Revenues Archives

July 30, 2007

Xerox Redesigns Paper

The Wall Street Journal reported today that Xerox has developed a new copy paper which, they say, uses half as many trees, fewer chemicals and energy to manufacture, and weighs 10% less (reduced shipping energy and cost). See Xerox press release. Apparently it uses a process closer to the one that creates newsprint, using more of the tree. On the down side, the paper isn't quite as white and apparently yellows "badly" (says the Journal) over time.

Is this another example of a green product that doesn't live up to its regular counterparts? The yellowing sounds iffy. But a savvy analyst quoted in the article says the paper will likely be used "for transactions such as invoices and phone bills where people don't care about long-term archiving.

Just think about how much paper is not needed for very long — most, I would wager, ends up in the trash the same day. Much like the rising awareness of the craziness of using potable water to flush toilets, businesses and consumers are starting to ask questions about when virgin, high-end materials are really needed. Xerox's innovation should help companies match the product to the need.

I've long thought the mantra of reduce, reuse, recycle was missing a couple of levels — redesign and re-imagine (see drawing below from Green to Gold that lays this out).

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Xerox, it seems to me, has done its part by redesigning paper. The customers need to reduce (how about not printing that presentation to flip through in the meeting, or printing 2-sided?), reuse, and recycle. And Xerox, other document handling companies, and creative start-ups can work on re-imaging how we use information so we don't need the paper at all. But for throw-away uses, which are a big part of the market, this innovation seems like a great incremental step. Bravo.

December 2, 2009

Five Ways to Use (Green) Data to Make Money

If you put an energy meter inside a home and show people total usage in real time, a miraculous thing happens: they use about 10 percent less energy. The simple act of placing data in front of people changes their behavior. Data makes people smarter and inspires them to make small changes to save money and energy. You can use this powerful tool in business not only to cut costs, but to drive innovation and revenues.

Some are calling this phenomenon the "Prius effect," referring to how people respond when they see real-time fuel-efficiency data while driving the popular Toyota hybrid. As the described it, the Prius effect "can change driving in startling ways, making drivers conscious of their driving habits, then adjusting them to compete for better mileage." Similarly, making footprint data more accessible to those managers that can do something about it can create real value. As they say, you can't manage what you don't measure. It's amazing how often I hear that phrase — and how often people need to hear it. Tech leaders will tell you that one of the best possible solutions to the rapid increase in energy use and cost in data centers is simple: Add the power bill to the CIO's budget!

You can put your green data to use in five ways that will help your bottom line:

1. Saving money — a lot of it. As we've seen, if you give your operational people information on resource use, they will be inspired to find ways to cut back.

2. Driving internal competition. Share footprint data broadly and transparently and you'll see how badly people like to win. When PepsiCo Chicago ran a floor-by-floor energy reduction competition, the results were staggering. In one three-month period, electricity use dropped 17% (and paper use 22%). Energy use on the winning floor plummeted 31%. Factory heads at a number of companies have told me that they'd rather miss their financial targets than their green or energy goals — it's just too embarrassing to be at the bottom of the list.

3. Answering your customers' pressing questions. Wal-Mart, along with many other companies, is asking suppliers and vendors very tough questions about their environmental and social impacts. Those that can gather their data and tell the best story will get the most shelf space and mind space (see my previous post on Wal-Mart's eco-ratings for more on this point).

4. Prioritizing initiatives. Resources remain very tight — you don't want to spend money on the wrong things. With all the pressure to go green, it's easy to get lost in the weeds and pursue avenues that may not yield the most benefit. When companies really look at their full value-chain impacts, they're very often surprised at the results. Green leader Stonyfield Farm discovered that 95% of the ecological damage from its packaging occurred during production and distribution. So the company has made light-weighting (which is what it sounds like) the top priority — use less stuff and the footprint goes down. Stonyfield has made the deliberate choice to not use a recyclable, yet heavier, plastic; this counterintuitive and seemingly non-green choice makes the most environmental and fiscal sense given the real data.

