. Meanwhile, Detroit's Japanese competitors, with their more energy-efficient, greener product portfolios, were selling more vehicles year over year. Toyota's results were right in the middle because it was trying to be all things. It was trying to be smart — to maintain two opposing strategies at once.

This kind of integrative thinking is a skill all modern leaders will need (see an interesting piece on this opposing-views idea and President Obama). Holding opposing views can lead to innovative ideas, and we desperately need radical innovation, or what I call "heretical" innovation, to solve our environmental ills.

For example, we can't forget that when Toyota asked why cars couldn't have solid power, good midsize interior space, nice design, and get better gas mileage, it was on to one of the most important innovations of our time — even if today the Prius is getting caught up in the quality concerns as well. As has been already argued, we shouldn't use the Toyota saga as a warning against innovative thinking. Instead we should look more closely at where their strategy worked, and where it failed.

What matters is holding the right kind of opposing views, because not all of them are safe or sustainable. As the wise Mr. Miyagi once told Daniel-san, "Walk on road, hm? Walk left side, safe. Walk right side, safe. Walk middle, sooner or later get squish just like grape." Pursuing leadership in lean manufacturing and design while at the same time trying to grow at all costs has badly damaged Toyota.

Sustainable growth, the kind that isn't going to get squished, is found by using the kind of integrative thinking that allows us to provide goods and services that are the same or better and also to use drastically less stuff: that's heretical, and involves the right kind of opposing views to try and hold in your mind. But where Toyota got in trouble with integrative thinking was when it combined sustainable growth in one part of its portfolio with uncontrolled, unsustainable growth in another, exposing it to the very risk its Prius strategy sought to mitigate.

No matter how green your company is elsewhere, that kind of unthinking growth is not a worthy or, it turns out, a profitable pursuit.

[This post appeared first on HBR]