For years, most supply chain programs have included a similar, somewhat narrow range of demands: stay on the right side of the law, keep operations within regulatory levels of air and water pollution, avoid child labor, and so on. Wal-Mart has already pushed that envelope to dive much deeper into supplier practices (packaging, fossil fuel use, and even how some things are sourced). These new announcements also expand the demands in different ways. In recent years, most of the high-profile supply chain initiatives like Wal-Mart's have taken hold in the consumer products and retail arenas, and Pepsi and P&G are no exception.

But IBM brings a new value chain — electronics and IT — to the discussion and thus broadens the movement. Other electronics companies are also pressuring suppliers; the biggest players in the industry launched the Electronics Industry Code of Conduct (EICC) for suppliers in 2004, and members now include Apple, Cisco, Dell, Hitachi, HP, IBM, Intel, Microsoft, Sony, Xerox, and many more.

But IBM is helping expand the definition of a green IT supplier by upping the demands. To get a sense of what IBM is asking of its 28,000 first tier suppliers, I spoke with Wayne Balta, IBM's VP of corporate environmental affairs and product safety.

Balta described IBM's work as "just the latest step in a long-standing continuum." In 2004, the company launched its own IBM Supplier Conduct Principles, which helped define the EICC standards. Even earlier, in 1998, IBM asked suppliers to consider adopting the international green operating standards, ISO 14000. But the new announcement makes this "request" more of a mandate, and that's at the core of the new demands.

In short, IBM is asking for four things and telling suppliers they must:

1. Define and deploy an environmental management systems (EMS).

2. Measure existing environmental impacts and establish goals to improve performance.

3. Publicly disclose their metrics and results.

4. "Cascade" these requirements to any suppliers that are material to IBM's products.

The mandate for deploying an EMS helps suppliers build their own capacity to manage environmental issues. But most of the biggest suppliers already have some EMS in place, and that means they will have some metrics already. So I find the third and fourth elements even more important. These demands differentiate IBM's program from most of what's come before. They give heft to the requirements and expand their influence.

The third element makes companies publicly disclose their data — they don't just need to report their information to IBM; they need to make it clear for all to see. Transparency is a very powerful tool, and the new openness will benefit every customer of these suppliers. It will encourage improved performance like no other incentive (good, open data, drives competition and results in many ways - see my post Five Ways to Use Green Data to Make Money).

The fourth component, "cascading," means that IBM's requirements will ripple up the supply chain. Businesses will move a step closer to the holy grail of environmental measurement — knowing the footprint of every product without conducting a costly and time-consuming lifecycle analysis. In essence, if every link in the value chain tracks its footprint closely, and uses the tools of cost accounting to distribute these impact measurements across components, it becomes much easier for companies to estimate the value-chain impacts of their products.

IBM didn't undertake this initiative lightly. Balta explains that "we thought carefully about how we would feel about having these requirements ourselves from our customers." In essence, they're not asking anyone to do anything they have not already done themselves.

IBM execs know that the green path is a profitable one, so they're pushing suppliers to operate leaner, better, and smarter. As Balta says, "Our goal is not to punish people, but to have them succeed."

(This post first appeared at Harvard Business Online.)

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I recently spent two nights at the lovely, high-end Westin hotel in Ft. Lauderdale, FL. Around my room I found the now-standard signs that describe how the hotel will save water and energy by not changing sheets and towels. These green messages say to customers figuratively, and often literally, "we care about the environment." So far so good. But when I first entered my room, every lamp and light in the place was on...plus two radios.

The cognitive dissonance of arriving at a room with every light blazing, and then being asked to hang a towel up to save energy, can cause even the most mildly environmentally aware customers some heartburn. But worse, this weird in-room disconnect betrays a corporate, internal conflict as well.

I truly don't mean to pick on Westin; the entire hospitality industry is guilty of similar dissonance. For example, who decided that the now-common "turn down" service was a good thing? Even if everyone wants a nice chocolate on their pillow, does anybody really need to come back to a room with lights ablaze and flat screen TV running? Frankly, the first few times I encountered this bizarre hotel practice, it scared the heck out of me since I thought I was walking into the wrong room. Now I leave the "Do Not Disturb" sign up when I leave. But I digress.

My reaction at the Westin was not just me being an overly watchful green strategy guy. One of my clients at the regular (as in non-sustainability themed) event I was speaking at told me that having to turn off all the lights bothered her as well.

I'm not crying "greenwash" here -- this kind of disconnect is much more subtle. I believe that hotels are basically sincere about the "we care" sheet-and-towel cards around the room. The big hotel chains (Westin is owned by Starwood) have been making strides to reduce their footprints. They all have environmental advocates and executives now. But it seems likely that policies about how to greet customers (leave the lights on) come out of some other part of the company.