5. Finding new market openings and focusing innovation. Procter & Gamble went through a similar lifecycle exercise and made a similar discovery about its laundry products. The vast majority of energy use was not in sourcing, production, or distribution, but in the use of the detergent in homes. And the majority of that was not the washing machine turning, but heating the water. This insight led to Tide Coldwater, a reformulated product to help customers wash in cool water, using less energy and saving money. Coldwater is one of P&G's seven original "sustainable innovation products" that generated $2 billion in sales in the first year.

Operating your business without environmental and social metrics leaves part of your management "dashboard" blank. How well can you run your company without complete information? But don't worry — you're not that far behind if you don't have a perfect handle on your value-chain footprint, or even your direct impacts. It's getting easier and easier to gather this data, and you can accomplish a great deal with even "back of the envelope" calculations (more on this in my next post).

For a slightly longer take on this topic, see also my recent e-letter, or the full discussion in my new book Green Recovery

[This blog was originally posted on Harvard Business Online]

June 2, 2010

SAP and the Greening of a Service Business

It's always easier to picture how a manufacturing company can go green — just cut back on energy, waste, and material to reduce air and water pollution, for example. But what does it mean for a service-focused business, such as a software company, to travel down the sustainability path?

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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January 18, 2011

A Paradigm Shift in the Auto Industry

My monthly (or so) e-letter is out. If you don't receive it, here's a quick summary and link to the latest...

How the Auto Giants are Managing a Paradigm Shift
The auto industry is arguably going through the most significant change in its history. The race to a future filled with clean cars that use a variety of new technologies is on. At the big Detroit auto show this month, companies are falling over themselves announcing green initiatives and products.

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So how are the big guys approaching this new world? The competition seems to be centered in large part on the range of the vehicle; that is, how far can you go on the battery? Here’s a quick look at the spectrum of tactics being employed...

See the full story here...

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January 23, 2011

Ford's Impressive Sustainability Strategy

For years, Toyota has been the darling of the green business world. The hybrid Prius was a legitimate business home run (2 million sold), and it helped both differentiate Toyota's brand as the market innovator and propel Toyota to unprecedented profits. But now the company faces renewed competition for the title of green auto leader.

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In the last couple of years, every auto giant has launched alternative vehicles, which they've been touting aggressively at last week's Detroit Auto Show (see my newsletter on the different strategies the big companies are pursuing). GM's "extended range" Chevy Volt and Nissan's all-electric LEAF are potential blockbusters, with strong early sales and serious buzz.

But I want to focus on Ford. The company announced its own electric vehicle, the Ford Focus EV, at the recent Consumer Electronics Show.

Buried beneath the pizzaz of high-profile PR announcements, Ford has developed what appears to be a broad, well-thought-out sustainability strategy.

As I explored Ford's fascinating sustainability report (and how often do those words go together?) from last year, I noticed a number of unusual things. So I reached out to Ford's Director of Sustainability and Environmental policy, John Viera to help me better understand the company's approach.

Three key aspects of Ford's sustainability strategy strike me as critical, and show the company's real leadership:

1. It's based on hard science. Ford's in-house climate scientists - yes, you heard that right — have bought into an important global scientific consensus: humanity must keep CO2 levels in the atmosphere below 450 parts per million to reduce the odds of catastrophic, species-threatening climate change (many leading scientists have since lowered the goal to 350 ppm — and we've already hit 390 ppm).

Ford then worked back from this necessary future reality, determined the share of global emissions coming from Ford products (around 2%), and mapped out the fuel-efficiency levels required to meet the scientific mandate. As Viera said, "I can tell you 5, 10, 20 years from now, where we need to be." Relying on hard climate science to map out non-negotiable boundaries for your products is, to say the least, very unusual.

2. It tackles both long-term and short-term sustainability challenges. Given those science-based plans, Ford is investing in the long-term — the sexy, new EV market that everyone is going after — and rolling out a series of efficiency technologies in the existing, combustion-engine fleet. The 2011 Ford Explorer, for example, is using EcoBoost engine technology to improve fuel efficiency by 25%. Viera points out that the world may save more fuel between now and 2020 through these incremental improvements than through nascent sales of cleaner cars. "It's not as glamorous," Viera says, "but it makes sense number-wise."

3. It's heretical. In Ford's sustainability report, one statement stopped me in my tracks: "By 2050, there will be nine billion people on Earth...Putting nine billion people into private automobiles is neither practical nor desirable." This is an auto company saying that going after market saturation is not ideal for the company or the world (since cities would cease to function with that much traffic).

