Green Business Archives

August 23, 2007

Big Business = Evil?

[This is a longer version of a response I'm posting on Huffington Post to a fairly ridiculous column about how evil former Sierra Club president Adam Werbach is for working with Wal-Mart (as featured in Fast Company this week). See the debate here ]

It's far more likely Mr. Schechter is living in Wonderland than Adam Werbach. I wish the world were as black and white as he makes it out to be, but it's much more complicated than that. Equating big business, and Wal-Mart, with evil — and labeling anyone who chooses to try and make the world's largest company more socially responsible as bad news — is too easy and incredibly misguided. Does Wal-Mart have some serious issues? Certainly. The company has big problems on the social side of the sustainability ledger, and its core business model, dependent entirely on low prices, is not sustainable for people or planet (an opinion I've shared with some of Wal-Mart's management). But just throwing up our hands and refusing to work with big business is not just illogical, it actually dooms us.

What's the alternative here? Should we only buy from and work for and with sustainable companies? Well, that would be nice, and I pray that in the future, the options are there, but for now, that would leave us with exactly zero companies. I can assure you after years of research for my book Green to Gold, there's no such thing as a sustainable company yet. Some are on their way, like Interface, Patagonia, and IKEA. But we can't afford to wait for the big companies doing business the old way to just wither and die. We must change the way the world produces goods, eats, shops, works, consumes, and lives and we'll only get there in partnership with some of the biggest organizations out there (in part by making the very defendable case that it's good for business to be green), and with some fundamental shifts in our market economy (such as...the prices of goods need to reflect their real impact on the world -- $20/gallon gas anyone?).

Companies are, like it or not, the most effective means we have for making things to wear, eat, and live with and matching them with people's needs (how much we consume is a big part of the discussion of course, but we all have some footprint no matter how green our lifestyle). Like it or not, when the history of green business is written (which I hope will come in the form of a digital or low-impact book available to the billions of people living a high-quality life and not scratched on a few palm fronds by the few remaining inhabitants of a climate-change flooded Waterworld), that history will be in large part about Wal-Mart. The company's environmental actions are very real — just ask the thousands of suppliers, large and small that have been "asked" to reduce packaging, use less fossil fuel, and change the way they make things.

Environmentalists (and I wear both hats -- business and environment -- comfortably) have to support the good things happening, even if they are coming from a seemingly unlikely place. The biggest companies in the world are taking environmental issues seriously, and the largest environmental NGOs are all working with industry closely. These relationships are a good thing. If we don't change the big guys, we won't make it.

June 8, 2009

Why This Is the Right Time to Go Green

[New post on Harvard Business.org here]

The green movement may be at risk of slowing down, especially within the business community. Many business people hold on to an outdated view of green: the misconception that environmental practices always cost a lot of money. So logically, in this economy they're asking, "Is this really the time for green? Can we really afford it now?"

At same time, most of the global discussion about getting the economy on track focuses on the macro picture — large stimulus packages at the national and industry level. But how can the economy as a whole get on its feet if individual companies don't as well?

I believe that these two questions — can we still go green and how do we revive the economy — are heavily intertwined. In this time of austerity, sustainability is perhaps even more relevant and will provide a path out of this mess. One of the core pillars of going green is doing more with less — saving physical and financial resources. So while the instinct may be to pull back from green initiatives in hard times, that would be shortsighted and a huge mistake.

Not only should companies not put their green efforts on hold, they should accelerate them in targeted ways to save money quickly and prepare for the future. Those who navigate these tricky waters the best will emerge from the downturn in better shape than their competitors.

See the rest...

August 25, 2010

It's not Environment vs. Economy: Green is the Path to Prosperity

The day after the climate bill failed in the U.S. Senate, the New York Times' conservative columnist Ross Douthat gave his take on "The Right and Climate" in a piece that on the surface sounded reasonable. Maybe it was best that the bill didn't pass, he says. While he displays some bravery in calling out the climate change deniers, who remain almost entirely on the right, for "making a spectacle of their ignorance," he nevertheless himself betrays a much greater ignorance about what climate change means for us and our economy. Douthat espouses the dangerous idea that doing nothing to combat climate change is the best course for business and for the world.

In doing so he relies on a set of arguments against the pursuit of a clean economy that have little basis in fact and mainly defend the untenable status quo. The overall pitch has two main parts: (a) promoting a clean economy through the use of market mechanisms like cap-and-trade is a perversion of free markets, since the renewable energy industry shouldn't need tax subsidies if it's a real business; (b) going green will cost jobs and hurt the economy. Let's look at both ideas.

First, the notion that fossil fuels do not rely on subsidies is absurd. A new analysis from Bloomberg New Energy Finance compares the roughly $45 billion of global government subsidies for renewable energy (mostly tax breaks) to the $557 billion of subsidies for fossil fuels in 2008 alone. That 12-to-1 ratio of dirty-to-clean subsidies is surely understated. Let's just say that the International Energy Agency, which calculated that larger number, is not a liberal think tank, and it is measuring only the most literal subsidies. In reality, the market for energy is not currently "free" at all. So if putting a price on carbon helps us support new industries of the future, drive innovation and, say, preserve the ability of the planet to support our species, it seems like a good deal.

Second, this general notion that green will hurt the economy is simply the easiest defense of doing nothing. This concept — that that there's some tradeoff between economic development and what he calls a "growth-slowing regulatory regime" — is the heart of Douthat's argument. This idea is so very dangerous since it keeps us tied to the past, and abdicates leadership to other countries that are pursuing the real growth and prosperity agenda.

The most thorough studies — such as the well-regarded Stern Review on the Economics of Climate Change — tell us that the cost of ignoring climate change (including the possible devastation to our species) will be far higher than addressing it. Using less energy and material, or switching to electric vehicles and renewable energy, will help everyone from homeowners to businesses save money. As one CEO said to me, "I don't know about climate change, but it seems pretty clear that producing less carbon is better than producing more."

And the flashy side of this "kill the economy" argument remains the odd notion that a green agenda will kill jobs. Of course it will destroy some old-school jobs, but clearly the move to a clean economy will create jobs as well — millions of them. Installing insulation and solar panels, building wind turbines, and managing buildings for energy efficiency are just some of the obvious ones. Every industry that makes components for these new sectors will also have new markets and customers.

So what part of the economy is actually hurt by the race to clean economy? Which companies will lose jobs? In essence, only one sector, oil and gas, will truly get hit. If everyone uses less in general, and switches from fossil fuels overall, then of course those companies that only provide fossil fuels will shrink-unless they decide to play a role in the new energy economy).