Because of that organizational disconnect, the hotel is forcing its customers to face two conflicting messages, one conservation-oriented and one theoretically welcoming, but blatantly wasteful. In the spirit of making my stay comfortable, they've chosen a path that forced me to do some work - going around to flip everything off - and annoyed me immediately. Compare this with hotel rooms all over Europe (and a growing number in the U.S., including the Encore/Wynn in Las Vegas of all places) that install master control switches near the door. These handy devices can turn everything in the room off at once or, in their best incarnations, require a hotel keycard to turn anything on.

My point is this: companies need to work these inconsistencies out internally and not make customers wade through them. The number of people who would find the dissonance disconcerting is certainly growing, so the risk of alienating customers is rising as well.

These kinds of inconsistencies are not exclusive to hotels; they crop up everywhere. Consider the rental car companies that automatically "upgrade" you to an SUV, when you've specifically asked for an economy or hybrid car.

But one example from the restaurant industry seems particularly egregious. This past Sunday, the New York Times Magazine ran a chilling article about bluefin tuna, a majestic species driven to near extinction by our ever-rising demand for sushi-grade meat. As part of its campaign to tackle the crisis, the author Paul Greenberg says, Greenpeace has pressured high-profile restauranteurs, particularly the owners and chef of the famous Nobu, to find substitutes. Nobu has continued serving the tuna and responded to the pressure by merely adding what Greenberg describes as a "haiku-esque warning on the menus of its London eateries" which reads:

"Bluefin tuna
Is an environmentally threatened species
Please ask your server for an alternative."

Nobu seems to be saying, "We sort of care about environmental issues and the death of a species our business depends on, but not really enough to do the work for you, our valued customer -- so please make the decision for yourself."

This attempt to "abdicate responsibility" to customers, as Greenpeace's Willie MacKenzie put it, is absurd. It will likely make those customers uncomfortable at best, and really tick them off at worst.

It's inevitable that as organizations navigate the complex world of sustainability, they will experience some internal cognitive dissonance about how they operate. Nobody said it was easy to balance the competing forces of (a) the inertia of how things have always been done, (b) the desire to meet the assumed needs of customers (for, say, welcoming, well-lit rooms), and (c) new pressures and questions about environmental and social performance.

But forcing your customers to confront these choices or, worse, making them do the work themselves, is not a good option.

(This post first appeared at Harvard Business Online.)

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I looked back at the actual Declaration of Independence to spark my thinking. After laying out our "unalienable Rights" to life, liberty, and the pursuit of happiness, our founders declared...

"That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government..."

I can think of no greater form of control and "destructive" practice than our utter dependence as a country and species on fossil fuels for our energy. We rely on fuels which come, in large part, from parts of the world that fund actual tyranny (of women in particular) and religious fundamentalism that creates a true security threat (see this report from retired generals and admirals about how climate change and energy dependence threaten our security).

Substitute our dependence on these fuels for "government" in the Declaration. Reliance on fossil fuels dirties our air and threatens our health and life (and those of our soldiers forced to defend oil stocks around the world), it reduces our liberty, and let me ask this: how happy are we with this dependence?

Consider also this passage from the Declaration that appears during the litany of complaints against the King.

"He has plundered our seas, ravaged our coasts, burnt our towns, and destroyed the lives of our people."

What is the BP oil spill if not a "plundering" of seas and destruction of coasts and economies? If we were not dependent on these fuels, we would not need to dig in such hard-to-reach places with such high risk of failure.

Energy is not the enemy. Energy is the foundation of our lives. And just as the colonization and support of the British empire allowed the formation of a new nation, we have used fossil fuels to build our society and raise the standard of living for literally billions of people. And we should respect that.

But it's time for us to throw off our bonds and pursue new, cleaner forms of energy as fast as possible. The same companies that have helped create our modern energy-rich society can play a critical role...or not. It's their choice.

Imagine how it would feel for an individual, home, or business to get all the energy it needs from local, free sources -- the sun, wind, wave, and heat of the ground below us.

That's a form of freedom and prosperity we have not known...but we will.

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The general idea of this new collaborative approach to innovation has been kicking around since the 2003 publication of Open Innovation by professor Henry Chesbrough at UC Berkeley (see a recent article he wrote with some key examples here). But it's been gaining real currency in recent years as (a) large companies such as Procter & Gamble and IBM have embraced the concept, (b) the platforms for accessing many brains through social media have evolved, and (c) companies have looked for low-cost innovation pathways during tight times.

The green shade of open innovation has appeared more recently. Earlier this year, Nike, Best Buy, Yahoo!, and a few others launched the GreenXChange, an organization dedicated to sharing patents and ideas that can help companies reduce their environmental impacts. The core non-corporate partner is Creative Commons, the godfather of modern idea sharing and an organization "dedicated to making it easier for people to share and build upon the work of others."

