The bizarre story of Whole Foods' CEO John Mackey is very educational. In case you missed it (which would be hard), Mackey was using the internet in ways that he shouldn't. No, this wasn't another sex scandal. Operating under the name "Rahodeb", for years Mackey was posting comments on Yahoo Finance investor boards, taking shots at competitor Wild Oats (and in some stranger moments, defending the Whole Foods' CEO's haircut — yes, that's his own hair -- as 'cute'). Gleefully, the Wall Street Journal recently ran a front page, center column story...the second front pager in just eight days.

This story is just too easy — thus the constant coverage. How much more can you say about how not-smart his behavior was? Wow.

But let's look at it in another way. What's the connection to the trend toward responsible and green business? In Green to Gold, we talk about the Green Wave, the combination of natural world and stakeholder pressures coming to bear on companies. In addition, seismic global forces are making the Wave even stronger — Friedman "World is Flat" kinds of trends like technology, globalization...and transparency.

This Mackey story is a new classic demonstrating how hard it is to hide what you do anymore. Anything you write, say, instant message, or send by carrier pidgeon — no matter how you encode it or hide behind a pseudonym — has a very good chance of becoming public knowledge. Mackey is in the middle of the proverbial nightmare, "don't do anything you wouldn't want splashed on the front page of the paper." And he's lived it twice in a week.

The world is driving fast toward universal expectations of transparency. Companies and CEOs are even starting to encourage this, with blogs from inside companies — the Journal did a follow up story last week about this phenomenon and the problem of over-sharing (one CEO talked about his colonoscopy). Examples abound — more here from an earlier post.

This new world of transparency means companies will need to open up about everything they do and how they impact the world — socially, environmentally, and through their Internet posts.

The New Year is always a time for taking stock, looking both back and forward. How did your company handle the shifting sands for business in 2007, the greening of society? Companies across many industry groups were scrambling and strategizing about how to best manage the environmental impacts of everything they do. Green issues were huge in '07 (see my upcoming strategy e-letter on the crushing flow of media to green issues in 2007 here in a few days).

But 2007 was just the beginning. It was not a fad — or a bad dream for some — but a fundamental shift in how we all do business. Why? Well the Green Wave was a big part of it: the two big forces of the natural world — real resource constraints like water shortages and climate change — and the rising pressure from stakeholders got stronger. But what was the strongest reason to belive it's not a fad (and one that became much clearer in 2007 )? In short, green business is better business — companies are slashing costs, driving new revenues, reducing risk, and enhancing brand value. Why go back if your business is better?

But the tipping point year is over now and the game is on. So what environmentally-driven challenges and questions will your business face in 2008 and how will you handle them?
I could pick many trends (I believe that most aspects of the Green Wave are getting stronger and still changing fast, even in tougher economic times), but I'll highlight just a few of the forces that will grow stronger in '08 and the coming years.

The "greening of the supply chain" grew legs this past year with Wal-Mart adding its substantial weight to a movement that had been gaining steam for years. The leviathan started asking suppliers to redesign packaging and reduce fossil fuel use, and even demanding more information on exactly how much energy a product used in its creation, from procurement to manufacturing to distribution. The B2B greening pressure means every company will need to track much more data on its operations. This is where we're headed: a world where every product will carry information with it about how it was made — the energy, water, resource use — who made it and where, how much they were paid, and on and on.

Clearly this won't all happen in '08, but it has already begun in earnest. The pressure for more data is part of a larger movement toward transparency in all we do. Dole now puts a sticker on its organic bananas with a farm number on it. Go to Dole's website and pick the farm number and watch as Google Earth zooms you to a satellite view of the farm itself. This is a fun use of transparency.

Other stakeholders are using the same tools for more critical uses, to expose much more information about where your products, or your energy, come from. Look at Appalachian Voices, a small but very smart NGO that works to combat mountain-top removal mining practices. Put in your zipcode at their site, and see a very clear picture of the mountains that were cut down to power your life. I spoke to Mary Ann Hitt, the director of this group, and for good reason, companies should be nervous about what she and other innovative NGO leaders will do with new technologies. Google is enamored with this kind of interesting use of their tools and has built Appalachian Voices' data into the popular Google Earth program. Every version includes an overlay of all the mountains destroyed anywhere (along with some other overlays under the "Global Awareness" check-box including WWF maps, biodiversity hotspots, etc).

Are you ready for this level of exposure and expectation of openness?

So next December, when many of your resolutions have fallen by the wayside and you're not as organized or as on-time as you hoped (I'm shooting to fully adopt the Getting Things Done workflow approach and we'll see how it goes...), will you be able to say that you made your business better? That your company is on a more profitable path using the green lens? Will you have an action plan to stay ahead of the curve on this critical business issue?

