Stakeholders: Employees Archives

August 30, 2007

RMI 25th, Part II (Optimism)

Some continuing thoughts on the excellent event in Aspen I went to a few weeks ago (earlier post here). One theme I heard repeatedly was how much sustainability can drive employee passion and loyalty.

I had an interesting conversation with James Murdoch, CEO of BskyB, the largest media company in the UK (and, oh yeah, son of Rupert). Under James' leadership, BskyB has become very interested in green, declaring that it will go climate neutral, and making many operational and product changes such as redesigning cable boxes to use 50% less energy. But one of the first things he said to me was that the company's green work has made recruiting easier.

Later, Ray Anderson put it powerfully: "In my 51 years in business, I've never seen an issue galvanize people in a company like sustainability."

I'm not surprised at statements like this anymore. Throughout my research for Green to Gold, and in many conversations since then, I've heard the same. Companies discover that the best audience for their CSR reports is actually their own employees, who are generally thrilled to find out what their companies are doing right. As a BP exec told me, the green stuff comes up in recruiting and training meetings all the time now.

Of course the pursuit of sustainability has also driven the work RMI employees and Amory Lovins. While it's more obvious to see this drive at RMI than at a cable company, it was still inspiring. It also helps explains what has kept Amory working so hard for 30+ years while he waited for the world to catch up to his thinking. Only passion can keep you going for decades. Amory's speech at the gala was incredible -- a vision of what a the future could look like.

This is the core issue: sustainability, once you get past the gloom and doom warnings about environmental issues, is fundamentally an optimistic pursuit — a vision of a healthier, stronger world for all.

Imagine what that kind of optimism can do for your employees and your company.

January 23, 2008

MBAs: Your Future (Green?) Execs

BusinessWeek seems to have taken on the self-appointed role as debunker of green business, which as I've written before is an odd switch from the beginning of 2007. This week the magazine takes a harsh perspective on an interesting new survey about interest in green values at work.

PR firm Hill & Knowlton talked to MBA students globally and asked them what factors would influence career and job choice. They ranked the factors by % that said it was "extremely" or "very" important. Here's the list from the study:

Career opportunities.......................................95
Corporate culture/working environment.............86
Compensation and benefits package................85
Employee satisfaction....................................84
Quality of products and services......................75
Financial performance/growth potential.............73
Corporate governance and ethics.....................58
Social responsibility/community involvement.....49
Brand and marketing message........................48
Environmental/green policy..............................34

BusinessWeek looked at this and declared "Green Isn't Gold for MBAs" and pointed out that green stuff is at the bottom. Now, color me optimistic, but I think these numbers -- 49% on CSR and 34% on green -- are actually pretty high. Of course career opportunities and money are going to be nearly universal; it's like asking consumers about price and quality versus other considerations -- of course they come first. I would expect that very few MBAs would pick on environmental considerations alone.

But I'm amazed that one-third or more of these MBAs consider green as important as those other factors (remember, this is 'extremely' or 'very' important). And where would those numbers have been 5 years ago? What's the trajectory on this?

What was interesting, and BusinessWeek does get to this after its sensational headline, was what happened when the questions got more specific. Two-thirds won't work for tobacco and half don't want to work for energy or autos -- those are just the two biggest sectors in the world. Finally, to cap it off, 1 in 5 American MBAs -- and 42% and 38% in EU and Asia respectively -- would be inclined not to take an "attractive" job offer from a company with a poor environmental reputation.

If you're recruiting for top talent, and you're not tackling green issues, wouldn't it worry you that 20-40% of your pool of applicants may have no interest in you?

And the numbers may be rising as you look at even younger cohorts. Monster.com did a survey of undergrads recently and found that 92% wanted to work for a green company. They were so impressed by this finding, they launched a green careers website. The recruiting giants are convinced even if BusinessWeek isn't.

June 6, 2008

Greener B-Schools, Greener Employees

This post first appeared at Harvard Business Online.

As an opening post on Harvard Business.org, I figure no topic could be more appropriate than the change happening at Harvard, among other places. I'm talking about the big shift in what business schools are teaching students and, more importantly, what those future business leaders want from their employers. According to a recent article in Newsweek, B-school's are greening their curricula. Students are learning how to weave environmental thinking into core business strategy and they're looking to apply it in the real world.