But the big mistake is that protecting these particular jobs, and keeping us pinned to the status quo, does not represent a path to growth. Consider this: at the macro level, the world produces roughly 85 million barrels of oil per day. Nobody reputable seems to think that the number will rise much if at all; in fact, "peak oil" theories have gone quickly from fringe to mainstream (even Kuwaiti scientists recently predicted a global peak in the next five years).

My point is that even with optimistic numbers, fossil fuels are not a growth industry, and not a job creator. Relying on that sector is not a path to prosperity for the world or for the United States. Creating new technologies and products, building greener buildings and businesses, and just plain using less energy to do it all: those actions will make almost all companies more profitable — just not the ones providing only fossil fuels.

Our current path, and commitment to doing nothing, is in effect protecting one sector at the expense of all the others...and risking our planet and economy as well.

(This post first appeared at Harvard Business Online.)

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August 8, 2011

A Giant of Sustainability: Rest in Peace, Ray

I just learned that one of my personal heroes, Ray Anderson, died on Monday at the age of 77 after battling cancer for that last 2 years.

Ray was known best for his inspirational role in the world of sustainability (so many of the leaders of the movement count Ray as a role model). And when I say inspirational, I mean it very personally. When I was searching for my mission in life over a decade ago, and was trying to find out how you could marry the strategies and tools of business with environmental concern, someone suggested I check out Ray's book, Mid-Course Correction. It was literally the first step in my own transformation.

After I had gone about my sustainability journey -- my mid-course correction -- for a number of years, I had the incredible fortune of sharing the stage with Ray at a conference a couple of years ago. Watching Ray the engineer lay out the irrefutable logic for a different way of doing business was like seeing the Beatles perform their greatest hits -- it was all familiar, and we knew the tune, but it was still amazing to see it all live. I didn't know Ray well, and I'm poorer for not spending more time with him. But I am glad I had the chance to tell him how important his work was to me.

Ray's books, including last year's much more personal tale, Confessions of a Radical Industrialist, tell the amazing story of a deeply transformational experience, Ray's own personal road to Damascus conversion. His journey began with a book as well, the remarkable and inspirational The Ecology of Commerce by Paul Hawken, which hit Ray like "a spear in the chest." He had discovered what the rest of world is still figuring out...the business ecosystem that we had relied on, for all the success and wealth it created, was fundamentally broken. It treated the planet's resources, the balance sheet of the world, as limitless and of no inherent value.

As founder and Chairman of Interface (a flooring company), Ray had never really thought about where all the materials in his petroleum-based products came from, or where they went after he sold a carpet tile (or millions of them). He had built a successful business of scale, employing many people, but now found himself wondering where he had gone wrong.

Ray set Interface on a course to climb what he called "Mount Sustainability" and build a truly sustainable business...even one that replenishes the world instead of drawing down its resources. Over the last 17 years, Interface has discovered how hard a job that really is, but has arguably come further than any enterprise on the planet.

Historians will report that in the late 20th century the world and its business giants began a slow, sometimes painful, pivot away from traditional industrial capitalism to something different...something healthier, more passion-driven, and, yes, more profitable. When they write about this period, a few names and moments will be pivotal. Ray's conversion and evangelism will be at the center of that history.

Instead of easing into retirement, Ray made it his mission to tell the world about his journey and wake business people up to the risks and opportunities in sustainability. He spoke to many thousands of people, giving an astonishing 1500 speeches. His books reached many thousands more. He fundamentally changed the careers and lives of many people looking for a deep connection to their work and their world. Count me among the converted.

Thank you Ray for all that you did.

May 1, 2012

Walmart's Shades of Gray

Many people love to attack Walmart — as the world's largest company it's an easy target. And although the retail giant's green efforts have done a lot to showcase the company's commitment to sustainability, sometimes Walmart gives its critics some legitimate ammo, like the recent revelations and allegations of corruption in its Mexican operations.

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As the New York Times recently reported, in the early 2000s, when Walmart de Mexico was building stores at a furious pace (making the country the company's second largest market), it was making illegal payments to get building permits and speed store expansion. The growth miracle was, it turns out, not so miraculous.

Of course this is not a good thing in and of itself. But where the story gets really troubling, if the accusations are true, is in how the company handled the matter. After its internal, FBI-trained watchdog group investigated the allegations — and made waves — the case was given back to the chief lawyer for the Mexican operations. This was, as the Times put it, "a remarkable choice since the same general counsel was alleged to have authorized bribes." It sure looks like something not flattering, and possibly illegal, was swept under the rug.

So what do the recent allegations mean for Walmart's sustainability efforts? On the one hand, nothing. In fact, the same week this story surfaced, the company released its 2012 Global Responsibility Report, an interesting juxtaposition to say the least. I've long been a fan and chronicler of the company's green efforts (full disclosure: I've spoken at multiple Walmart events, including a sustainability summit held by Walmart Mexico in 2010), and this report did not disappoint on that front.

Walmart listed some impressive accomplishments, from diverting 80% of waste from landfills, to doubling the amount of local food sold, to generating over 1 billion kilowatt-hours of renewable energy onsite (the second most of any corporation in the U.S.). These achievements, along with a 5-year record of pushing the sustainability agenda harder than almost any company, are real and demonstrate leadership in responsible business.

So here's the rub with sustainability, corporate social responsibility, ethics, and anything else that's generally (if sometimes awkwardly) thrown together into the vast bucket of "good stuff": The measurable and legitimately good things a company does will not make up for what it does wrong. But nor will the bad cancel out the good — the good things are no less legitimate just because the company does some things its leaders should be ashamed of. The good practices are worth emulating regardless of the larger context.

The significant challenge of how to view, judge, and learn from the actions of a complex, messy thing called a "company" is nothing new. If an oil and gas company wages a multi-decade campaign to muddy climate science, but also funds next generation low-carbon fuels research and operates incredibly efficiently, is that original campaign any less immoral? Should other companies avoid the cost-saving, innovative, best practices of the bad actor? Of course not. When it comes to what we can learn or gain from a company's profitable and sustainable initiatives, the bad things don't really come to bear.

But when thinking about a company as a whole and that vague thing called a "brand," it's a different story — everything is related. Key stakeholders, such as customers, consumers, employees, and even the investors and markets, judge the value and values of a company and then decide if they want to interact with it. That judgment so far is pretty clear in this case. Even though one can never have too much faith in short-term market reactions, this one was serious: Walmart's stock dropped 5% when the story broke and, as of this writing, is down 8%, or $16 billion in market cap (while the Dow was flat).

I'm frankly surprised investors care — there's historically, and unfortunately, little downside for companies that engage in this kind of corruption in developing countries. But the immediate market reaction here is fascinating. It says to me that there's some recognition of real risk to the company in these practices: that the hit to the brand matters, or that people may not want to work for or buy from a company they can't trust.

There's some understanding that a company's value in the market is connected to its values (of which sustainability efforts can be a good indication). Just as it's not sustainable to over-consume natural resources, it's not sustainable to alienate key stakeholders through ethical lapses.