To explore the larger topic of "sustainable mobility," Ford worked on a pilot program in Toronto that encouraged people to use more public transit. Suggesting that people might — and should — use less of your product is an aggressive, tight-rope walk of a sustainability strategy. It's not easy, but it can drive real innovation and new thinking, as well as build customer loyalty that maintains or grows market share. (I discussed this idea, and give some examples of companies using this strategy to great advantage, such as Xerox, in my last book, Green Recovery.)

Even as they look at mobility more broadly, Ford is still pushing hard on cars of the future. The company is not missing the electric wave. Car guru Chelsea Sexton, who knows more about the market for EVs than nearly anyone, says the Focus EV demo seriously impressed her and other influencers. As Sexton told me, "It's the first time in my life that I've lusted after a Ford!"

In sum, Ford's sustainability strategy is to pursue a broad portfolio approach, making multiple bets on the future — a stark contrast to competitors that have really bet the farm on one technology. Improving the environmental profile of the current product portfolio while launching new leapfrog products is no doubt a tough balancing act. But it's very smart. The world is nothing if not uncertain; who can know whether policy, technology, and consumer whims will continue to drive adoption of electric cars?

Of course, as Sexton reminds me, strategy is one thing, but execution is another. She believes Ford is doing things for all the right reasons, but wonders how well they'll translate all that smart thinking into market success. In her opinion, the company has been late to the party on communications around electric vehicles (all the heat has been around the Volt and LEAF).

So will Ford develop — and build great brand stories around — the efficient or electric cars that people want? That's the billion-dollar question, and it's where, in this industry, the rubber really does meet the road.

February 14, 2011

Ask Customers to Use Less of Your Product: The Big Heresy

I recently attended an Executive Sustainability Summit hosted by Xerox, Waste Management (WM), and Arizona State University. The short conference brought together public and private sector managers working on environmental and social issues. Xerox asked me to attend and give my thoughts on what I heard and saw*.

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What really struck me is that both Xerox and Waste Management are doing something mostly unheard of: they're working with customers to help them use less of their traditional product or service. The plenary panel during the Summit included execs from both companies proudly talking about these fast-growing, service-oriented parts of their businesses. And what's really important is that these are not just niche product lines, but fundamental shifts in what these companies do.

In some sense, this shift is not optional, as both companies are in the throes of fundamental transformations of their industries. Xerox has been navigating the shift to digital documents for years, and WM is facing an existential threat. As CEO Dave Steiner put it, "When your company is called Waste Management, and your customers all talk about 'zero waste,' you better change your business model."

So both corporate giants are handling the industry transitions by embracing sustainability to the core. Xerox's president, North America , Russell Peacock, speaking for the company at the event last week said, "Sustainability...is what is driving the transformation of Xerox to a services-led business."

Xerox advises companies on how to save money on document handling, and holds a sizable 48 percent market share in the broadly defined, and surprisingly large, $7.78 billion "managed print services" (MPS) industry (according to research firm IDC). Part of this new strategy is an outsourcing play — they'll take over all your print needs for you — to grab share. This is clearly not a niche business-this is a firm that existed on selling devices, paper, and machine servicing, so the more it's used the better.

But at the core, what Xerox is offering is less total printing. That's a big shift in business as usual.

Xerox has worked with multinationals such as Dow (case study here) to drastically reduce the number of printers sitting in individual offices by thousands, shifting instead to many fewer centrally-located multifunction devices. But at the Summit, Xerox execs gave an example from their corporate backyard. The company helped the city of Rochester, NY slash the number of printing devices from 459 to just 168, saving a very budget-constrained local government millions of dollars over the next five years.

These printing retrofits save clients up to 30 percent of their document-related costs. And the sustainability story is significant. In addition to using less energy to run machines, slashing paper use also saves large amounts of energy and water upstream in the paper production process.

For Waste Management's part, the story their execs told was similar but goes beyond cost savings and has a measurable financial upside. When WM helps customers reduce waste to landfills — which is how WM has made all its money until recently — it diverts those waste streams to recycling facilities which segregate materials to resell or to waste-to-energy (WTE) plants.