This isn't idle academic stuff. Top talent is increasingly demanding more from employers. As a survey run by Hill & Knowlton revealed, up to 40% of MBAs in some countries won't take a great offer from a company with a poor environmental reputation, and half don't even want to work in environmentally-challenged sectors like energy or autos.

My work - writing, talks, and advising corporations - focuses heavily on what's driving companies to seek green strategies and how to profit from these forces. A big part of the story is about stakeholder pressure, from innovative NGOs to shifting regulatory environments to B2B customers greening the supply chain to shifting consumer preferences. But I return again and again to employees because I believe that no stakeholder group is more important. A global talent strain and shortage is in the works across many industries. How will companies compete if they don't attract and retain the best people?

But companies should not think that the MBAs who are learning more about green business are only the ones with a deep moral commitment to the environment (and there are plenty), or that they are only looking to work for green-focused companies, such as Patagonia in the U.S. or IKEA in Europe. One of the most fascinating parts of the Newsweek piece is the opening profile of Ash Upadhyaya, a Stanford MBA from India. Even though he's been studying sustainable business, Ash wants to work for a private-equity firm and says, "Am I really driven to do this by my values? The honest answer is no...It just makes good business sense to be sustainable."

This profound shift in perception from seeing green as a moral cause to green as good business is the real story here - it explains why b-schools are covering it so much more, and why large portions of the student community are on board. It's a great thing for the planet that more employees see green as a core strategic issue, no matter what your company does (even perhaps private equity). I'm optimistic that planet- and market-changing innovation will be coming from these fresh new minds.

But I'm not optimistic for the companies that don't make the shift and actively court the new talent. Another theme in my work is that green isn't really optional anymore. With resource constraints a harsh reality, you get leaner and greener, or die. And that culling of the weakest in the herd will go much faster when the best people stop coming to work.

The lesson here is simple: without a clear commitment to sustainability, a strong message and tactics that bring that commitment to life, and measurable results, you will be unable to compete for talent in the coming years. In fact, you may already be at a significant disadvantage.

September 12, 2009

Sustainable Business Truths: The Least Your Employees Need to Know

[This appeared first on my Harvard Business blog here]

In hard times, focusing your company on environmental challenges and opportunities — or "greening" your business — can be a terrific source of employee motivation. But I make the case in my new book Green Recovery that increasing engagement and knowledge around green issues isn't just about pumping up morale — it also gives your people a solid foundation to innovate and create value in new ways.

The world is changing, and fast. Profound shifts are under way as the world mutates demographically (more, younger, less white), politically (new bases of power to the East), and perhaps most importantly, physically (climate change, water stress, resource constraints). How can your company prepare for markets that will be driven, unavoidably, by a quest for sustainability? As I argue in the book, you need to get all your employees on the same page on three essential realities:

1. Resources are not infinite. This goes against everything we've experienced as a species for millennia. We are reaching limits in resource availability, from fossil fuels to water. You know it's serious when Forbes Magazine casually mentions that Exxon is going to natural gas because it's "running out of oil."

2. The value is in the value chain. In most industries, the largest part of a company's environmental footprint lies outside of its direct control, falling either upstream in the supply chain or downstream with customers using the product. The environmental risks (such as discovering lead in your toys like Mattel did in 2007) and opportunities (like creating energy-efficient products that consumers lap up) reside outside your four walls. Everyone will need to think more holistically.

3. Climate change is a political and business reality regardless of what anyone thinks about the scientific reality. I won't belabor this idea, but getting lost in debates about whether Al Gore is plotting to take away your SUV is missing the point. Virtually every country in the world is joining international negotiations about climate or directly regulating carbon. Most of the world's largest businesses are actively tackling their own carbon emissions and demanding the same of their suppliers. The cost of doing business is changing permanently and being carbon-fat is getting much more expensive. These are critical business issues to understand and prepare for.

[Please see the rest of the post here]

December 10, 2009

Gathering Green Data: Tools and Tips

A couple posts ago, I talked about the ways you can use green data — footprinting information on your products and services up and down the value chain — to create enormous value for your company. As they say, you can't manage what you don't measure. And those with the best information can cut costs, reduce risk, answer customer questions on environmental and social impacts, and help customers reduce their footprints.