The totality of a company's actions does matter. We should demand consistent, ethical behavior and a real commitment to doing what's good for people, planet, and profit, which includes not compromising on ethics. We can expect more from companies we buy from and work with and for, especially the very large ones that show such promise and leadership.

(This post first appeared at Harvard Business Online.)

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December 22, 2012

Top 10 Sustainable Business Stories of 2012

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It's time once again to try and summarize the last 12 months in a handy list. But before I dive in, some quick thoughts.

It was an odd year for green business, and it began with some mixed signals about how far companies were coming on sustainability. A GreenBiz report indicated that progress had slowed or even regressed, but MIT and BCG also declared that sustainability had reached a "tipping point" with more companies putting sustainability "on the management agenda."

In reality, both views were right. Corporate sustainability lost some of its sexiness from previous years, as it grew more entrenched in day-to-day business. Some parts of the agenda — eco-efficiency and resource conservation for example — are widely accepted now, and it's rare to find a big-company CEO who doesn't have sustainability on his or her radar.

The mega forces driving sustainability deep into business — such as climate change, resource constraints, and transparency — are getting stronger. We may not be keeping pace with these pressures, but leading companies continue to evolve more sustainable strategies and tactics. Let's look at some top macro- and company-level stories.

Macro Trends

1. Historic drought and Hurricane Sandy sweep away (some) climate denial
For many people this year, climate change moved from theoretical to painfully real. Mega weather took many lives and cost over $120 billion in the U.S. alone ($50 billion for the drought, $71 billion for Sandy). After Sandy raged across the eastern coast, Businessweek blared on its cover "It's Global Warming, Stupid." New York Mayor Bloomberg, a Republican, endorsed President Obama in the election, titling his open letter, "A Vote for a President to Lead on Climate Change."

As bad as Sandy was, the relentless drought across the middle of the country may prove more convincing in the long run. Corn yields per acre fell 19%, food prices rose, and water disappeared —the Mississippi River may soon struggle to support commerce. Individual companies are feeling the bite: analysts at Morningstar estimate that input costs at Tyson Foods will rise by $700 million — more than its 2012 net income.

Over one-third of the world's largest companies surveyed by the Carbon Disclosure Project arealready seeing the impacts of climate change on their business. So with life-and-death consequences and vast costs, we must have moved quickly to tackle climate change, right? Sort of...

The year ended with the failure, yet again, of the international community to come to some agreement on climate change. But country-level and regional policy moved forward: Australia passed a carbon tax, South Korea approved carbon trading, and California just began its own trading experiment.

Many countries also committed serious funds to build a clean economy: Saudi Arabia pledged $109 billion for solar, Japan declared that a $628 billion green energy industry would be central to its 2020 strategy, and China targeted $372 billion to cut energy use and pollution.

In the U.S., a backdoor approach to climate policy took over. The Obama administration issued new standards to double the fuel economy of cars and trucks, and the National Resources Defense Council (an NGO) proposed using the Clean Air Act to reduce emissions from power plants by 25%.

2. The math and physics of a planetary constraints get clearer
Arithmetic had a big year: Nate Silver's nearly perfect predictions of the election gave him the oxymoronic status of rock-star statistician. The math and physics of sustainability got some serious attention as well.

Writer and activist Bill McKibben wrote a widely-read piece in Rolling Stone about climate math — how much more carbon emissions the planet can take — and followed it up with a national awareness-building tour. Based on similar numbers, both McKinsey and PwC UK calculated how fast we must reduce the carbon intensity of the global economy (PwC's number is 5% per year until 2050).

And on the resource constraint front, Jeremy Grantham, co-founder of the asset management firm GMO ($100 billion invested), continued his relentless numbers-based assault on the fallacy of infinite resources. In his November newsletter, he demonstrated exactly how much of a drag on the U.S. economy commodity prices have become.

Nobody can really deny that, in principle, exponential growth must stop someday. Grantham, McKibben, and many others are making the case that someday has arrived.

3. The clean economy continues to explode
The rapid growth of natural gas production (the biggest energy story of the year) and the high-profile failure of one solar manufacturer (Solyndra) have confused people about the prospects for clean tech. In reality, the clean economy is winning. The share of U.S. electricity coming from non-hydro renewables doubled to 6% in the last 4 years. On May 26, Germany set a world record when it produced 50% of its electricity needs from solar power alone. In a mini political tipping point, six Republican senators publicly supported an extension to the wind production tax credit in the U.S. (which will expire in days), and got an earful from a Wall Street Journal editorial.

It wasn't just energy. One auto analyst declared 2012 the "Year of the Green Car," with more high-MPG models, 500,000 hybrid sales in the U.S., and plug-in sales up 228%. To cap the year, the pure electric Tesla Model S was selected as the Motor Trend Car of the Year.

Company Stories

This year, there were countless eco-efficiency stories about companies saving millions of dollarsand developing new tools to make buildings, fleets (Staples and UPS, for example), and manufacturing much leaner. Aside from that overall theme, the following stories grabbed me because of their connection to larger trends.

4. The green supply chain gets some teeth: Walmart changes incentives for buyers
This year, Walmart finally added a key element to its impressive green supply chain efforts. The retail giant's powerful buyers, or merchants, now have a sustainability goal in their performance targets and reviews. For example, the laptop PC buyer set a goal that, by Christmas, all of the laptops Walmart sells would come pre-installed with advanced energy-saving settings. It was by no means a hiccup-free year on sustainability issues for Walmart, with deep concerns about corruption in its Mexican operations. But the subtle change in buyer incentives is a big deal.

5. Transparency and tragedy raise awareness about worker conditions
Early in 2012, Apple took some serious heat for the working conditions at Foxconn, the giant company that assembles a huge percentage of our electronics. Later in the year, tragedy struck Dhaka, Bangladesh when a fire at the Tazreen Fashion factory killed or injured hundreds of people. The company that owns the factory serves Walmart, Carrefour, IKEA, and many others (but in fact,some companies didn't even know that Tazreen was a supplier). It's unclear if any of these human and PR disasters will affect the companies downstream, but transparency and knowledge about the lives of the people who make our products will continue to rise.

6. Data gets bigger and faster: PepsiCo and Columbia speed up lifecycle assessments
The rise of Big Data was an important theme in business in general this year, but especially in sustainability. And nowhere is good data needed more than in the onerous and expensive task of calculating a product's lifecycle footprint. PepsiCo has had great success with the method, finding ways to reduce cost and risk for key brands, but execs wanted to apply the tool across thousands of products. To make the exercise feasible and affordable, they turned to Columbia University, which developed a new algorithm for fast carbon footprinting. This isn't just a wonky exercise: As PepsiCo exec Al Halvorsen told me, "the real reason you do an LCA is improve the business, to put more efficient processes in place, and innovate in the supply chain."