I met some of the key players in the GreenXChange consortium — and saw Professor Chesbrough speak — at the recent Sustainable Brands Conference. Nike managers described how this fascinating agreement to share patents works in practice. Earlier in the 2000s, Nike had developed a "green rubber" that lowered production costs and slashed toxic emissions by 96 percent. The company offered up this technology and the Canadian outdoor equipment company, Mountain Equipment Co-op, licensed it (for what I sense is a nominal fee) to apply to its products.

Members of the GreenXChange contribute patents for new methods of production that reduce energy, water, toxicity, and so on. Each company can learn from and build on what has come before. As the Nike managers put it, companies have latent ideas and technologies sitting on shelves, not being used. Why not let others in?

Is open innovation a great thing for sustainability? A couple of major points in its favor: First, it certainly represents heretical innovation of the innovation process itself, and I'm big proponent of asking heretical questions. Second, the energy, toxicity, waste, and water challenges the world faces are so great and pressing, we don't have time to wait for every organization to discover cleaner ways of operating on its own —- we need to share information and speed up adoption of new methods and technologies. We need cooperation across traditional boundaries and open innovation to solve the biggest problems, and that means companies sharing much more than they're used to.

But I'll admit to having one major reservation about this innovation strategy. One of the core arguments for going green is that it creates competitive advantage, a logic that makes sustainability palatable to many corporate leaders. A skeptical executive would be completely right to ask, "Won't sharing our ideas level the playing field and give away the keys to the candy store?" Imagine getting your patent attorney on board. Well, Nike execs brought theirs to the conference and he talked about his personal journey to seeing the value — to society and to Nike — in exchanging patents.

I asked the manager leading the GreenXChange project my core question about giving up competitive advantage. Her logic was interesting. When the company discovers something like green rubber, "people" (meaning, I think, their employees and other key stakeholders) expect the company to do the right thing and spread the word — and so Nike does just that.

But there are certain kinds of innovations the company wouldn't share. The ideal shoe, this manager imagines, would likely be made from one material (which would greatly reduce its material use and lifecycle footprint and make recycling very easy). If Nike could accomplish this feat, the new geometry and design would be all Nike's, and thus a source of real advantage.

In the end, I come down firmly on the side of supporting open green innovation, especially given the scale and nature of the challenges we face. But for each company, the supporting logic for open green innovation will need to be balanced by a good understanding of where and when to share ideas, and which ideas are unique to the company's core competencies — such as design and branding, in Nike's case. Those latter ideas will drive profit and advantage.

For now, it seems that Nike has this delicate balancing act down.

[This post first appeared at Harvard Business Review Online]

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That's why it's so refreshing to see one large company, Sony, set a goal of zero environmental footprint by 2050. The company has dubbed this mission its "Road to Zero."

Before diving into how Sony has approached its target-setting exercise, here's a quick review of why "zero" is an idea whose time has come: In a resource and carbon-constrained world, the best scientists tell us, we need to cut emissions of greenhouse gases by 80% by mid-century (it's no coincidence that Sony picked 2050). For other pressing issues, society, governments, and the cold realities of science will demand even more dramatic changes. The word "zero" — as in zero waste, zero net water use, zero toxicity, zero child labor, zero fatalities, and zero carbon — will by necessity become a core part of business strategy and operations. (One large consumer products company is in the process of setting sustainability targets, which it calls the "Eight Zeros.")

Only one of the green-themed zeros has had broad appeal thus far in the business community — the quest to send no waste to landfills. Most people shorthand this pursuit to "zero waste" even though it's not really zero (but everything is being recycled or, much less preferably, incinerated).

Subaru demonstrated it could be done in 2004 in its Lafayette, Indiana plant (saving millions of dollars in the process), and GM has recently achieved the goal at 62 plants across the world. These are impressive feats, but we'll need even greater innovation to get to the other zeros.

Yet outside of a few usual suspects, such as perennial sustainability leader Interface Flooring or Wal-Mart's goal of using 100% renewable energy, there are nearly no companies (or countries for that matter) that have outlined a path to get to zero environmental footprint.

This spring, however, Sony made the leap. If you spend some time at the Sony site dedicated to the Road to Zero, you get the sense that executives have clearly thought this through. They seem to realize that a big goal, just hanging out there on its own, would be far too daunting, nebulous, and not very actionable. So The Road to Zero works, as I see it, because of two fundamental components.

First, the company broke up the goal into pieces, separating the discussion into four "perspectives" and six "lifecycle" stages. Sony has phrased the perspectives as ongoing actions:

- Curbing climate change,
- Conserving resources (which covers material use, waste, recycling, and water),
- Promoting biodiversity, and
- Controlling chemical substances.

The perspectives hew closely to the biggest environmental challenges we face as a species: climate change and energy, water, biodiversity, and chemicals and toxics. So while I might nit-pick and suggest that "conserving resources" is a bit too broad to be actionable, it's a good list.

The six lifecycle stages cover:

- Research and development,
- Product planning and design,
- Procurement,
- Business operations,
- Distribution, and
- Take-back and recycling.