But it's a fair question to ask how you might gather this data, especially when budgets remain very tight as the economy gradually recovers. Conducting a full, detailed lifecycle analysis (LCA) is likely to be a time-consuming, resource-draining affair. But luckily there are some shortcuts. Here are a few principles and guidelines for getting smarter about your footprint with the least resources possible:

1. Qualitative analysis is good. In fact, it's better to start with a more strategic view on your products or services than to dive right into detailed numeric analysis. Map out your value chain for a quick view on resource use. Then ask really top level questions that aren't part of the normal day-to-day thinking for most functions in a company, like what comes in the door, and what did it take for suppliers to produce it (are there processes energy or water intensive, for example)? What do we do with our inputs, and how much energy and resources do we use? How much energy and resources do our customers use? What happens to our products after customers are done with them?

You're looking for directionally-correct answers on where the biggest risks and opportunities are...or at the very least, where your data gaps are and how best to fill them.

2. "Back of the envelope" analysis is also okay. Top-line numbers on your own impacts and energy use, from departments like IT, facilities, and distribution, can give you sense of where cuts are most needed or valuable. The data may not be readily available at first, but it certainly isn't capital intensive to find it.

3. Use data that's already out there. A truly detailed LCA is, frankly, a pain. Following a product through every stage of its creation and use is difficult. Luckily, the resources available to help you are multiplying. Industry groups and academics have conducted LCAs on many products. You can extrapolate numbers from similar categories to save time and at least understand where the biggest issues lie. For example, let's say you produce food products, some of which have a big dairy component. The dairy industry has conducted an extensive LCA on a gallon of milk. That study can tell you that the methane produced by livestock may dominate your life-cycle carbon footprint as well.

Another option: public (or quasi-public) databases. See the wonky-sounding Economic Input-Output Life Cycle Assessment (EIO-LCA) data at Carnegie Mellon, or the data collected by AMEE in the UK. Without going into too much detail, the EIO-LCA captures data on flows of goods in and out of all sectors of the U.S. economy, along with data on energy use in each sector, and allows for big picture estimates on impacts. It's a back-of-the-envelope calculation — on a very big envelope. But if you don't want to dig into databases yourself (and who does), then you'll be glad to know that some smart developers have embedded these data sources into handy software products, so...

4. Seek out tools to help you. There is also a wealth of options for software that can help you get a handle on your impacts, including those throughout your supply chain. There are a few now classic providers of product LCA software, such as Ecobilan's TEAM and GaBi Sofware. But new niche players and products that focus on a company's carbon footprint include offerings from both the usual suspects and new entrants: Carbon Impact (formerly Clear Standards, now part of SAP), Planet Metrics, SAS for Sustainability Management, Computer Associates eco-Software, and two open source solutions Carbon Counted and Earthster (in beta).

I've worked with, or been taken through demos of most of these players — all are offering good tools and expertise. But I'm sure I've missed many others so please send me tools you've found useful (andrew@eco-strategies.com).

On top of these carbon modeling tools, companies are offering a range of other green data-tracking services: a sustainability dashboard from Microsoft, Google PowerMeter to measure energy consumption (for homes, but how far off are business-targeted versions), and a cool new product from AngelPoints (working with Saatchi S) that puts the Wal-Mart Personal Sustainability Project program into tracking software so companies can show employees what all their pledges of behavior change add up to.

Beyond these more self-help methods, there is an ever-growing number of consultants that can guide you (including partners of mine such as Domani). You may need to start small with my guidelines above and estimate if resources are too tight, but if you can, working with experts can provide you with a much deeper picture of your company's data-gathering capabilities.

Finally, a larger investment in getting smarter — building that internal capacity to understand footprints on an ongoing basis, and even real-time — will pay back in ways you can barely imagine. Those with the best data win.

This first appeared on Harvard Business online.

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March 16, 2011

Will Employees Choose the Greener Options for Office Printing?

Just a quick link and note about part 3 of my "series" of blogs on my trip to the Waste Management/Xerox Executive Sustainability Summit a few weeks ago. Xerox asked me to attend and cover the event. My final piece discusses an interesting presentation there from an IDC analyst and paper/print industry expert.

Survey data shows that people have high intentions to act green around the office, but a much smaller percentage will actually print less. I discuss also the challenge of defining "green" in a digital vs. paper world (there's a footprint to both forms of media), and lay out some topline ideas on using less paper at the office.

See the full post...

Will Employees Choose the Greener Options for Office Printing?