Recycling streams can generate income for customers. So instead of paying to dump garbage, customers may get paid for valuable material, which adds up (GM, for example, has made $2.5 billion on recycling over the last five years). Meanwhile, the other stream of waste will create a potentially significant source of clean energy (adding to the sustainability win). In its WTE plants, WM now produces enough energy to power 1 million homes, more than all the solar power in the United States. From waste hauler to energy company — that's a transition for sure.

These two companies are not the only ones out there going down the "use less" path. It's increasingly common in the B2B space. Another client of mine, Kimberly Clark Corporation, has similar conversations with its customers for its K-C Professional division, which supplies paper and cleaning products to public and private sector organizations. The customers appreciate supply partners that help them save money.

Let's be clear: Xerox, Waste Management, Kimberly Clark, and others are purposely cannibalizing their own businesses. The wisdom of such a strategy has been discussed in business circles for years, most notably in the work of Harvard's Clayton Christensen (The Innovator's Dilemma). My tweak to Christensen's famous term "disruptive innovation" is to describe sustainability-driven creativity as even more heretical; it's about questioning the entire consumption model — it's heretical innovation.

It can be painful for companies to threaten their own cash cows, but what's the other option? I interviewed Xerox's CEO Ursula Burns for my last book, Green Recovery, and asked her about this strategy. Talking about Xerox's service business strategy and its "solid ink" technology, both of which displace existing printers, she said, "Will these new products cannibalize our machines? Maybe, but someone else doing it is much worse."

So the choice is not between asking your customers to use less of your product and ignoring the trend...it's between you doing it or your competitor. That's the risk reduction logic. But a related logic relies on improved customer service and deeper customer relationships. As Waste Management's Steiner said last week, "We're cannibalizing our own business to give back more to our customers."

Xerox's VP of Environment Patty Calkins probably put it best during the Sustainability Summit: "Who would think that Xerox would help you reduce printing or that Waste Management would move toward zero waste?"

Who indeed.

(*Both Waste Management and Xerox have been clients of Winston Eco-Strategies, LLC. I attended this meeting at Xerox's request. This post first appeared at Harvard Business Online.)

April 21, 2011

How Can We Build a Culture of Disruptive, Heretical Innovation?

The forces driving the business world toward sustainability are vast, powerful, systematic…and growing. In recent months, we’ve witnessed massive climate disruptions everywhere from Russia and Pakistan to Brazil and Nashville. Resource constraints are a reality, with serious discussions about peak oil, peak coal, peak coffee, and, well, peak everything. Technology-driven transparency is creating a mad rush to capture product and company sustainability data, and companies continue to push new demands aggressively up their supply chains.

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And the mega-force to beat all – the relentless rise of population and living standards in the developing world – continues unabated. So how will we provide a good quality of life to what will be 9 billion people on a resource-constrained planet?

In short, we need some very large changes to “business as usual,” requiring radically new ways of thinking.

Over the past couple of years, I’ve written frequently (in my last book Green Recovery in particular) about the need for “heretical” innovation – that is, asking very hard questions that challenge the very nature of a business or product. I wrote recently about two companies, Waste Management and Xerox, in the middle of deep transitions. From hauling waste and getting paid by the ton, to managing recycling streams and helping customers achieve zero waste goals. Or from selling as many printers as possible to helping customers reduce the number of devices and do less printing over all. Asking customers to use less of their core products – that’s heretical.

Some will point out that this is similar to the concept of “servicizing”, and of course it is. But I believe there’s a deeper heresy at work than just turning a product into a service. After all, Xerox could offer outsourced printing services and try to print as many pages as possible. It’s the combination of service and talking openly to customers about using less in total that makes it novel.

So I have a paradoxical task in mind: figuring out how to systematically and logically ask illogical, wacky, heretical, leapfrog questions. I’m looking for ideas from the assembled knowledge and experience of the sustainability leaders reading this.

My three main questions are:
1) How do we cultivate a culture of heretical innovation (how do we make it ok to ask wacky questions)?
2) How do we identify and support the true innovators, intrapreneurs, and heretics in even the largest organizations?
3) Is sustainability-driven innovation fundamentally different than ‘regular’ disruptive innovation, and how?