Sony indicates that it will need to find a path to zero in each area, using different tactics and approaches. In distribution, for example, Sony describes a broad set of strategies including smaller packaging, improved loading efficiency, and shifting to more rail and water transport.

The Road to Zero site describes these all in very general terms, which reflect the reality that nobody really knows exactly how to get to zero. But what's important is that Sony is pairing this directional exercise with some down-and-dirty tactical goals as well. So...

Second, Sony set interim targets dubbed "Green Management 2015," which follow and build on its now-completed "Green Management 2010." This step is critical and the goals are both specific (reduce greenhouse gases 30% in absolute terms from 2000) and thought provoking (reduce mass per product by 10%). For some areas, such as operations and distributions, the targets are numeric and clearly understood. For others, such as R&D, they're more strategic.

The four environmental impact areas — or perspectives as Sony calls them — and the six lifecycle phases make up a matrix. Thus the company has set a climate-related goal for each lifecycle phase, chemical reduction goals for most phases, and so on.

Sony's site repeatedly refers to hitting zero "throughout the lifecycle of our products," which raises an interesting question: Will Sony be demanding that its suppliers hit zero as well? I would think that this discussion could not be very far away.

Of course, we could debate if "zero" is even good enough, since cutting-edge sustainability thinking focuses on creating products that improve the environment (such as concrete that captures CO2 in its manufacturing process or building materials that clean the air). But for the big guys like Sony — and for all of us — zero is a pretty good start.

[This post first appeared at Harvard Business Review Online]

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The family visits an energy expo in town and in one of the many quick gags, a digital sign flashes the title of a session at the conference:

"Gas, Grass, or Ass: Exploiting Petroluem, Bio-fuels, and Methane"

Homer is then talking to salesmen about different renewable energy options for his house. Here's the exchange with a sales guy (from Denmark of course):

Salesman: With tax subsidies, it will pay for itself in 12 to 18…
Homer: “Months?”
Salesman: “…lifetimes”

Ouch. As Homer often says, "It's funny because it's true." Or at least it touches on the big perception out there -- somewhat justified -- that renewals have a long payoff.

Finally, after the family buys a personal wind turbine, Homer gets mad that he has to pay anyone for energy, so he takes them off the grid. He then says, ominously,

“From now on the Simpsons are living..BUM, BUM, BUM…intermittently.”

Ok, you might have to be a renewables geek to appreciate that one. I can always count on the Simpsons for a novel look at big issues.

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His talk was focused on how you drive change. He name-checked Nudge, Predictably Irrational, and other recent, important books on changing behavior. Some fun examples included this crowd favorite: Airports that etched a little fly into urinals for men to aim at saw an 80% reduction in, well, pee on the floor.

MacGregor demonstrated how hard change really is with one shocking statistic: Only 10% of people facing a life-threatening situation — as in the doctor says change your behavior or you die — make the changes necessary.

Here were his three principles on driving real change:

1. Speak joy, not fear. Example: The Wii Fit gets people playing and exercising without guilt; instead of focusing on a message of fear ("get up off the couch or else!"), the Wii promised fun — and fitness was a side benefit.

2. Use judo: harness existing momentum towards a new goal. Example: Bank of America's "Keep the Change" program, which rounds up your debit purchases to the nearest dollar and puts that extra in a savings account. Customers have saved $2 billion so far.

3. Create the crowd. Example: Japan's Cool Biz program. When the country wanted to get companies to raise the thermostat in the summer (it was so cold in most office buildings, that you needed to wear your jacket), it had the Prime Minister come out in public in short sleeves with no tie. They also held a fashion show with execs wearing no jacket or tie.

These ideas have important meaning for the sustainable business (and social) movement, particularly the principle of creating joy, notfear. For forty years of Earth Days and ever since the iconic "crying Native American" ad that disparaged modern environmental recklessness, "doom and gloom" has dominated environmental messaging (often for good reason: the Gulf spill is exhibit 1). Advocates for environmental awareness have often played off fear to create a sense of urgency in the general public.

But companies and environmental NGOs need to paint a picture of what a sustainable world could look like and describe how much better, healthier, and profitable our lives and businesses could be.

Successful eco-products follow the pattern of the Wii story. The Toyota Prius — putting aside for the moment the recent safety issues — has been extremely successful because it's an exciting new technology that people have fun using. And as I mentioned a couple weeks ago, Pepsi is trying to make recycling more fun with its new "Dream Machines"that take your bottles and give you points toward rewards.

The three IDEO concepts are deceptively simple, but powerful reminders of how to drive real change. Focus on what brings real fulfillment and joy, leverage momentum, and gather a crowd to build more profitable, lean, and yes, fun, organizations.

[This post first appeared at Harvard Business Review Online]

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But tonight's speech on the oil spill was a real disappointment for those who believe a clean energy future is perhaps the only path to job growth, public health, national greatness, and freedom (from dependence on a ecologically and economically destructive fossil fuels).