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January 22, 2012

A Vision of Real Corporate Leadership on Sustainability

[This piece appears on Sustainable Brands' site as part of a special monthlong focus on leadership. Chris Laszlo and I are guest editing. We have laid out a framework for true sustainability leadership to help shape the discussion. We each are also offering a deeper dive on one half of the two-by-two matrix we suggested. I'm focusing on the “external” side of leadership which focuses mainly on (a) how a company responds to global sustainability pressures and (b) how it does business in a way that’s visible to the outside world…its products, processes, relationships, and so on.]

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The basics of sustainability excellence are fairly well known by now: reduce your footprint, create products and services that help customers do the same, drive employee engagement, think value chain, track data and enable transparency, and on and on. But real leaders will go further and address the scale of the sustainability challenges we face by fundamentally remaking their companies. Here’s what I envision in a few key areas:

Science-Based Goals

Footprint reduction targets are important, but if the goals are not based on what scientists tell us – i.e., we need an 80% reduction in absolute greenhouse gas emissions – they’re not good enough. Sony and a few others have targeted zero impact by 2050. This level of commitment needs to become the norm, and then a few brave souls can go beyond reducing harm (even to zero) and set goals to build restorative enterprises.

Policy

While uncommon today, the basic level of performance on policy should be to make lobbying efforts consistent with core business strategy and public messaging (for example, are you proudly launching products that use less energy, yet lobbying hard against higher efficiency standards?). Real leaders go much further and lobby for stricter standards and aggressive action on climate. CEOs can demonstrate their external leadership by promoting this agenda with corporate peers and government leaders. Some companies are on track, committing to the recent “2 Degree Challenge Communiqué” or joining groups like BICEP (led by Ceres, Nike, and others) which demand strong climate policy action.

Product and Service Innovation

Reducing the customer’s footprint will need to be the core aim of all innovation efforts and all product lines (not just a sliver of the portfolio as it is today). Sustainability innovators will open up their creativity process, inviting customers and partners to offer innovative solutions (GE’s Ecomagination Challengeis a good example). Innovators will embrace disruption and heresy (which I’ve written about before) by helping customers use less of their products. For a glimpse of the future, see Unilever’s campaigns to get customers to reduce water use and Patagonia’s Common Threads, which offers a grand bargain: “We make useful gear that lasts a long time…You don’t buy what you don’t need.”

Valuation and Investments: Financial and Operational Metrics

Leaders such as P&G and GE have set aggressive revenue targets for their greener products. A few companies put a price on carbon for internal capital allocation decisions or, like DuPont and Owens Corning, set aside a percentage of capex for eco-efficiency investments. These actions help correct the inherent flaws of ROI decision-making by valuing sustainability more explicitly. The next step is fully incorporating intangible value – employee engagement, customer loyalty, brand value, and the like – as well as measuring and including all externalized costs in investment decisions. Two trendsetters, Puma and Dow, have begun this important journey.

Investor Relations

I believe that the relentless pursuit of short-term, quarterly profit goals to please Wall Street analysts is bad for companies – great enterprises very rarely seek profit alone – and certainly isn’t good for the planet. Like Unilever’s CEO Paul Polman, the real leaders will stop providing quarterly guidance and ask managers to focus on the real measures of success: making great products, serving customer needs, creating good jobs, and driving both cash flow and long-term profitability. The most sustainable companies will become “benefit companies” or “B Corps”, with a broader charter than just pursuing shareholder value. Seek greatness and sustainability, and the money will follow.

Resources Dedicated

Most companies give their sustainability execs woefully inadequate resources to do their stated jobs, let alone transform their companies. A truly committed organization will allocate resources equal to the challenge and will give the sustainability function real power. I suggest creating a “skunk works” team run by sustainability, along with perhaps corporate strategy and R&D, to question everything and challenge the core business model (e.g., What if the product were a service? What if we used no fossil fuels?). This is how companies can systematize heretical innovation.

Employee Engagement

Educating all employees on sustainability principles and creating green teams are good first steps. Tying all executive compensation directly, and substantially, to sustainability goals is even better. But real leaders should work to convince those hostile to change throughout the organization…or eliminate them. In the words of Jim Collins in Good to Great, “get the right people on (and off) the bus.” Leaders will also help employees pursue sustainability in their own lives and communities and provide an outlet for organizing campaigns, such as the awareness-raising “climate ride” conducted by apparel company Eileen Fisher. If the workplace is appropriate for United Way drives, why not for climate action?