7. Sustainability innovation opens up: Unilever, Heineken, and EMC ask the world for help
This new world of social media, where everyone has a voice, can be tough on companies. Consumers can gather around a green issue and pressure companies to change their behavior. Some notable change.org campaigns this year challenged Universal Pictures (about its green messaging around The Lorax), Crayola (recycling markers), and Dunkin' Donuts (Styrofoam cups). But companies can also use "open" innovation tools to generate new ideas and invite the world to solve problems together.

Unilever, which has my vote for leader in corporate sustainability right now, held an online discussion or "jam." Then the company posted a list of "Challenges and wants" and asked for ideas on solving big issues such as how to bring safe drinking water to the world's poorest regions.Unilever has received over 1,000 ideas and is "pursuing 6 to 7 percent of these with internal teams." Other notable open innovation models this year included Heineken's $10,000 sustainable packaging contest (which yielded some very fun ideas like a roving tap truck) and EMC's eco-challenge with InnoCentive on e-waste.

8. The economy gets a bit more circular: M&S, H&M, and Puma experiment with closing loops
On the heels of Patagonia's "Don't Buy This Jacket" campaign (one of my top 10 stories from last year), British retailer M&S began a program called "Schwop" that asked customers to bring back old clothes every time they bought new ones. This month, H&M also rolled out a global clothing collection and recycling effort.

Puma, after making last year's list with it's Environmental P&L, kept the momentum going andannounced a new "InCycle" collection with biodegradable sneakers and shirts, and recyclable jackets and backpacks. Remanufacturing has been around a long time, but closing loops is getting more popular every year.

9. Dematerialization gets sexier: Nike's knitted shoe shows off sustainable style
Keeping the apparel theme, um, running, check out Nike's new shoe with FlyKnit technology. The upper part of the shoe is constructed from a single strand, which greatly reduces waste and lightens the shoe dramatically. It's a great thing when a more sustainable design also coincides perfectly with customer needs. Enough said.

10. Zero becomes more the norm: DuPont, GM, and John Elkington show the way
The idea that organizations should send zero waste to landfill was once a niche idea, but it's quickly becoming the ante to enter the waste management game. Announcements on waste may not be exciting, but they demonstrate how companies can turn a cost center into a source of profit. DuPont's Building Innovation Products business reduced its landfill waste from 81 million pounds to zero in three years. GM announced that it would ramp up its already extensive waste reuse and recycling efforts, which are now generating $1 billion a year. And a plug for a fellow writer: In a new book, sustainability thought leader John Elkington made the case that the future would belong to the "Zeronauts," the "new breed of innovators determined to drive problems such as carbon, waste, toxics, and poverty to zero."

Five Questions For 2013

Some other promising stories are in the "too early to tell" stage, but bring up some key questions:

1. Can we standardize sustainability, which some smart folks began to do around rankings (GISR) and accounting (Sustainability Accounting Standards Board)?

2. Will we find a way to value externalities like ecosystem services and internalized, intangible benefits? (A focus of some of my work as an advisor to PwC US). For example, Microsoft launched an internal carbon tax and some major companies (Coca-Cola, Nike, Kimberly-Clark, etc.) pledged to value natural capital at Rio+20.

3. Will government get in the way or help, like when the U.S. Senate allowed the military to keep investing in biofuels?

4. Hertz and B&Q (Kingfisher) have delved into collaborative consumption (see WWF's Green Game-Changers report), but will the sharing economy make a dent on sustainability issues?

5. Finally, how much will we challenge the nature of capitalism, and what will that mean for how companies operate? (This is the focus of my next project.)

So many stories, so little time... on to 2013. Happy holidays and have a safe and wonderful New Year!

(This post first appeared at Harvard Business Online.)

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July 30, 2015

Taking Action on Climate is the Ultimate No-Brainer Business Strategy

[Just some summer catch up on re-posting things I've written in other places. I posted this on The Guardian's site a few months ago. It's one of those "going green is a win-win" stories that I wish were not necessary anymore. For the knowledgeable sustainability folks, this is a 'duh'...and I could've written this in almost the same way years ago -- except for the part of the story about the precipitous drop in the cost of renewable energy. So I expected more pushback from readers on 'we've heard this before', but I got almost entirely positive feedback on how I'm making the case (again). The larger point is that we do need to tell this story over and over -- the misperception remains that if it's green, it must cost more. Let's put a stake through that.]

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(Photo: Flickr by h080)


Recently, as I finished speaking to a group of fund managers, I was asked two questions that have become increasingly common. The first was: “What if scientists are wrong and the climate thing doesn’t turn out to be so bad?” The second was: “Will companies regret doing something about it?”

On the bright side, these questions are a big improvement over the one I kept getting asked a year or two ago – namely, whether climate change was happening at all. While climate change is more than reason enough for a deep reconsideration of how we do business, I suppose it’s not an unfair question to ask if going green has other benefits. The short answer is yes.

To get a feel for how tackling climate change can benefit a business, it helps to look at the four major categories of corporate action that fall under the banner of “doing something” about carbon:

  • Eco-efficiency in all its forms: slashing energy and material use in production, packaging, distribution and business operations, as well as redesigning products and encouraging customers to reduce their energy draw
  • Using renewable energy: either investing in energy-generating assets or signing long-term power purchasing agreements for renewable electricity
  • Ensuring the supply chain is working on eco-efficiency and renewable energy
  • Lobbying for a tax on carbon or encouraging other policies that would help drive all of the above

No regrets

It’s hard to see which of these actions might be regrettable. The first category, eco-efficiency, saves money and makes companies less dependent on resources that can disappear or get more expensive. Most companies looking at these investments tie themselves to an arbitrary two-year hurdle rate, but even if a company went further down the payback list, what would the regret be? Lowered operating costs after payback?

The second point, renewables, has often been a harder sell. Renewable energy has been the poster child for the most expensive – and, presumably, anti-profit-maximizing – way to go green. But this view is incredibly outdated: solar and wind prices have dropped 60-80% over the last five years, and “grid parity” – the point at which unsubsidized renewables are as inexpensive as fossil fuels – is quickly approaching in most countries.

Because of these trends, more companies are now able to sign power purchasing agreements to buy renewables for the same price or less than they’ve been paying for non-renewables. Financing options also mean they don’t have to start off with any capital investment, which further eases the transition.

Of course, it’s possible that these companies will regret locking in a price if energy costs plummet. But that contingency seems unlikely: recent oil price drops aside, basic commodity prices have been trending upward since the beginning of the century. In fact, even at recent lows, oil costs twice what it did in 2000.

