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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