 "Why companies struggle to implement sustainability programs?")
According to a July 2014 survey by McKinsey, executives believe that sustainability has become a more strategic and integral part of their businesses. In previous years, when asked about their companies’ reasons for pursuing sustainability, respondents most often cited cost cutting or reputation management. Now 43 percent (and the largest share) say their companies seek to align sustainability with their overall business goals, mission, or values, up from 30 percent who said so in 2012.
There are a number of benefits that companies can derive by complying to environment programs. Short-term tangible benefits include energy and material conservation, process improvement, and waste reduction. Long-term benefits are competitive differentiation involving product redesign, new market entry, and new organisational models. There are also intangible benefits, which are image and public perception, employee morale, and employment engagement.
Executives at all levels see an important business role for sustainability. But, when it comes to mastering the execution, and accountability of their sustainability programs, many companies continue to struggle. They find it difficult to implement eco-friendly approaches. When they have a clear idea about sustainability, they often stumble over execution because of skepticism within their own organizations.
One difficulty is measuring the effects of sustainability investments. Calculating returns over generations can be difficult with traditional methods, further exacerbated with the quarter-to-quarter expectations of analysts. The uncertainty characteristics of the world and the evolving changes in regulatory and in customers’ preference make traditional strategic plans obsolete.
Most sustainability metrics concentrate on scientific and toxicological aspects to help choose between technologies, evaluate the environmental performance of promising chemicals and processes. They generally do not summarize the economic benefits of adopting green chemistry in terms that managers, investors and workers can understand. Because they are not understood as means of internal and external marketing, most do not have significant business salience. Consequently, the industry is less motivated to pay attention to green chemistry even though the environmental and health advantages may be obvious.
Concerns about VOC emission have forced downstream manufacturers and users to demand lower VOC-containing solvents and paints to comply with US and EU laws. Manufacturers may achieve faster movement of new products to the market and cost savings from more efficient product design. Registering new chemicals in the US, for example, can be costly. Air Products says that it can spend $150 000 on a design process, only to find EPA rejecting its registration because of risk concerns, hence losing its investment.
Retailers and manufacturers can change what consumers find available by switching to green chemistry without depending on consumer demand or willingness to pay premiums. In the UK, Friends of the Earth and Greenpeace have led campaigns to pressure retailers and downstream manufacturers to screen their products for a number of toxic chemicals and to request that upstream manufacturers remove those chemicals. The European Social Investment Forum have stated that “green” chemical innovation could be a significant source of competitive advantage for companies in the consumer products segments, particularly when brand or product differentiation based on “green” credentials is a key component of value for the final customer.
Some retailers, closer to customers and more concerned about their reputation, are already demanding green chemistry by using what Dow calls ‘X-lists’, or lists of undesirable chemicals such as VOCs, heavy metals and PBT chemicals. Most such actors are oblivious to green chemistry possibilities. Rohm and Hass, before it was acquired by Dow Chemical in 2009, seek to develop alliances with customers to anticipate regulatory and supply chain pressures and create new niche markets.
The large issue is that the benefits of green chemistry are not self-evident for the remaining 60% of executives. In some executives’ eyes, consumers, retailers or downstream manufacturers are not demanding green products on a large scale. US chemical companies have complained that there is no market for specifically ‘green products’, and that green products they have introduced in the market have not been great commercial success. There is a strong disconnect currently between customers and manufacturers. This is probably because of a lack of information about chemicals, weak infrastructure for evaluating the greenness of products and poor understanding of how supply chains can provide competitive advantages.
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The author is an Independent Consultant based in Chapel Hill, NC, USA, and was recently Vice President - Technology at Asian Paints Ltd, Mumbai, India. He is a member of the American Chemical Society and Product Development Management Association. Email: mosongo@mosongomoukwa.com
There are a number of benefits that companies can derive by complying to environment programs. Short-term tangible benefits include energy and material conservation, process improvement, and waste reduction. Long-term benefits are competitive differentiation involving product redesign, new market entry, and new organisational models. There are also intangible benefits, which are image and public perception, employee morale, and employment engagement.
Executives at all levels see an important business role for sustainability. But, when it comes to mastering the execution, and accountability of their sustainability programs, many companies continue to struggle. They find it difficult to implement eco-friendly approaches. When they have a clear idea about sustainability, they often stumble over execution because of skepticism within their own organizations.
One difficulty is measuring the effects of sustainability investments. Calculating returns over generations can be difficult with traditional methods, further exacerbated with the quarter-to-quarter expectations of analysts. The uncertainty characteristics of the world and the evolving changes in regulatory and in customers’ preference make traditional strategic plans obsolete.
Most sustainability metrics concentrate on scientific and toxicological aspects to help choose between technologies, evaluate the environmental performance of promising chemicals and processes. They generally do not summarize the economic benefits of adopting green chemistry in terms that managers, investors and workers can understand. Because they are not understood as means of internal and external marketing, most do not have significant business salience. Consequently, the industry is less motivated to pay attention to green chemistry even though the environmental and health advantages may be obvious.
Concerns about VOC emission have forced downstream manufacturers and users to demand lower VOC-containing solvents and paints to comply with US and EU laws. Manufacturers may achieve faster movement of new products to the market and cost savings from more efficient product design. Registering new chemicals in the US, for example, can be costly. Air Products says that it can spend $150 000 on a design process, only to find EPA rejecting its registration because of risk concerns, hence losing its investment.
Retailers and manufacturers can change what consumers find available by switching to green chemistry without depending on consumer demand or willingness to pay premiums. In the UK, Friends of the Earth and Greenpeace have led campaigns to pressure retailers and downstream manufacturers to screen their products for a number of toxic chemicals and to request that upstream manufacturers remove those chemicals. The European Social Investment Forum have stated that “green” chemical innovation could be a significant source of competitive advantage for companies in the consumer products segments, particularly when brand or product differentiation based on “green” credentials is a key component of value for the final customer.
Some retailers, closer to customers and more concerned about their reputation, are already demanding green chemistry by using what Dow calls ‘X-lists’, or lists of undesirable chemicals such as VOCs, heavy metals and PBT chemicals. Most such actors are oblivious to green chemistry possibilities. Rohm and Hass, before it was acquired by Dow Chemical in 2009, seek to develop alliances with customers to anticipate regulatory and supply chain pressures and create new niche markets.
Dr Mosongo Moukwa
In order to extract much longer-term benefits, companies need to form broader alliances with external stakeholders and rethink economic framework, because the pay off occurs much later. They would also need to build new relationships and information flows along their supply chains, upstream and downstream. Finally, they need to evaluate the influence and needs of different customer groups within the supply chains. Increasingly, companies are targeting retailers, governments, institutions and downstream manufacturers. Collectively, they can wield much more power than consumers.The large issue is that the benefits of green chemistry are not self-evident for the remaining 60% of executives. In some executives’ eyes, consumers, retailers or downstream manufacturers are not demanding green products on a large scale. US chemical companies have complained that there is no market for specifically ‘green products’, and that green products they have introduced in the market have not been great commercial success. There is a strong disconnect currently between customers and manufacturers. This is probably because of a lack of information about chemicals, weak infrastructure for evaluating the greenness of products and poor understanding of how supply chains can provide competitive advantages.
___________________________________________________________________________________________________
The author is an Independent Consultant based in Chapel Hill, NC, USA, and was recently Vice President - Technology at Asian Paints Ltd, Mumbai, India. He is a member of the American Chemical Society and Product Development Management Association. Email: mosongo@mosongomoukwa.com