More importantly, energy prices are incredibly volatile, so locking in prices brings stability, risk reduction and increased resilience. All of these benefits are real, even if we don’t put numbers on them.

But what about those companies that buy their own power-generating equipment – like solar panels – and face a longer payback than the normal hurdle rates? Even in this case, there isn’t much to regret: getting a significant portion of energy at zero variable cost holds zero risk.

The same logic broadly applies to pressing the supply chain to reduce carbon. Driving suppliers to lower operating costs and increase reliability and resilience is good for their businesses.

As for the final point, putting a price on carbon accelerates the benefits of all of the other actions. The only regret might be if we go too fast for the economy to adjust to rising prices for dirty fuels. Then again, I wouldn’t bet on global policy action moving too fast any time soon.

The big picture

Moving beyond the corporate level to the macro perspective, these benefits multiply. Cutting carbon means cutting overall pollution, not to mention the serious and expensive health consequences of burning fossil fuels. Perhaps most importantly, it makes us more energy independent. After all, nobody can raise the price of sunlight and wind – or cut off the supply.

This isn’t to say that there won’t be any losers in a clean economy. The entrenched technologies and the workers in those sectors – like coal miners – will be hurt. But we can, as a business community and society, work to ease that transition rather than deny the overall benefits that will come from doing so.

Looking at the situation as a whole, asking about the regrets that we might face if we slash carbon emissions is a bit like asking what would happen if smoking wasn’t as bad for our lungs as doctors say. Would we regret avoiding all the other problems like increased risk of heart disease and stroke? Would we regret eliminating the $10 per pack expense from our lives?

The question about whether we’ll regret moving to a clean economy is usually put in terms meant to sound careful and risk averse. The truth, however, is that not going clean is riskier. After all, a key part of risk management lies in considering the “tails” of the curve of probable outcomes. In other words, if you’re asking what happens if science is overstating the problem, then you have to ask what happens if they’ve understated the problem. And, given the consistent trend of headlines like this, this side of spectrum seems far more likely.

How much will a company – and all of us – regret not taking action if the outcomes are much worse? Given the day-to-day benefits of moving to a clean economy, corporate action on climate is the ultimate no-brainer.

(This post first appeared on The Guardian online.)

(Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

December 18, 2015

On Climate Change, Skepticism is Getting Old...Optimism is Warranted

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Is the Paris Climate Agreement good enough? Can the world build a low-carbon economy fast enough?

These are critical questions for the future of humanity, so it’s important to consider them carefully. But too many people in the press and in the business world are unnecessarily dour about the whole thing.

Consider two important voices that spoke up at the start of the Paris COP 21 climate conference. First, David Brooks, the quasi-self-appointed “reasonable” voice of moderate U.S. conservatism, penned a skeptical op-ed about the prospects for global change. Although he gave his arguments a veneer of tech optimism, he mainly focused on how hard will be to reduce carbon emissions. Brooks lamented, “the pain in reducing carbon emissions is individual but the good is only achieved collectively. You’re asking people to impose costs on themselves today for some future benefit they will never see.”

Second, listen to Alan Murray. He’s the editor of Fortune magazine, a publication that has covered the greening of business fairly extensively and positively for a decade, going back to an important cover story, “Green Machine,” which was accompanied by the cover line “Wal-mart Saves the Planet.” But Murray personally is clearly wary of a large-scale move to a clean economy, tweeting, “Sadly, U.S. is split between those who deny climate change and those who embrace wildly unrealistic solutions.”

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He goes on to say the quest for a low-carbon world could “destroy the economy.”

These views on the cost and feasibility of building a low-carbon world are not uncommon in the business world. But they are dated, damaging and dead wrong. We need a broad coalition of business, government and citizens to tackle a problem as large and complex as climate change. Telling people it’s not possible is worse than unhelpful. Luckily, most of the world is now ignoring the naysayers.

A Serious Response to a Serious Problem

Before addressing their biggest concerns, let’s stipulate something. Fossil fuels brought billions of people out of poverty. Society has invested for 150 years in infrastructure to power modern life. So of course it’s daunting to contemplate moving the world away from what we know. And many fossil fuel companies and petro-dictatorships are fighting the transition with their immense influence and power.

Nobody said it would be easy.

But throwing up our hands and saying “this is all too hard” is not much of a response to a serious problem. And, more important, the reasons for optimism are now bountiful.

Let’s look at Brooks’ commentary more closely. He says there are costs, which is a deceptive (or perhaps uneducated) way of referring to smart investments: All business or government expenses are choices about where to put capital. But the weirdest and most dated part of his statement is saying we’ll “never see” the benefits of a clean economy. Quite literally, China will see clearer air by reducing coal use and traffic in Beijing and other megacities. And for business, there’s an enormous range of initiatives that slash costs quickly — such as lighting and building retrofits, efficiency, and now even renewables. Companies like Walmart, Google and Apple are cutting carbon, buying tremendous quantities of renewable energy and saving money doing it. So when is this “never” that Brooks speaks of?

The idea that it’s just too expensive to go low carbon is one of thebig myths that are crumbling right now. If anything, the best economic analyses show that not moving away from fossil fuels will be devastating to humanity and our economies — a possible US$72 trillion expense over the next 40 years, according to a report from Citi. The bill for inaction is already starting to come due. Look at the costs of droughts like the one in California, or the immense human and economic toll of the “once-in-a-century” rains and floods in Chennai, India. Ford, BMW and many other multinationals have factories there. Lost production is expensive.

Citi’s study also suggests that we can take the trillions of dollars we will be spending on infrastructure and fuel in the coming years and point it toward renewables instead of old, dirty technologies. The total bill will be the same or less, just without the carbon and climate risk. So, far from destroying the economy, the low-carbon world will save it.

It’s true that it is a big job to turn over the world’s energy systems. But the need to cut carbon fast is not driven by love of polar bears. It’s about keeping the planet livable and productive for humans and our businesses and economies.

The continuing good news is that the new technologies are getting much cheaper all the time. Solar and wind costs have plummeted around 70 to 80 percent in the past five years, and a number of analyses tell us that, as the International Energy Agency and Bloomberg noted, “fossil fuels [are] losing cost advantage over solar, wind.” The world seems to have noticed this economic shift: More than half the new energy built today is renewable.

Murray has his concern about wildly unrealistic expectations, but I have a practical point. It’s true that it is a big job to turn over the world’s energy systems. But the need to cut carbon fast is not driven by love of polar bears. It’s about keeping the planet livable and productive for humans and our businesses and economies. We’ll do what’s required because we have to, based on physicsand economics.