The President showed that he gets how big a mess the Gulf is and he's changing leadership at the agency that oversees the industry. That's all well and good.

But when it came to reducing the future risk of these kinds of catastrophes, the prescriptions were in short supply. Obama called for accelerating the transition to a clean economy. That's fantastic. But how can we possibly move fast without a price on carbon? (Uber-capitalists John Doerr (Kleiner Perkins) and Jeff Immelt (GE) said it best in "Falling Behind in Green Tech")

How could Obama not use this opportunity to call on us to do some hard things? Imagine if he had asked us to use less oil, accept higher prices for fossil fuels, support legislators that make the hard calls (raising people's gas prices is about the hardest thing a politician can do).

After 9/11, it's been said many times, President Bush only asked us to shop...and nothing else. Obama seems to be making the same mistake.

He did suggest we need a moon shot to get to clean energy and get off the oil. And he harkened back to America's ability to build tanks and planes in WWII. But those examples of American success are 40 and 70 years ago.

What's scary about the speech tonight is that it almost could've been any President in the last four decades. They've all sat in the Oval Office and said 'never again' and 'we're going to find a new energy future.' And yet, here we are, using more fossil fuels than ever.

In the end, the President suggested we all "pray" for courage and the people of the Gulf.

It's truly a shame that that's the only thing he asked us to do.

The nightmare is not over and the repercussions in terms of regulations and the future of BP are far from certain. But it's high time to start sifting through the wreckage for some learning so we can avoid similar catastrophes. I'm sure there are literally dozens of good lessons (please post yours), and I think many companies already have a solid understanding of the key principles of good behavior. But why do we need to wait for each fresh disaster to relearn the lessons we already know?

Here are my top five lessons, running from geopolitical and philosophical to corporate-level branding and strategy.

1. Our reliance on old, fossil-fuel based technologies is devastating for the planet, for society, and for business. This spill is in many ways an expected result of the path we have chosen. Given the declining stocks of easy-access oil, our addiction is forcing us to dig up extremely remote oil — something very, very hard to do that comes with enormous complexity and myriad risks of catastrophic failure.

The assumption that we will continue to dig up more carbon-emitting fossil fuels may be called into question in a serious way by the Gulf oilpocalypse. Governments may very well ask for companies to invest far more in safety. It's a reasonable outcome that regulators demand that companies invest not only in the technologies to dig oil up, but also in cutting edge ways to greatly reduce the risk of it going all over the place. So far, the oil giants seem to be pursuing only the first part. Which brings me to...

2. Preparing for a world where things only go right is extremely dangerous. To hearken back to the recession for a moment, one of my favorite tidbits about the financial meltdown was something I read about the ratings agencies (you know, the groups that gave horribly risky investments triple-A ratings). In the spreadsheet models they used to estimate the value of mortgage-backed securities, analysts could only plug in a positive number in the "growth" cell. That is, they could not predict the value of those derivatives if housing prices actually went down. You have to wear very large blinders to build a model like that.

But the oil companies have done the same thing. They've invested heavily in exploration technologies, finding ways to do things — like dig a mile under water — that were only space-age fantasies until recently. But where are the technologies to avoid spills, contain them, and clean them up?

3. Downplaying your mistakes is, well, a big mistake. It's gospel in business schools that Johnson & Johnson set the bar on handling a disaster when it dealt with the poisoning of Tylenol (and thus murder of some of its customers) in 1982. The massive, and immediate, recall was unprecedented and set the standard for corporate behavior in the face of existential threats to a business.

Cut to 2010 where BP leaders apparently never read the J&J case study. CEO Tony Hayward infamously said that the spill was "relatively tiny" compared to the "very big ocean." That statement is both scientifically baseless and beside the point - the amount of leakage that the CEO should accept from his operations is approximately zero. Unfortunately, Hayward hasn't learned much in the way of media training as he told a reporter this week that he wants to end this disaster because, "I'd like my life back." Wow.

And the response has seemed awfully slow. Why, for example, has each attempt to stop the leak been done in a serial fashion? Meaning, when the "top kill" failed, why didn't BP have the next containment dome in position already instead of waiting a few more days? BP has been acting like a child that doesn't want to clean up its mess and drags its feet, which is strange, given the monumental risk to the company.

4. Environmental risks can threaten the viability of a business. Reducing risk was the core focus of environmental efforts for many years so it got a bit passé as a forward-looking argument for sustainability. But it certainly is making a comeback now. As someone who's written for years about how going green can drive profits and growth, I've probably also downplayed the role of risk reduction in creating green value. So let me make the very easy case for BP's poor risk management.

As of today, BP has lost over 40% of its market value, worth about $75 billion. The New York Times went so far as to suggest that BP could be vulnerable to takeover once all its liabilities for this spill are accounted for.

