Environmental thinking powers companies to profitability.
In Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage (Yale University Press, 2006) Andrew S. Winston and Daniel C. Esty interviewed hundreds of managers and executives about their environmental strategies—finding out what works and getting practical advice for every kind of business. Profit spoke with Winston, a Fellow at the Center for Business & Environment at Yale University.
PROFIT: What got this book started?
WINSTON: Environmental issues have come on like gangbusters. You don't see many people denying climate change anymore. Are there water shortages? Are there concerns about forests and habitat? That's all pretty easy to see. But the canon of green business books is very cheerleading. It just wasn't believable that if you think green, it's always going to work. Our idea was, let's tell the story of what works and what doesn't when going green and provide a real road map.
PROFIT: Who should drive the strategy?
WINSTON: The easy answer is everybody, and the second easy answer is the CEO or other executives. One of the critical success factors includes having top-level support. When Dupont's CEO stands up and says, "I'm the chief safety officer, I'm the chief environmental officer," that sends a pretty clear message. Then you need the line management to own it.
PROFIT: How should executives respond to the skeptical shareholders?
WINSTON: Shareholders should realize that you're going to lose value—sometimes very quickly—if you're not onboard with green thinking. Most shareholders wouldn't have a problem with eco-efficiency and clear cost savings; it's hard to argue with a payback within six months on changing the lighting in your stores. It's also hard to argue with companies removing toxins, because new regulations can cost a lot of money down the road. It's the upside stuff, though, that's the real story. Executives need to say to shareholders, "Hey, there are real revenue possibilities," and look at the companies that are starting to really reap the rewards. Look at Toyota. A lot of its success has to do with their environmental cars and the fact that even in the regular product lines, they have the most efficient cars.
PROFIT: What do you want readers to walk away with?
WINSTON: Taking your company green takes focus, energy, strategy, and execution. The upside is there, but it's not easy. But there are always surprises in how you can innovate and create a new kind of product or service, or do things in a way you hadn't really thought of before. And that's very hopeful and really exciting.
Andrew S. Winston and Daniel C. Esty suggest that business leaders start by analyzing their company's specific strengths and weaknesses. They name this process AUDIO, Winston says, because the process is about listening to your business:
A is for aspect. Think of the specific ways your business touches this issue. How does climate change or energy use impact your business?
U is for upstream. How do these issues affect your suppliers? If you're a big business with a big brand and a lesser-known supplier starts dumping toxic waste, you can bet the article's going to be written about you, not the supplier.
D is for downstream. What are the issues for your customers? If you're an auto company, the climate change has aspects that are important to you, but downstream, where customers burn gas and produce emissions, is really the issue.
I is for issues. Looking at your first three answers, what are the major sticking points for your business?
O is for opportunities. Most people focus on risk reduction and threat control, but you should also consider how environmental thinking opens doors. How could you solve a problem for your customers?