Good luck and Happy (Green) New Year!

Last week, Hernando de Soto (the insightful Peruvian economist and author of The Mystery of Capital) wrote one of better pieces I've seen about the financial meltdown and all these "toxic assets." In the Wall Street Journal, De Soto made the compelling case that "the real problem is not the bad loans, but the debasement of the paper they are printed on." The $50 trillion in bad paper, he says, is far more than the $1 trillion in subprime mortgages that supposedly started all of this.

To put the magnitude of the derivative financial creations in perspective, de Soto describes simply the scale of all assets in the world: $100 trillion of tangible goods (land, buildings), $170 trillion of semiliquid asssets (mortgages, stocks), and $1 quadrillion of new derivatives (mortgage-backed securities, collateralized debt obligations, and so on). Let me repeat that. One quad-rill-ion -- as in one thousand trillion. First, I've never heard anyone use figures like that outside of my 5-year-old making jokes about wanting infinity or googol more minutes to play a favorite game before bedtime.

Ok, shocking numbers aside, de Soto outlines six prescriptions to avoid this kind of market failure in the future. In short, the answer is making sure "property" is not some financial figment, but something definable and trackable, something we can guarantee the value and legitimacy of. The first two guidelines he provides are why I'm writing about this.

First, he says, "all documents and the assets and transactions they represent or are derived from must be recorded in publicly accessible registries." Second, "the law has to take into account the 'externalities' or side effects of all financial transactions..." This sounds an awful lot like themes of sustainability and business. Internalize the externalities and get much more knowledgeable and open about your impacts. I couldn't agree more. The solution de Soto recommends hinges on a renewed commitment to transparency so there's no "back-room" financial market that regulators and, more importantly, investors can't see.

Transparency is one of the driving forces keeping the green and sustainability waves moving (it's a theme I touch on in my new book, Green Recovery, coming out this summer, so I'll return to this topic over the coming months). I believe that we're rapidly entering an era of radical openness, driven both by regulation -- see the EPAs recent announcement that it plans to "ask" 13,000 facilities in the United States to share data on carbon emissions -- and the rising demands of employees and customers, particularly the younger ones. The new level of transparency will make any of us old enough to remember a world before MTV uncomfortable. But the Facebook and MySpace generation will have no problem with it -- in fact, they'll be expecting it.

A renewed transparency drive may be partly fueled by the latest emotional issue of the day -- executive pay and bonuses. I don't really believe in government-mandated 90% tax brackets for bonuses, no matter how repugnant the payments may seem. But I do think the government can set standards for openness. Let's list everyone who got bonuses at these firms and how much they made. Let the court of public opinion (and that of peers and co-workers) be the judge.

I'm going to make a seemingly unlikely prediction: companies will increasingly reveal all salaries and bonuses (far beyond sharing the pay to a few top executives as required by the SEC). The most responsible companies already do this to some extent -- Seventh Generation has a public commitment to keeping the CEOs salary below 14 times the lowest salary. The biggest companies will, painfully, follow suit (about sharing, not about the 14x multiple) over the coming years as it becomes clear that the more open they are, the more trustworthy they'll be.

Imagine what openness about salaries and bonuses might do for some other thorny issues, such as equal pay for women and minorities. Wal-Mart is facing a highly publicized class action suit about its treatment of women. Will complete openness about pay generate more of these kinds of claims, or help companies avoid these problems? I have no idea, but I certainly hope it's the latter since the transparency is coming, like it or not.

How do you prepare for this new open world? It's not easy, but some of those old grandmotherly maxims seem to gain some force: don't say anything about anyone that you wouldn't be comfortable with that person hearing...or don't do anything you wouldn't want on the cover of the paper...or the standard Golden Rule certainly comes to mind. No doubt there will be some real challenges in handling increased transparency, but my hopeful view is that it will drive more ethical, sustainable behavior.

In this view, those who can't meet the standard will struggle. But those companies that are proud of their operations will be fine talking about what's in their products, how products are made, how much energy they use, how much they pay people, who else is involved in the production, and what their executives receive in compensation. They will also attract and retain the best people who trust their employers. And they will build a more loyal base of customers that feel the authenticity. Sorry for all the unbridled optimism in such a pessimistic time, but maybe it's time to look on the bright side of some of these massive changes in the works.

This post first appeared at Harvard Business Online.

While the "greening of the supply chain" has been in the works for decades, the movement has really taken off in 2010. In the last few months, a number of corporate giants have announced new initiatives that pressure suppliers to do much more to measure and manage their environmental impacts. The big guns asking the questions include Pepsi, P&G (more in a future post), and IBM.

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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