Of course for most companies, sustainability-related, enterprise-threatening risks are not quite as tangible as miles and miles of your product killing an entire ocean. But even harder-to-measure threats can destroy a business model. Think of the "stroke of the pen" risk from regulations that outlaw a component of a product due to toxicity (one recent candidate: plastics chemical BPA). Or consider at the risk to companies that do not meet the new sustainability-themed supply-chain demands from business customers. Or look at a company's ability to attract and retain talent based on how well the company manages its environmental and social performance. Ironically, BP leaders have told me in the past that their reputation as a green leader was making recruiting the best engineers far easier. But that reputation is shattered.

5. Companies can lose the reputation as a sustainability leader very fast. Warren Buffett famously said, "It takes 20 years to build a reputation and five minutes to ruin it." Having a reputation as a sustainability leader is valuable, but it's a tenuous thing, and it can be lost very fast. In the book I coauthored, Green to Gold, we open with two stories: one about Sony and environmental risk and the other about the money BP saved through carbon reductions. For years, the sustainability community has praised BP as best-in-class. In the 1990s, the CEO at the time, Lord John Browne, set BP on a path to go "beyond petroleum."

But over the last few years, BP has quietly reduced its investment in renewable energy to a negligible percentage of sales and profits. Under Hayward the focus has been on cutting costs, and the company has explicitly avoided talking about "green" initiatives in the media (give them credit at least for trying to reduce greenwash). Given the explosion of 2005 and this spill, it doesn't seem like much of a stretch to guess that the company has under-spent on safety.

BP nets about $20 billion a year. How much do you think BP should have spent on extra precautions and new clean-up technologies? Imagine if every well had a second, relief well nearly dug at all times. Expensive, yes, but so is the destruction of your reputation and business, not to mention an entire ecosystem.

The answer to how much BP, or any company, should spend to avoid these problems is somewhere between zero and how much the company is worth. Unfortunately for BP, that latter number is far smaller than it used to be.

[This post first appeared at Harvard Business Review Online]

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Last week I got an interesting view on how enterprise software giant SAP is pursuing a green agenda. Sustainability was a core theme at SAP's annual meeting SAPPHIRE NOW, a large gathering of over 16,000 CIOs and tech professionals. (Full disclosure: SAP hired me to speak at the event.)

So how does a company with a seemingly small physical footprint create real value from pursuing sustainability? SAP seems to be pursuing three paths that are a good framework to keep in mind.

First, walk the talk. SAP is first reducing its own impacts. Last year, the company saved $90 million Euros through eco-efficiency, including a 7% reduction in energy consumption. A good portion of the savings came from reducing air travel, which makes up 35% of the company's total carbon impact. SAP also got lean in its IT operations; for the first time ever last year, it had fewer servers when the year ended than when it began.

SAP also worked to engage employees and tackled some smaller, symbolic issues like paper use. Sustainability managers placed large stacks of empty paper boxes in the cafeteria to demonstrate how much employees used in a single day. The company has also asked its 50,000 employees to take "100,000 steps" (that is, two each, or one for each foot) to be more sustainable in their lives.

Second, and far more importantly, help your customers reduce their impacts, a core greening strategy for any company. As co-CEO Jim Hagemann Snabe put it during his keynote, SAP wants to be "an Enabler." Snabe continued, "We believe transactional systems we have installed in many customers have information that...can help customers manage resources — not just human capital, materials or money but scarce resources like water, energy and CO2...This is the mission we have taken on with sustainability."

SAP took a hard look at its product line to see if it could deliver on this vision. In the last year, the company acquired Clear Standards, a well-respected carbon footprint software company (rebranding it Carbon Impact), and announced it will purchase Technidata, a leading provider of environmental, health, and safety management software. Last week, SAP execs were running around the show floor, gleefully demonstrating how cool Carbon Impact looked on an iPad, and demonstrating how it helps SAP analyze its own footprint data.

As an example of how SAP envisions working with companies to enable sustainability goals, execs describe how the company helped oil refiner Valero harmonize its operational systems. By obtaining much better information on energy use and processes across the organization, Valero was able to save $120 million in energy costs last year (and an expected $200 million-plus in 2010) and slash environmental incidents 63% since 2006. The savings realized from having better data available is a perfect example of the "Prius effect" that I've written about before.

By working in this way with their customers, SAP is able to reduce impacts and create value far beyond what it could just do internally.

Third, communicate clearly with customers and stakeholders about how your products and services help the cause. SAP has developed a view on the key operational focal areas that companies need to manage well to head down the road to sustainability. The company created a "Sustainability Map" that includes 33 topics — such as sourcing, logistics, design, and green IT - across 8 functional areas of the business. These topics map to some broad goals that SAP argues drive sustainable value creation (such as reducing operation risk and improving resource productivity).

The map is a critical part of the company's new CSR report, an innovative, social-media-driven approach to both discussing the company's impacts and pitching its solutions. This dual-purpose report makes sense for a service business.