On the first question at least, I have a few broad ideas. Here’s a starting list for budding corporate heretics:

Start with value-chain data to identify big risks and opportunities. With solid data, managers can focus limited resources on tackling the real footprint and drive toward new ideas and questions. For example, Pepsi’s Tropicana brand is experimenting with low-carbon fertilizer after discovering that growing oranges was the biggest part of its GHG footprint. And more famously, P&G launched Tide Coldwater to address the largest (by far) portion of detergent lifecyle emissions, washing clothes in hot water.

Use open innovation. The hottest concept in innovation today is inviting people in to solve your problems. P&G has opened up its innovation pipeline to anyone with a good product idea. A few companies are sharing some of their best ideas (and patents) with the world – as Nike and others do with GreenXChange – and then hoping for reciprocal karma.

Try “co-creation” (the second hottest concept in innovation and a subset of open innovation perhaps). IBM has had great success in recent years with “Innovation Jams” that allow all employees and customers to throw ideas into the mix. Cross-fertilizing people from radically different disciplines, and from outside the organization as well, can lead to some novel questions.

Show personal leadership (walk the talk). Have senior execs take part in jams and brainstorms. Let them publicly generate wacky ideas and support pilot projects to explore them.

Systematize innovation. 3M and Google famously set aside a portion of everyone’s time for whatever strikes their fancy. More companies should emulate this practice, but also make a point of focusing specifically on sustainability pressures.

Award the wackiest ideas, even the ones that don’t pan out. Some public pats on the back and recognition for employees who show bravery and try new things can go a long way.

Create competition. Sharing data on sustainability performance internally can drive real competition and learning across divisions or products. Or utilize public prizes, like the famous X Prize or the $1 million Netflix Prize.

All of these paths can help us regularly ask the toughest, most interesting questions. Only then can we match the scale of innovation to the scale of the sustainability challenge.

These are just a few ideas (after all, this is a blog, not a book). There are many more. So please send me your thoughts on how to drive breakthrough innovation and how to find the heretics in the organization. Finally, any examples of heretical questions within your organizations are very welcome. (andrew@eco-strategies.com).

(This post first appeared on Corporate Eco-Forum's site.)

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June 13, 2011

Our Future Business Leaders Are All About Green

Tucked into this year's Fortune 500 issue is a short article on the annual Rice University Business Plan Super Bowl. With $1.3 million in cash, equity, and advice in play, this contest is one of the world's most prestigious and richest competitions for budding entrepreneurs. It also provides some insight into what MBAs and VCs are excited about today.

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If these entrepreneurs are our future business titans, then I'm feeling pretty good about where we're headed. In short, next-gen leaders want to build businesses that solve sustainability problems. Here are a few of the 6 winners profiled in Fortune.

  • 3rd Place: PK Clean from MIT designed a factory that converts carbon-containing waste like plastic into fuel.
  • 4th Place: cycleWoodPlastics from University of Arkansas developed a biodegradable plastic bag to replace grocery bags, which are increasingly being banned around the world.
  • 5th Place: SmarterShade from Notre Dame created an elegant technology that adjusts the tint on windows, saving on building cooling costs by preventing heat gain.
  • 1st Place. TNG Pharmaceuticals from University of Louisville developed a vaccine for a parasite that strikes cattle, costing the dairy and beef industry over1 billion a year. The winning team pointed out that, compared with the current industry "solution" of ear tags to mark the sick cattle, their method is cheaper and "greener" (it reduces pesticide use and increases milk production, thus making the industry more efficient and saving lots of energy).

The other winners, FYI, were a better human authentication tool for websites and a material science innovation, a heat-resistant filter made from titanium dioxide.

So out of the six winners, call it three (and part of the TNG pitch) were green-focused. I'd say that three and a half out of six is a darn good ratio in a competition that was not intended as a sustainability contest. And these entrepreneurs are working on some of our biggest problems — buildings represent about 40% of all energy use and emissions, waste is the new frontier in fuel sourcing, and the cattle industry is one of the largest sources of greenhouse gas emissions.