It’s a strangely defeatist attitude to declare visionary thinking as unrealistic. Imagine rewinding the clock 25 years, when some were likely predicting a cellphone in every hand or magical portable computers that would give everyone access to the world’s knowledge. I’m sure many said it was impossible, but most in business probably eagerly embraced the massive multi-trillion-dollar build-out of the mobile industry in the 1990s and 2000s. So why not get excited about the trillions moving us toward a more resilient, distributed-energy, renewable-based world?

Predictions From Optimists

I prefer to get my predictions from optimists — people like Tesla’s Elon Musk who are painting a world of electric cars and renewable energy and moving forward to build it. And now we have the biggest source of optimism to date: In what is perhaps a first in human history, representatives from nearly 200 nations agreed in Paris to cut emissions over the next 10 to 15 years.

Yes, the deal has huge flaws. It has limited repercussions for countries not meeting targets, the tracking and transparency could be stricter, and even if we meet the current targets, we come up far short of slowing warming to 2 °C.

Companies are coming off the sidelines now for real, committing to serious reductions in carbon and massive investments in renewables.

But these are all problems we can deal with if everyone is on board. And, most importantly, the deal tells business and the markets that governments are serious. Investing in building the low-carbon economy just got even more rational. Why, then, is the carping from the sidelines usually couched as the more reasonable, sober position versus pie-in-the-sky or naïve activists wanting a renewable-powered world?

It’s easy to be depressed about the situation we’re in. Corralling close to 200 countries to act in collective best interest is obviously hard. And the science is not helping, because the climate problem is moving fast (I’m sick of seeing headlines like “The Arctic is melting faster than scientists thought”).

But the reasons for hope are now plentiful: from rapidly improving economics, to serious action in the business community, to global citizen and political will-building. Those denying we have a problem are being sidelined within nearly all governments (except the U.S. Congress) and increasingly, I find, within executive suites and boardrooms. Companies are coming off the sidelines now for real, committing to serious reductions in carbon and massive investments in renewables.

Globally, we’ve finally achieved a consensus that there is a serious problem. We’re nearing consensus that it’s in our economic and moral interest to do something about it. So it’s time for everyone to join the parade, criticize only when it’s productive and suggest real solutions that help us build a thriving world.

(This post first appeared at Ensia online.)

(Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

September 25, 2017

The Same, But Different: Some Thoughts on Japanese Business

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I recently visited Tokyo on a business trip and had the chance to meet with a number of Japanese companies. At the end of a three-hour meeting with sustainability professionals from a dozen or so multinationals, the host asked me for my impressions of Japanese organizations and their sustainability efforts. My honest answer: “I’m confused.”

My perspective is limited, but I can compare what I know about corporate sustainability in general to how these execs described the way things work in Japan. I left with the impression that these big companies were both leading and lagging. The core tension seems to be between, on the one hand, their unusual ability to take a broad, long-term, systemic view of business and its role in society; while, on the other, approaching sustainability tactically in narrow, somewhat dated terms.

Consider how many Japanese companies have set ambitious, long-reaching sustainability goals, with many focused on what they can accomplish by 2050 (decades further out than most Western companies are comfortable thinking about). Look at Sony’s Road to Zero goal of leaving no environmental footprint by 2050. Or Toyota’s Environmental Challenge 2050, which lays out a similar vision for its vehicles and plants, but then adds expansive statements about building a recycling-based society in harmony with nature.

While I was there, I also learned about some companies I hadn’t been familiar with. An executive from Kao, a $12.5-billion consumer products company, told us about its solid performance on energy, waste, product redesign, and more. But what surprised me was Kao's corporate mission, “The Kao Way,” which begins: “Our mission is to strive for the wholehearted satisfaction and enrichment of the lives of people globally and to contribute to the sustainability of the world.”

Besides Unilever’s Sustainable Living Plan, very few companies have put sustainability at the center of their corporate vison and strategy. For most, the sustainability mission, if there is one, is in a silo.

So, thinking big and long term seems more comfortable for Japanese companies. As one specific proof point, anecdotally I’d say that more Japanese companies (and those in the EU) have embraced the Sustainable Development Goals as a blueprint for their targets. Companies in the U.S. seem to lag on this front.

And yet, there was one really important area where Japanese corporate sustainability was behind. The sustainability and top executives are still talking only in terms of “corporate social responsibility,” not the broader more impactful sustainability-style language we see in the U.S. and EU. It’s about the common good and philanthropy. It’s not like U.S. companies have all made sustainability into core strategic issues, but the language still felt dated in Japan.

For all of those differences, a lot seemed eerily familiar, even when many people I met with insisted that “things are different” in Japan. Part of that perception gap is based on some misperceptions about stakeholder pressure in the West. For example, they told me that consumers in Japan don’t really care much about the environmental or social aspects of products, unlike, they thought, those Western consumers that are forcing the hand of sustainability leaders such as Unilever. Or, they’d tell me, investors don’t care and just want short-term performance.

Sure, there may be some differences in stakeholder pressure – e.g., the people from consumer products companies said the “clean label” movement I described was not big in Japan, and I don’t have regional data to argue the point one way or the other. But I had to break it to them that consumers in the West, outside of a few product categories such as organics and some personal care, are not really driving the agenda, either. In fact, I hear the samecomplaints about consumers from the big CPG companies here.

And the mantra “Wall Street doesn’t get it” is getting less true in Western sustainability circles, but I still hear it a great deal. The institutional investors around the world are asking more questions about long-term issues, but the analysts and hedge fund guys? Not so much.

In total, the conversations I had while sitting down with 20 sustainability execs in Japan to share my Big Pivot story – a saga of mega-trends, a growing clean economy, Millennial attitude shifts, big risks and opportunities, and corporate heroes – felt incredibly familiar.

They face similar hurdles in the marketplace and perhaps more so internally, where they’re not taken as seriously as they should be. Again, that CSR-only languagesidelines them. It likely explains, along with Japanese culture in general, the self-effacing approach I witnessed: It’s really hard to get them to brag about anything they’ve done.

These companies are likely doing more than we realize, and more than they give themselves credit for. But they need to advocate for their importance in their enterprises.

So, in essence, corporate sustainability in Japan is the same as … but also different from ... everywhere else.

On a lighter note, here are some random impressions from an outsider coming to Japan:

  • Business is formal and hierarchy in meetings reigns. But the dress is more casual than you’d think (few ties, short-sleeve business shirts), primarily because the 12-year-old “cool biz” program – which keeps office temps warmer in the summer to save energy – is clearly working.
  • Everyone was unfailingly polite and incredibly helpful as I navigated culture and food (I’m pescatarian) with non-existent Japanese language skills outside of the helpful Styx lyric from the ‘80s, “Domo arigato, Mr. Roboto,” which doesn’t get you as far as you’d think.
  • They follow the rules. Nobody crosses the street until the walk sign is green, no matter how empty the streets. I lived in New York for 12 years, where you walk if there’s any semblance of daylight between cars, so this one felt like torture.
  • Tokyo is the cleanest city I’ve ever seen by far. Many streets looked like Disney’s version of a Japanese city.
  • And they take their personal hygiene seriously. People wear masks, presumably to keep their germs from rudely spreading to others. Also, for no reason I can discern, the urinals flush as you approach them and when you leave (perhaps not the best use of resources). And the toilet in my hotel had more computing power than the Apollo mission.