In short, I’m imagining a very different kind of company. The overwhelming challenges we face demand profound shifts. Of course, much more than I’ve mentioned will need to change – on the social side of the equation for sure – so please let me know what you would add to my vision of true leadership.

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March 20, 2012

Corporate Sustainability Efforts -- Feast or Famine?

Is corporate sustainability on the wane or growing more important to top executives? At the beginning of the year, two big-picture reports on the state of green business painted divergent pictures.

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In GreenBiz's annual review of 20 indicators of "how business is doing" on green, we learn that 6 of those indicators are on a downward trend. But in the report "Sustainability Nears a Tipping Point," MIT and BCG prove their point with a fast-rising graph of companies that recently put sustainability "on the management agenda."

While they seem at odds, both views are right — companies are no longer ignoring sustainability; most big companies now have someone focused on it, at least in part. That's why execs can honestly tell MIT that it's on their agenda. But with sustainability often siloed into just one person or department in each organization, it's hardly a surprise that, at the same time, we're seeing some loss of momentum. Sustainability has moved from being a hot, new management trend to being just one more thing for execs to keep an eye on: for many it's become a check-box exercise..

This structural gap reveals the fundamental misunderstanding about what sustainability really means for organizations. I've seen it time and again in the companies that I work with or study. For them, sustainability is a thing to tackle, a functional area; it's a what, like marketing or product development.

But sustainability needs to be viewed as much more of a how concept, like quality or innovation. It's a way of operating that creates the most value when it's embedded throughout the organization.

Of course companies have distinct quality or R&D departments and professionals, but the most committed companies drive the thinking into every aspect of the business. This is the mindset that sustainability needs to engender throughout an organization. And as with quality, this isn't just about ethical or aspirational hopes — acting with sustainable values, for example, as covered well by many, including Dov Seidman in his book How.

No, I'm talking here about the more prosaic, everyday, tactical, blocking-and-tackling of business. Sustainability pressures force changes in how we build our supply chains, how we design and manufacture products, how we deliver services, how we create and execute our business models and strategies, how we develop financial metrics to measure success, how we attract and retain 21st-century, holistic thinkers, and on and on. So sustainability pressures, if acted on, drive us to create and build better products, design more efficient services, execute better, and hire the best. Those are goals that reach throughout the entire organizational structure, and they're actually enabled by sustainable thinking.

Given the scale of these goals — and the global challenges we all face — putting just one (or a few) people against the what of sustainability is a woefully inadequate response.Resource constraints and rising input prices; increasing demands from customers, employees, and consumers; the risks of severe business continuity disruptions from water, climate, or labor problems in the supply chain...the list of big pressures grows more complicated every day. And these issues require a full-court press from all aspects of operations.

It's become a mantra in the sustainability world that green needs to be a part of everyone's job. Of course that's true, since detecting risks and innovating around them will often fall to those closest to the ground (hint, that's rarely the c-suite). But most companies are missing a big step.

To conquer a how you need more than just a mantra. You need a significant investment of resources in time, top-leader focus, people, and money. You need people to ride herd and drive the agenda — to do the cross-cutting analyses such as lifecycle assessments, to track and get a handle on the many diverse and complex issues, to present a unified front to employees and external stakeholders, to question business models and find new, heretical ways to operate and serve customers...the list goes on.

There's no "ideal" structure for sustainability efforts, just as no two companies would tackle innovation the same way. Most large companies have now appointed a lead on sustainability, but have provided limited financial support and fewer human resources. There are exceptions: a few well-known sustainability leaders, such as Starbucks, Nike, and Coca-Cola employ central teams with specialists in areas like water, climate, and packaging, as well as reps spread out around the organization.

One of my clients, Kimberly-Clark, a much quieter sustainability leader, has a centralized team of 5 to 10 sustainability-only managers (and that's only part of the 50-plus central staff covering environmental, health &safety (EHS), OSHA, and, yes, quality). More importantly, Kimberly-Clark has another couple dozen professionals in dedicated sustainability roles (again, not EHS) embedded in business lines and geographic regions.