Dr. Peter Graf, the company's Chief Sustainability Officer, put SAP's shift in large, strategic terms and made it clear that providing customers with solutions was critical to the company's future: "When we look at sustainability we compare it to other fundamental megatrends [such as] globalization and the Internet. Sustainability is going to be similar in the way it fundamentally changes all business processes...so as the leader in business process technology, we have to play, and we have no choice but to lead." (See a streaming video of an interview with Peter Graf and me here — you'll have to register, and then look under "keynotes and broadcasts").

For many years, IT companies felt that they didn't have a lot of skin in the sustainability game — they didn't have big smokestacks, after all. But now even service companies like SAP are seeing the deep connection between green and business growth survival.

[This post first appeared at Harvard Business Review Online]

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But there have been other major announcements lately about new supply chain demands as well. My monthly e-letter came out this week and covers Pepsi briefly, but also a few other stories from IBM, P&B, and Kaiser Permanente (some of which i'll delve into in more detail soon).

The full e-letter is here, but below is the opening...

For the last few years, if you said "greening the supply chain," a lot might come to mind, but most of it was about Wal-Mart. The pressure the retail giant has put on its 100,000 suppliers is now legendary (in the sustainability world).

Of course other companies have had programs for years, but often were behind the scenes. No longer. Just in the last month, we’ve seen some important, large-scale announcements that I wanted to review here briefly. Companies such as IBM, P&G, Pepsi, Ikea, Ford, and Kaiser Permanente are setting new, tougher standards. In some cases, they’re getting directly involved in how suppliers operate and how they make their products.

To understand a couple of these initiatives better, I spoke to key executives to get the scoop on what they're trying to do.

The overarching theme of these new initiatives, as I see it, is transparency. It's all about gathering, publicizing, and acting on lifecycle data. But in the trenches things have gotten much more tactical. The age of gathering green metrics – and acting on what we learn from them – is definitely upon us.

What's also interesting to me is that the Wal-Mart focus has been most relevant to consumer products, food, and a few other sectors. Now, with companies like IBM, Ford, and Kaiser Permanente raising the bar, other large value chains will feel the pinch as well. It's rippling through every sector and every company of any size.

To get my head around the recent announcements, I put them in a few big categories, in roughly ascending order of impact and change demanded:

- Asking for data and filling out scorecards to rate suppliers
- Setting standards for how suppliers manage environmental issues (this is about both systems and capabilities development)
- Driving operational and product changes in supplier companies

[see the rest here, and sign up for my monthly e-letter at my site]

Pepsi recently demonstrated its commitment to reducing its environmental impacts up and down the value chain with two rapid-fire announcements about new initiatives. The old-school approach to greening is to focus on operations within the proverbial "four walls." But Pepsi, like other leaders, is approaching sustainability more holistically, with much greater impact.

I recently spoke with Tim Carey, Pepsi's Director of Sustainability for Beverages in the Americas, about two big initiatives in which he's playing a key role.

First, on the downstream side, Pepsi looked for ways to raise the recycling rate of beverage containers from a relatively paltry 34% to 50% or higher. Working with GreenOps, a division of Waste Management, Pepsi launched a new program called "Dream Machine." These "reverse" vending machines, now being placed in high-traffic areas such as gas stations and stadiums, take back those often-abandoned and often-unrecycled empty bottles and give users points toward rewards from sponsors or local merchants.

But Pepsi has gone beyond those relatively minor incentives to add on a social mission. The program will also help fund Pepsi's donation to a group called Entrepreneurship Bootcamp for Veterans with Disabilities (EBV), which trains vets at business schools around the country. Pepsi expects that the combined immediate points and larger mission will drive new, greener customer behaviors — and help solve one of the beverage industry's most intractable value chain problems.

Second, Pepsi has embarked on a very unusual supply chain effort to reduce the carbon emissions associated with its Tropicana orange juice. After conducting a full life-cycle analysis of the product line, the company was relatively surprised to find that the biggest portion of the carbon footprint was found not in manufacturing, or distribution, but actually back in the agriculture stage — primarily the result of the heavily natural-gas dependent process of making fertilizer (see chart).

The analysis showed Pepsi execs where the largest impacts were, and thus where they'd get the biggest bang for their buck on carbon reductions. The company started working with suppliers and farmers to find new ways to make and apply fertilizer. For example, instead of using natural gas from as far away as Russia (which then requires shipping heavy fertilizer across the world), Pepsi is using biomass from closer to home. Wood waste and agricultural by-products are two sources, but execs are hopeful they can also use the large number of their own orange rinds left over in manufacturing, which would fully close the loop.

The company is also working with scientists on the root chemistry of orange trees, applying fungi and bacteria to increase the uptake of nutrients. All that techno-speak means that the trees will need less fertilizer in total, which means less manufacturing and shipping of that fertilizer and, voila, a smaller footprint.

A 100-acre test run of these new methods of working with new, low-carbon fertilizer is underway. A few years from now, Pepsi and its suppliers will know what's working and what isn't.