In total, it was a fascinating and eye-opening trip, from bathrooms to boardrooms.

(This post first appeared at Sustainable Brands online.)

If you enjoyed this article, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston

Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.



December 31, 2017

The Top 10 Sustainable Business Stories of 2017

(I recently published my 9th annual roundup of top themes/stories impacting how business navigates environmental and social issues. See original at HBR. I've reposted it here with a couple smaller "honorable mention" stories at the end that got edited out of the HBR version. A few social media comments pointed out my list is perhaps too U.S. focused -- fair enough, I am U.S. based. And one big thing I definitely should've included here was Brexit. I was probably too focused on our own dysfunction in the U.S. Oops. But overall, readers have said they thought I was balanced and, surprisingly, fairly optimistic. See what you think and enjoy the New Year!)

The year 2017 has been a long, strange trip. The definition of sustainability in business evolved quickly — the topic in executive suites now covers a wide range of issues that address how a company navigates environmental and social challenges. From carbon footprint to taking a stand on human rights or immigration, companies need a position and strategy on all of this and more.

We saw big leaps both backward and forward this year, some of which weren’t especially surprising. In my year-end wrap up for 2016, for instance, I predicted that “the context for sustainable business in 2017 may center on the competition between two stories, the election of Donald Trump and significant action on climate change.” That’s pretty much what happened. Trump pulled the U.S. out of the Paris climate accord, the hard-won global agreement to tackle the greatest threat to humanity and the economy, becoming the only country in the world on the sidelines.

But the Newtonian equal-and-opposite reaction from business, states, and cities was nothing short of amazing. Their pushback on policy decisions is my #1 story of 2017. Here’s more on that, plus nine additional developments business leaders need to pay attention to.

Climate, Clean Tech, and the Environment

1. U.S. leaders from the public and private sectors rejected Trump’s decision on the Paris accord and committed to climate action.
On the day of the president’s announcement about the Paris climate accord, 25 multinationals — including Apple, Facebook, Google, HPE, Ingersoll Rand, Intel, Microsoft, PG&E, Tiffany, and Unilever — ran a full page ad in the Wall Street Journal asking Trump to stay committed to the agreement. By that weekend, dozens of big companies declared, We Are Still In. This public statement includes thousands of signatories — not just companies, but states, cities, and universities.

On the governmental side, the states of California, Washington, New York, and others representing a third of the U.S. population and GDP announced the formation of the U.S. Climate Alliance. California Governor Jerry Brown emerged as the de facto climate leader for the United States, holding his own meetings in China and headlining a delegation to the global climate talks in Bonn. A growing list of 385 local leaders have joined the U.S. Climate Mayors pact as well. A group of high -profile business leaders offered their thoughts on the sustainability agenda right here at HBR (I am also an adviser to that effort). In total, the message to the rest of the world has been clear: “sub-national” support for climate action is very strong in the United States.

2. The deadly costs of climate change became even more obvious.
This year, the science got clearer about the connection between extreme weather and human-caused climate change. And that extreme weather was horrifying. Record-setting storms, floods, and drought-driven fires wreaked havoc around the world. Flooding in South Asia killed more than 1,200 people. Asia also experienced shocking heat, including a day in Pakistan that hit nearly 130 degrees Fahrenheit. Hurricane Harvey hit Houston hard (the before-and-after flooding pictures are mind-boggling), and the national weather service added colors to flood maps to reflect the record 30 inches of rain that fell. Hurricane Irma demolished Caribbean islands, and Hurricane Maria created an economic and humanitarian disaster in Puerto Rico. As of this writing, months after the storm, a third of the island is still without power, and 10% of these U.S. citizens have no water. On the U.S. mainland, unprecedented wildfires ripped through Napa and central California, as well as Los Angeles County.

These extreme weather events are primarily human tragedies, but they’re economic and business disasters as well. When entire regions are under water or lose power for months, it’s not good for local and national economies. In fact, the economic cost of extreme weather is vast and rising. In the 1980s, 27 weather events cost the U.S. more than $1 billion each (in today’s dollars). A little more than halfway through the current decade, we’ve already experienced 89 billion-dollar events, and they’re much, much larger. Hurricane Sandy in 2012 and the big trio of Hurricanes Harvey, Irma, and Maria this year are all $50 billion to $100 billion storms.

3. The Trump administration started dismantling environmental protections.
In the U.S., the new administration’s policy goes beyond pulling out of Paris. We’re seeing an all-out assault on our air, water, climate, and land. The EPA head, Scott Pruitt, spent years suing the agency and essentially intends on dismantling it. Pruitt and Trump, with assists from Interior Secretary Ryan Zinke and Energy Secretary Rick Perry, are working to, for example:

Bi-partisan groups of former energy commissioners and EPA heads have spoken out against every move. And while many companies may hope to save money in the short run with fewer regulatory hurdles, it’s also clear that an unhealthier environment is not great for businesses, its customers, its communities, or its employees in the long term.

4. Investors woke up about climate risk and benefits of sustainability.
I know, I know, Wall Street only cares about short-term earnings performance. And yet there’s something brewing among big institutional players, the economy’s risk assessors, and even some Wall Street types. For example, Larry Fink, the CEO of BlackRock (with $6 trillion in assets under its management) asked business leaders to focus on “long-term value creation” in his third annual letterto S&P 500 CEOs. BlackRock also said its “engagement priorities” for talking to CEOs would include climate risk and boardroom diversity.

Shareholder resolutions on climate disclosure and strategies succeeded for the first time at Occidental Petroleum and ExxonMobil as well. Fund giant Vanguard, which led the charge at Exxon, also declared climate risk and gender diversity “defining themes” of its investment strategy. Institutional investors continued to drive climate action also, with hundreds signing a statement of support for the Paris agreement. And Norway’s $1 trillion Wealth Fund is forcing banks to disclose the carbon footprint of loans and will divest from fossil fuels. In late-breaking news, the World Bank will stop financing upstream oil and gas projects after 2019.

Finally, a few big developing stories could create long-term ripples. First, the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (or TCFD) — chaired and led by financial giant and former New York City mayor Michael Bloomberg — issued a critical set of guidelines for investors and insurers to understand climate risks. On the heels of TCFD, a group of 225 global investors with $26 trillion under management launched “Climate Action 100+” to “engage” with large emitters on their management and disclosure of climate risks. And in fascinatings new on the debt financing front, Moody’s told cities to address climate risks or face downgrades on their bonds. Could shifting rates on company debt be far behind?