But even the leaders with robust organizations are rarely putting much money specifically into sustainability-driven innovation or disruptive changes that might dramatically reduce the value chain footprint of the company's products. Let's be honest: It's very hard to assess how much is "enough" when you're investing in a strategic priority. But it helps if the organization first defines it as a strategic priority. And given the ever-rising costs of under-reacting to sustainability pressures (such as direct costs from rising input prices, or business discontinuity risks from extreme weather), it's clear that companies should put a lot more people and money against an agenda as large, complicated, pressing — and let's not forget profitable — as sustainability.

Only with significant investment can we move down the path to sustainability integration and real, ongoing, full value creation. A robust network of sustainability professionals within a company — whether or not they sit in one "department" — may need to obsolete themselves over time. But until then, sustainability can't drive anything — it will just remain a nice side show.

(This post first appeared at Harvard Business Online.)

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October 10, 2012

How Walmart's Green Performance Reviews Could Change Retail for Good

Walmart's efforts to green its supply chain are about to get much more effective. Sustainability will now play a role in its merchants' performance reviews, which help determine pay raises and potential for future promotion. This is a big deal: these merchants are high-level managers responsible for multibillion-dollar buying decisions. They're the people who determine which products appear on the shelves of the world's largest retailer.

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Some quick background: Walmart deserves praise for its industry-leading sustainability successes, such as improving its fleet fuel efficiency by 69% and becoming the nation's leading commercial buyer of solar energy. The company's most important sustainability initiative — the pressure it puts on its 100,000 suppliers to improve their environmental performance — has changed how thousands of products are made, packaged and sold.

For the past five years, Walmart has built sturdy scaffolding around what could be a world-beating green supply chain, including:

  • Developing Sustainable Value Networks, which bring together major suppliers with cross-functional internal teams to tackle issues from packaging to waste to energy use.
  • Asking 100,000 suppliers to answer and provide data on 15 environmental impact questions.
  • Building the Sustainability Consortium (TSC) with many of the world's largest consumer products companies and big retail competitors. TSC created metrics to evaluate suppliers and their products on environmental and social performance, and Walmart has integrated these metrics into its own supplier Sustainability Index and scorecards.

But greening its supply chain has been a tough task. Suppliers have repeatedly voiced one critical and legitimate complaint: Walmart's merchants don't really take sustainability into account when they make buying decisions. This flaw in Walmart's green supply chain program has threatened to undermine the foundations of a highly-touted and important initiative.

In essence, the suppliers and other stakeholders have told the company, according to Walmart's Sustainability director Jeff Rice, "It's great to ask your suppliers questions, but it only matters if you do something with the information." In their view, the company has continued to choose the products it sells primarily on price.

But now, in addition to Walmart's long-standing, laser-like focus on cost, its merchants will have to consider sustainability in their buying decisions — or risk a weak performance review. And all because of a simple shift in incentives.

Jeff Rice gave me a great example of how this change is already working, in the form of how Walmart selects the personal computers it sells. Laptops use a lot of energy over their lifetime, and a big driver of energy use is the default setting on power management. These settings determine how fast (if at all) the computer goes to sleep or when the screen dims. Using the index scorecards I mentioned above, Walmart's laptop buyer identified energy use as the biggest determinant of the computer's total lifecycle footprint and emissions.

The buyer then discovered that only 30% of the laptops sold at Walmart ship with the advanced energy-saving settings in place. To compound the problem, the company's research shows that most consumers leave such settings at factory default. So the laptop buyer set a new goal for herself: to increase the percentage of laptops sold with the advanced power settings from 30% to 100% by this Christmas. This single product shift will reduce CO2 emissions by hundreds of thousands of metric tons and save customers money on their electric bills.

Rice told me that performance evaluations for buyers only include a handful of targets, and all are discussed thoroughly at annual reviews. Sustainability performance won't determine the entire evaluation, of course, but it's high profile enough that it should affect behavior.

Incentives matter and cultures shift over time. Hard-won operational changes like modifying performance reviews may not be sexy, but the results can be profound. And when it's the world's largest retailer changing its buying criteria, the ripples will likely be felt around the world.

(This post first appeared at Harvard Business Online

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February 24, 2013

The Inside Story of Diageo's Stunning Carbon Achievement

This is the exclusive, short story of how Diageo North America, with creativity and guts, both in operations and in the senior ranks, achieved the holy grail of carbon emissions reductions. They did it without using carbon offsets — and about 38 years earlier than they had to.