Given the outcome of this year's contest, perhaps what the judges and competitors are telling us is that every competition needs to be about sustainability now. We're facing a tough future for our species if we don't turn the power of all of our institutions — business, government, academia, NGOs, and communities — toward solving our biggest challenges. Luckily for all of us, these bright young minds, our future business leaders, are excited to tackle these problems (and make gobs of money doing it).

But let me leave you with two main questions if you're a current business leader:

  1. Are you ready to innovate and find solutions for our toughest sustainability challenges?
  2. Will you be able to attract the best and brightest talent to your organization if you're not?

(This post first appeared at Harvard Business Online.)

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October 10, 2011

What Sustainability Should Learn from Steve Jobs

The passing of Steve Jobs was in no way surprising – we knew it had to be serious for him to leave the company he loved. But it’s still a shock that we’re robbed of his brain and all the amazing things that he would have invented.

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I had always hoped that this once-in-a-generation genius would turn his prodigious mental powers to solving the world’s largest challenges. Imagine a Jobs-designed, must-have iCar that people would want as badly as an iPad…Or an iHome that uses drastically less energy with its iFridge and iWasher…Or how about an iCity or iTrain to tackle urban design and transportation challenges?

We’ll never get those products from Jobs, so other innovators will have to fill the void. But there is one incredibly important lesson that sustainability-minded leaders can learn from Jobs’ legacy: you should lead your customers and show them a better way.

Steve Jobs did not ask people if they could use a tablet computer. In fact, in a long list of amazing quotes from the man, one of the most powerful is this: "It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them."

Before the iPad came out, plenty of pundits asked why anyone would really need a tablet. After all, laptops were fairly small already and we had connectivity and games on our phones. Why add this midsize device to our lives? Steve Jobs made us want to.

In my experience, most large companies today are “fast followers” – a strategy that has seemingly lower risk for a public company. But just look at the playing field littered with tablet computer also-rans to see how expensive second-place can be. And yet it still seems like the preferred (or default) approach for most companies.

This fiscal and strategic conservatism breeds a culture where execs prefer to wait and talk to customers before doing anything drastic. Of course customer (and other stakeholder) perspectives are critical. But as with tablet computers, when it comes to sustainability, often the customers don’t really know what they need.

Companies often gather data on what their business customers think a sustainable product should be, and the survey might show that including recycled material is important, even if that’s a tiny part of the real footprint story. Nobody knows the value chain of your product and service as well as you do (or if someone else does, get them in the room pronto). So figure out where the impacts really lie and what you can do to reduce your customer’s footprint in ways they hadn’t considered. This might require asking heretical questions about whether the product should even exist in its current form or should be converted into more of a service.

Do most people think they need a hybrid car, or would they even imagine that they’d share a car using a service like ZipCar? Probably not, but if the experience can be made fun and profitable enough, perhaps they will. The Toyota Prius has sold well, in part, because it did some exciting new things (ran quiet on no gas at times) in a familiar midsize car framework, much like the iPad looked like a big iPhone but could do so much more.

I wish I could come up with more examples of companies truly leading with sustainable products. It’s a sparse field for now, but that will change. The next generation’s Steve Jobs will most likely focus on sustainability since that’s where the largest challenges and business opportunities lie. Consider the case of William Kamkwamba, a boy from rural Malawi, one of the poorest countries in the world. At 14, this self-taught “Boy Who Harnessed the Wind” built a working wind turbine from scraps. He’s now at Dartmouth College.

The world contains some true innovators. Will our big companies find these leaders and harness them…or be brought down by them? I know which one I’d pick if I were normally a “fast follower.”

Here’s hoping we find the next Steve Jobs quickly, someone who can bring us green things we never knew we wanted so badly. Rest in peace, Steve.

May 24, 2012

3M's Sustainability Innovation Machine

Planes are now held together by tape, not bolts. It's really, really strong tape, but still. Who knew the maker of Post-It Notes could help keep aircraft aloft?

This somewhat frightening factoid is just one of the fascinating things I learned in a recent visit to the St. Paul, MN, headquarters of the perennial innovation leader, 3M. During my daylong visit, I observed a quiet, longtime sustainability leader plugging away, creating new products that will help the world save energy, water, waste...and lots of money.