5. China accelerated its clean tech advantage.
On the fifth day of 2017, China announced it would spend $360 billion on renewable energy by 2020. The rest of the year brought even more leadership: China cancelled 103 coal plants, committed to cut coal by 30%, made big moves in electric vehicles (see #9, below), erected the world’s largest land-basedand floating solar farms (becoming the world’s largest solar producer in the process), and – in one of the most fun stories of the year — built a solar farm in the shape of a giant panda just for the heck of it. Essentially, in 2017, China took over the role of global climate leader and then, to top it off, committed nearly a trillion dollars in infrastructure spending to connect China to the rest of the world.

6. Clean tech continued its relentless march (and coal continued to die).
As a whole, the economics of every major green technology got radically better. (Morgan Stanley predicted an “inflection point” in 2020, when renewables become the cheapest energy source globally.) But to focus on two intertwined areas, look at what happened with electric vehicles (EVs) and battery storage.

On the former, some large economies, including France, India, Britain, Norway, and China, committed to ban diesel and gas vehicles. Automakers moved quickly as well, with GM and Ford announcing major investments in EVs and Volvo phasing out conventional engines starting as soon as 2019. A group of multinationals with big logistics operations launched EV100, an initiative to speed up the switch to EVs. One big city, Shenzhen, China, moved its entire bus fleet to EV. In total, EV sales were up 63% globally.

The economics of batteries (needed for EVs and, critically, the grid so we can store clean energy) continued to get much better—50% cheaper since 2014. Tesla built grid-scale storage for Southern California and quickly erected the world’s largest lithium ion battery storage in Australia. The end result is going to be the end of coal, bolstered by commitments from states like Michigan to go coal-free—and the entire EU, which will build no new coal plants after 2020.

The Role of Business in Society

7. Famous CEOs took moral stands.
One group of business leaders faced a tough decision this year: stay in the president’s CEO advisory councils or protest his policies by pulling out. A few, like Tesla’s Elon Musk and Disney’s Robert Iger, left in the spring after the Paris climate decision. But most stayed on — that is, until the Charlottesville, Virginia white nationalist marches. When the president said there were “some very fine people” among the white supremacists, the CEO Advisory Councils disbanded quickly, with the leaders of Pepsi, IBM, GM, BCG, Merck, 3M, and others walking away (a few wanted to stay, but the momentum was clear).

One CEO in particular, Apple’s Tim Cook (who was not formally on the councils) denounced the “moral equivalence” of white supremacists and human rights protesters, but he also went on to say something more important about business: “We have a moral responsibility to help grow the economy, to help grow jobs, to contribute to this country and to other countries that we do business in.” In essence, Cook made a blended argument for sustainability that isn’t about philanthropy and the polar bears, but about the core business and its role in society. And yet, Apple had its own challenges. Proving that no company’s actions are black and white, the world discovered that Apple has stashed a quarter of a trillion dollars in cash outside the U.S. to avoid taxes. Yes, it’s legal, but is it right? Given Cook’s own argument, it’s an uncomfortable disconnect.

8. Companies went to court.
This year large companies dove into legal battles on social hot-button issues to an unusual degree. Tech companies big and small filed an “amicus brief” to fight the president’s first executive order on immigration (biotech firms spoke out as well). Fifty big companies asked a New York federal appeals court to fight discrimination based on sexual orientation. Companies also lobbied for pro-environmental and social policies. Companies went local as well, with seven big guns — Procter & Gamble, Walmart, Unilever, General Mills, Target, General Motors, and Nestle — pushing the state of Missouri to pass a bill to make it easier for them to buy renewable energy.

9. The super bowl of sustainability advertising was… the actual Super Bowl.
A surprising number of big brands used the most expensive, most viewed advertising time in the world to do something different this year: Instead of pitching products the old-fashioned way, focusing on how great it tastes or will make you feel, they chose to say something about an important aspect of social sustainability. And they took risky stands, in often not-so-veiled ways, against the policies of the new U.S. president.

Budweiser’s ad told the story of their founder and proudly pointed out his immigrant status. Little-known 84 Lumber went viral with a five-minute video about the journey of a family from central America. Coca-Cola focused on diversity and inclusion with its multi-lingual ad. And Audi’s ad “Daughter” lamented the lack of pay equity for women (though Audi then took heat for its own record on pay and women in leadership, showing that sustainability-focused ads can be risky).

10. Unilever fights off a hostile takeover bid.
Unilever is the consensus corporate leader on managing sustainability for business and societal value. That’s why I consider the attempted takeover of Unilever by Kraft Heinz and 3G Capital an important sustainability story.

It is unlikely that a firm like 3G would continue supporting the sustainability strategy at the heart of Unilever, even though the strategy has been wildly successful (the company’s market cap was at an all-time high — and then went up another 20% after the takeover attempt). As Unilever’s CEO, Paul Polman told the Financial Times, it was “clearly a clash between a long-term, sustainable business model for multiple stakeholders and a model that is entirely focused on shareholder primacy.” Everyone interested in seeing companies lead the charge to a thriving world breathed a sigh of relief. (Full disclosure: I’ve been an advisor to Unilever North America, but I had zero involvement on this issue.)

Honorable mentions
- Big new sustainability goals. Kudos to Mars, Inc. for committing $1 billion toward becoming “sustainable in a generation” and to HPE and H&M for setting science-based and carbon neutral goals for their suppliers.
- More transparency and accountability. New technologies (hello, blockchain) are capturing more information about products. Transparency is increasing. Panera went 100% “clean label”, Target and Walmart leaned into chemical management, and Unilever set a for transparency on fragrances.
- Citizen action on a grand scale. The women’s march and #metoo revealed a lot of pent up frustration with the world’s businesses and institutions (and with men).

So what’s next?

It’s risky to say anything definitive about the future. But I do believe that some mega-trends have too much inertia for any one stakeholder to completely disrupt. So some light predictions for 2018:

  • The climate will continue to get more volatile. Any remaining business leaders who don’t understand climate as a systemic risk and opportunity will have to get on board.

  • Millennials and Gen Z will continue to push for purpose and meaning in work and life.

  • AI, big data, blockchain, and other tech will change how we understand companies, products, and services, leading even more to embrace “clean labels”.

  • To meet ever-rising expectations, and drive business value, companies will set more and more aggressive sustainability goals.

  • Clean tech will be under attack by the U.S. administration, but it will continue to prevail globally.

  • Finally, the #metoo movement against sexual harassment, which is sweeping through politics and media, will hit big business. We may see some senior Fortune 500 execs fall.
  • Onward to 2018. Have a happy, healthy, and sustainable New Year!

    *******

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    Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.