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Don’t Be Green–Be Great

This is Earth Week. The World Economic Forum just released a report, Repowering Transport .
It describes what it will take to break the transport system’s
dependence on liquid fossil fuels. (My colleague at Booz & Company Nick Pennell
led the team that wrote it.) Today, liquid fossil fuels provide 96% of
the energy for ships, trucks, busses, trains, planes, and automobiles.
Under a business-as-usual scenario, the sector’s energy needs will
increase 40% by 2030. You don’t have to be afraid of greenhouse gasses
(though you should be) to realize that considerations of supply,
security, pollution, and price make that untenable.

The remarkable fact is that it’s possible to accommodate the growth
without any more oil just using readily available technologies; with
aggressive investment in advanced biofuels, batteries, and the like,
liquid fossil fuel use could actually decline, even with the 40% demand
increase.

Trouble is, the best case requires solving a series of Rubik’s Cubes
to align technology, policy, and financing across several industries and
multiple political and economic stakeholders. Other
sectors–construction and housing, agriculture, manufacturing, IT, you
name it–face equally daunting sustainability puzzles.

The same situation obtains for companies. It’s perfectly obvious that
something’s gotta give.  But it’s not clear when and how change will
come–or who wins and loses–or what to do meantime. The strongest
incentive is to procrastinate. Consumers are unlikely to force the issue by changing buying habits, Timothy Devinney, Paul Auger, and Giana M. Eckhardt show in a recent study. Walmart got customers to buy fluorescent lightbulbs not by hawking virtue but by dropping the price.  Sure, in Germany Green Party politicians are embarrassed to be caught flying
when they could take a train, but it’ll be a long time before air
travel becomes “as socially unacceptable as smoking,” as a London
carbon-credits financier prophesied to me a few years ago. As for
policy-makers, they’re playing  Alphonse-Gaston
with industry, each graciously determined to let the other go first.
(The major exception is China. The likely result: Chinese companies will
dominate advanced energy technologies and Western politicians act to
protect their dirty-sunset industries.)

Nevertheless, the most unsustainable sustainability strategy is to
kick the can down the road. When change comes, it will appear to arrive
overnight. That’s what happens when systems reach a tipping point.

Given the fact that the (immediate) business case is weak, what does a
smart low-carbon strategy look like? If you’ve been reading me
regularly, you know that I believe strategy derives from and expresses
itself in capabilities rather than in some staked-out position in the
marketplace. Sustainability’s no exception: it’s got to be grounded in
those things you do better than anyone else.  You’re looking for a set
of green capabilities that mesh with and add to whatever else makes you
distinctive.

Looking where? There are two kinds of capabilities everyone has to have:

  • Cost and footprint management. Every business can be helped by
    shrewd carbon footbinding. Worried about the cost and reliability of
    energy supplies? The cheapest, most secure fuel is the energy you don’t
    use-negawatts, as Amory Lovins calls it. Supply-chain a key part of your strategy? It can be engineered to deliver whatever capability is critical–price or flexibility or speed–in
    a greener way. More than three-score years after Deming started
    preaching the quality gospel in Japan, it’s astounding that anyone
    thinks waste is ever inevitable.
  • Business model enhancement. Walmart’s “packaging scorecard” and
    other efforts to get suppliers to take weight and bulk out of shipments
    aren’t just good stewardship: They make Walmart better at what Walmart
    already does better than anyone–they’re a direct extension of the
    company’s everyday-low-prices business model. Late to the green game, Applerelentlessly focused on customer experience–says
    “the most important thing we can do to reduce our impact on the
    environment is to improve our products,” which is also the most
    important thing they can do to improve the business. Coincidence? Of
    course not.

Beyond these, some companies should build low-carbon capabilities
into their innovation or growth plans; others will need to be savants
about carbon finance, regulation navigation, industry standard-setting,
and similar business-rules topics. The essential point is simple. If you
think that there is a contradiction betrween sustainability and
business-as-usual, then sustainability won’t happen. A low-carbon future
will come about only if and when it becomes as much a part of your
strategic capability set as anything else.

Illustration courtesy flickr user wburris

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