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Here's what scientists are telling us: the world must cut carbon emissions by at least 80 percent from 1990 levels by 2050 to (we hope) avoid the worst of climate change. This level of change seemed like a pipe dream to many, including me... until I spoke last fall to Roberta Barbieri, the global manager for environmental sustainability for Diageo, the $17 billion spirits company. Imagine my shock, as we talked about setting aggressive goals on carbon emissions, when she casually mentioned that Diageo's North American division — a group with $5.58 billion in sales and 14 production and manufacturing facilities — had already cut emissions 80 percent.

The first thing I said was, "Excuse me?!," followed quickly by, "when can I come and talk to you?"

It all started in 2008, she told me later, when top Diageo execs had their minds set on doing something big. First, for perspective, they ran the numbers on what it might cost to go entirely carbon free. The back-of-the-envelope calculation was daunting (hundreds of millions of dollars) and included ideas like building bioenergy plants to power some of their largest distilleries — an option that would achieve large reductions, but was in no way cheap. They settled on a still-aggressive goal of 50%, made it public, and, remarkably, crossed their fingers.

At about this time, Richard Dunne, an environmental exec, entered the picture and took responsibility for meeting the target in North America. He had a strong suspicion that building an expensive bioenergy plant was not the only way to get there. His team implemented a rigorous process of collecting ideas for emissions cuts and estimating the costs. Then they sorted the results on a massive spreadsheet, ranking ideas by net gain on environmental improvement and then by financial investment. By looking at the largest carbon reduction options first, they could group ideas into three big buckets: 1) low/no cost (the no-brainers); 2) some operating expense increase; and 3) more significant capital expenditures (like the bioenergy plant).

Executives initially thought that only major capital projects would reduce emissions significantly. But Dunne's process revealed a surprising number of no-brainers. As a result, Diageo North America achieved a 50% carbon reduction by 2012, mainly with a mix of no- and low-cost initiatives. These project range from easy efficiency efforts like lighting retrofits, boiler upgrades, and installing variable speed drives; to larger, but still economical, changes, such as switching fuels (from oil to natural gas) and cutting back from two boilers to one in a small distillery.

Reaching the 50% reduction in North America years ahead of schedule was a pleasant surprise. But Diageo still needed to go further: the economics on reductions in other regions were not nearly as good, so North America needed to close the gap to help the global organization reach its 50% goal by 2015. But even with the expensive bioenergy plant beckoning as a solution, something even more unusual happened at a Canadian distillery, one of the company's largest.

Gene Ruminski, Diageo's North American sustainability manager, proposed that the Canadian distillery contract with its utility to supply natural gas harvested from a landfill - a net zero carbon solution that would reduce the carbon footprint for North America by another whopping 30%. But there was a big catch: energy costs would go up more than $1 million per year. This expense was more than the single plant could justify.

But then a senior exec, the president of Global Supply and Procurement, got wind of the idea (important point here: this exec sits on the company's internal sustainability council). With his global perspective, he realized that even though the landfill gas solution would increase operating costs for this one plant, it was actually a relatively cheap way to deliver a large reduction in emissions. So he gave the go-ahead and some financial leeway to the plant manager who had to take the annual million-plus hit to his bottom line. As it turns out, the plant's ongoing cost-cutting initiatives had already identified many millions of savings, so Diageo reduced the plant's target for total cost savings to allow for this massive carbon-reducing project.

This is an amazing story, with a few important lessons:

1) Companies still have much more room to cut energy, water, and waste than they realize. Even a well-run company can find enormous savings from easy, low-cost stuff.

2) Big goals force you to look for big ideas, meaning you can, as Diageo's Roberta Barbieri says, "do more than just turning off the lights."

3) Leadership matters. With a more strategic attitude, you can invest in longer-term value, both tangible and intangible. Flexibility is crucial, as the top exec had to give the plant manager leeway on his savings targets to meet the environmental goal.

This last point is really critical. Shifting subtly away from an attitude of "maximize profits this quarter at all costs" does not mean you leap right from capitalism to communism; it just means you take into account a broader definition of value to the organization and community. Flexible thinking about value frees you up to find unique solutions. As a clean tech and impact investor Charles Ewald said to me recently, "the gap between 'capitalism' and so-called 'philanthropy' leaves a lot of room for creativity."

I congratulate Diageo for getting creative, finding that chasm, and driving a spirits truck right through it.

(This post first appeared at Harvard Business Online.)

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