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For good reason, the $30-billion company has long been held up as a role model of how to manage innovation. In the sustainability realm, 3M pioneered what now seems like an obvious idea: avoiding pollution before having to clean it up. The company's simply named Pollution Prevention Pays (3P) program has saved many billions of dollars over 36 years.

The environmental results of its near obsession with eco-efficiency are frankly astonishing. In the last two decades, 3M has slashed toxic releases by 99% and greenhouse gas emissions by 72%. It's the only company that has won the EPA's Energy Star Award every year the honor has been bestowed.

3M's sustainability leadership has come mainly from its eco-efficiency success, but these practices are increasingly the norm in business. So I was happy to observe abundant evidence of the company pivoting to make sustainability a driver of business growth as well.

Before my presentation at an employee event, I listened as CEO Inge Thulin and senior execs from each of the major divisions laid out their strategies. Thulin spoke about sustainability being "embedded...in our new vision" of growth and innovation. Other execs bragged about the high percentage of their division's sales coming from sustainability and "energy preservation."

But most importantly, I heard about some great new products and technologies. When you're describing a company that launches an average of 20 new products every week, it's hard to pick favorites. But here are a few examples of what sustainability innovation looks like:

  • The world's highest reflectivity mirror film, which can take sunlight from a roof and carry it deep into a building — the length of a football field, in fact — all while losing less than half of the light. I saw this technology paired seamlessly with some regular fluorescent lighting and working well in an interior conference room. As one exec said, somewhat heretically, "Why build solar panels to convert sun to electricity to then turn on lights if you can do this?" (Note: I'd do both!)

  • Pipe linings: Every year, due in large part to 250,000 water main breaks, our cities lose 1.7 trillion gallons of treated water (equal to the total water use of the 10 largest cities). To help solve this problem, 3M launched a product that sends a machine down into pipes to apply a fast-setting lining which structurally reinforces them, without having to go to the significant expense of digging them up first.

  • An industrial paint application product/service that reduces toxic solvent use by 70% and is saving customers, mostly auto repair shops, $2 billion from simpler paint operations and reduced waste. It's also a sizable business for 3M.

  • 3M's Novec Fluids, which provide cleaning, coating, cooling, and fire suppression for the electronics industry (chip manufacturing, datacenters, and so on) in a non-flammable, non-ozone-depleting way. It's also remarkably safe for users and technology — you can safely dip an iPhone in the stuff.

3M is a refreshingly humble company: every estimate or "boast" is carefully and conservatively calculated to not overstate the case. For 36 years, the company has used only first-year savings to tally the benefits of pollution prevention projects — that's an effective discount rate of, well, infinity. And with the water-pipe-lining technology, the payback calculation for customers includes only labor savings and overall construction efficiency. A more thorough accounting would add in the significant water and energy savings, as well as reduced impacts on local economies (traffic and business disruption).

But there are signs of a feistier attitude brewing. The new CEO is making sustainability, growth, and innovation a powerful trifecta. With Novec Fluids, the team is not only working with key customers and early adopters, but it's also pushing the market toward greener options by advocating for tougher government standards and regulations. This kind of pro-environment lobbying is an advanced sustainability strategy that only real leaders can pull off.

Finally, I toured the company's relatively new innovation demonstration center. It's a customers-only, hands-on science museum that proudly demonstrates all that 3M can do through cool combinations of its 46 base technologies.

Bottom line: sustainability is deeply integrated in 3M's innovation pipeline, which is the engine of the company. The company's core new product development process includes key sustainability questions and criteria for designers to address.

Many companies start talking about sustainability efforts before they've really made significant changes to the company or its products. Although 3M may have the opposite problem — getting too little brand and marketing value out of its efforts — it is usually smarter to execute first, and then tell your story. In 3M's case, it's nice to see the engineers at this quiet company just out there doing it.

(This post first appeared at Harvard Business Online.)

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter@GreenAdvantage)

December 22, 2012

Top 10 Sustainable Business Stories of 2012

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

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

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

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

Macro Trends

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

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

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

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

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

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

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

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

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

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

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

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

Company Stories

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

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

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

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

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

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

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

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

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

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

Five Questions For 2013

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

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

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

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

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

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

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

(This post first appeared at Harvard Business Online.)

(Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)