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Be competitive, be green

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Subir Roy New Delhi

The significance of this book lies in its publishing history. As the authors recall, it came out in 2006 with the hope of persuading business leaders to make the environment a part of their strategy. Not only was the timing of the book “lucky”, its impact exceeded the authors’ “wildest expectations”. From focusing merely on environmental costs and risks, more and more companies now see the road to growth and profit lying through pursuing environmental sustainability. In this revised paperback edition, the authors have looked at the latest trends by updating facts and case studies and incorporated newer material. The general argument has not only remained unchanged but become stronger. Now it is “imperative” for firms to bring an environmental and sustainability focus to their business strategy.

 

The two authors came to Yale following somewhat different routes but with a common concern. Daniel Esty came from the US Environmental Protection Agency and spent 15 years working with companies to improve their strategies. The other author, Andrew Winston, spent 10 years in marketing and strategy. In 2003, as faculty at Yale, they got together to examine corporate environmental strategy and the book resulted from research which, among other things, involved speaking to over 300 people and 100 companies.

The book begins by examining how and why the environment has emerged as a critical strategic issue for businesses of all sizes. It then examines the eco-advantage strategies of WaveRiders, environmental leaders. Fifty such firms, 25 each from the US and rest of the world, are identified. The US list includes Johnson & Johnson, DuPont, Dow, HP, Ford, Starbucks, Intel and McDonald’s. The international list includes BP, Shell, Toyota, Sony, Unilever, LaFarge, Alcan and Siemens.

Leaders cut costs and reduce environmental expenses throughout their value chain, identify and reduce environmental and regulatory risks in their operations and supply chain, drive revenues by delivering products that are environmentally superior and liked by customers, and build intangible brand value by marketing their overall corporate greenness. To master the green-to-gold-play, firms have to first adopt the right mindset and focus that drive environmental thinking deep into corporate strategy. For this they need to map their environmental performance, understand issues that affect them, redesign their entire value chain, and most fundamentally develop an eco-advantage culture that goes down the line in the firm. The eco-advantage strategy must avoid pitfalls and have short-, medium- and long-term plays.

These leaders are responding to an emerging cardinal truth: “The economy and the environment are deeply intertwined” and the authors go on to predict that soon “no company will be positioned for industry leadership and sustainable profitability without factoring environmental issues into its strategy.” This is happening because of two reasons — pollution and natural resources stresses, and “a world of people who are insisting that the business community take action in response.” Civil society in general and environmental NGOs in particular have emerged as forces to be reckoned with. “Coordinated action against irresponsible corporations has never been easier thanks to e-mail, the Web, social networking and other modern communications technologies. And activist shareholders, including large mainstream investment companies, have suddenly found their voice.” This is affecting the future of different industries. What will happen to coal? If it survives, will skiing?

The case studies all show how it pays to be green. Alcan spent $225 million in turning toxic waste that lines the bottom of pots used for making aluminium into inert recyclable material. This has not only solved Alcan’s waste problem, it may even end up treating competitors’ waste, for a price. Toyota set out to redefine the twenty-first century car and has come up with the hybrid Prius for which customers will wait and pay a premium. John Deere, which sells tractors, has started a business unit to help farmers harvest wind energy. And green strategy has an exponential effect when large buyers like Wal-Mart and McDonald’s drive environmental strategies down their supply chain.

The world for business is changing because public consciousness about the environment is rising and regulators are responding. Where does India figure in all this? The country has certainly come a long way in terms of both public consciousness and regulation since Indira Gandhi single-handedly stopped the destruction of Silent Valley. But there is still a long way to go. A lot of business considers environmental concerns a nuisance and even administrators talk in terms of environmental clearance as one of the hurdles in the way of projects. ITC aspires to be a WaveRider and it will be a great day when it can feature in a list like that of the international top 25 in a book like this.


GREEN TO GOLD
Daniel C Esty & Andrew S Winston
YUP; $19.95; 380 pages

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First Published: Mar 24 2009 | 12:01 AM IST

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