But here's the best part: the cost of these changes to consumers and growers will be about zero. And it had to be. Let's face it, this kind of carbon reduction isn't easy to convey to consumers, so the market benefit may be small for now. So the sustainability team needed to find ways to lower the fertilizer footprint without causing any additional cost to suppliers or farmers. How did they do it?

By focusing its efforts on the real footprint — identified through a solid lifecycle analysis and good data — Pepsi found the approach with the highest payback. As sustainability exec Tim Carey put it, "It's not unusual to spend tens of millions of dollars removing some carbon from a manufacturing process at returns that can be 10% or less...or we can take 15% of total carbon out in the fertilizer step without costing anything."

The impacts of these tests — and future rollout — will not be small; Pepsi buys a fairly shocking one-third of the Florida orange harvest. And the recycling work could shift millions of bottles out of landfills. Pepsi's full value chain view on sustainability is deep green stuff — this is how you implement green thinking.

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I suggest everyone read this piece. It's an important wake-up call. Here are a couple of the most cogent quotes. First, comparing the spill to the CO2 "spill" into the atmosphere...

The continuing undersea gusher of oil 50 miles off the shores of Louisiana is not the only source of dangerous uncontrolled pollution spewing into the environment. Worldwide, the amount of man-made CO2 being spilled every three seconds into the thin shell of atmosphere surrounding the planet equals the highest current estimate of the amount of oil spilling from the Macondo well every day. Indeed, the average American coal-fired power generating plant gushes more than three times as much global-warming pollution into the atmosphere each day—and there are over 1,400 of them.

Second, the reason we have so much trouble understanding the climate issue...

One important difference between the oil spill and the CO2 spill is that petroleum is visible on the surface of the sea and carries a distinctive odor now filling the nostrils of people on shore. Carbon dioxide, on the other hand, is invisible, odorless, tasteless, and has no price tag. It is all too easily put “out of sight and out of mind.” Because the impacts of global warming are distributed globally, they often masquerade as an abstraction. And because the length of time between causes and consequences is longer than we are used to dealing with, we are vulnerable to the illusion that we have the luxury of time before we begin to respond.

I also read last night the first chapter of Bill McKibben's very important new book, Eaarth. It's a long look at what's happening to the planet today. As McKibben says, climate change is not a future threat, or a threat of any kind...it's reality. We're living on a new planet, he says, and it's not one we're used to. I can't do justice to all the facts he throws into the ring, so I'll just say, please read this book. I'll likely come back to this when I finish the whole thing (which I sure hope will get more positive).

We all need to get more educated on the nature of the challenge and look facts in the eye...

All of this scale matters a great deal to the green movement. Wal-Mart's pursuit of sustainability in its operations, and in particular in its supply chain, is changing the way products are made globally. The company's five-year shift in strategy and in its approach to the external world (which I consider the largest strategic shift that we've ever seen) has spread beyond Wal-Mart's own walls and is influencing how the rest of us do business.

The company has improved fleet fuel efficiency 30%, and started experimenting with new fuel and engine technologies for its fleet, creating a very large impetus for truck manufacturers to build new models. Its push to adopt lighting technologies and energy management systems is helping to drive scale into new technologies that everyone can use.

But it's the supply chain pressure that really matters. I've covered this topic many times (see my pieces on Wal-Mart's trips to China and Brazil (here and here) to put pressure on suppliers). From my conversations with people in the retail space recently, including a top consumer products exec this week, it seems that nearly every other retailer is behind on this front. Sure, many are working on their own energy and waste projects, and doing well at it.

But only Wal-Mart has built tools of scale like the Sustainable Value Networks (bringing together partners in the value chain to work on big sustainability issues) and the packaging scorecard it made everyone fill it out, or got so involved in the sourcing choices of its suppliers.

Many people will, perhaps rightfully, still find fault with Wal-Mart on many social issues, such as health care or pay (and this week they even got fined on the environmental front for not handling hazardous waste well in California). But still, it would be very hard to find another company doing more. The race is on, even during and coming out of the recession, and Wal-Mart is winning. But it doesn't matter, as their scale will force everyone else to speed up as well.

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So, is he brave because he's saying, "Enough delay on climate, let's get going on legislation"? Or is he being an arse (in nicer British terms) by putting his feelings/agenda first and threatening an entire legislative discussion that the world is depending on?

As my colleague Will Sarni says, Graham's "brave to balk, an arse to withdraw."
I tend to agree -- it's a bit of both. But I'm (naively and optimistically) leaning toward brave. The fact is, I sort of agree. The administration has put health care, financial reform, jobs, nuclear disarmament, and a few other things ahead of pushing through an energy and climate bill. Those other priorities are all important, but we missed the international deadline in December which derailed the Copenhagen meetings. It's time to act now before the 2010 election.

Who knows what all this maneuvering means for business. I think most companies are still expecting climate regulations in the coming years, but the timing and specifics continue to be up in the air.

Your thoughts?