There's a Green Monster in the Boardroom

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The environment used to be anathema to business as the costs of tackling things like carbon emissions were considered an expensive burden on the economy. Now, the news is full of the latest corporate initiative designed to save both the planet and boost the bottom line. Is it all just "greenwash", asks editor Diana Davis, or is there a more fundamental shift afoot?

In 2005 Walmart made a rather startling pledge: it would one day be supplied by 100 percent renewable energy and produce zero waste (although its website doesn’t mention a deadline for this vision to be a reality). The company’s website says that it knows that "being an efficient and profitable business and being a good steward of the environment are goals that can work together." Indeed, it says that its sustainability efforts are driving higher quality and lowering costs.

Global consumer goods giant Unilever announced its Sustainable Living Plan late last year where they say they will set out to halve the environmental impact of their products by 2020 by working with suppliers, sourcing products sustainably and other innovations. The company says that "If we can develop products today that help people adapt to the changing environment of tomorrow, it will help us grow faster in future."

Just last month, Pepsi announced that it would create a plastic bottle made out of plant based sources. "By reducing reliance on petroleum-based materials and using its own agricultural scraps as feedstock for new bottles, this advancement should deliver a double win for the environment and PepsiCo," Conrad Mackerron, Senior Program Director of As You Sow, a San Francisco-based foundation, was quoted as saying in the related Pepsi press release.

Indeed the news is full of the latest corporate initiative designed to both save the planet and the bottom line. Critics may say that the initiatives don’t go far enough, but the companies are making moves to putting at least some money where their mouth is, particularly when cost savings are also involved.

What has happened? The environment used to be anathema to the boardroom, and the costs of tackling things like carbon emissions were considered an expensive burden on the economy. Now, it seems, companies are willingly starting to tackle some of the issues themselves.

Public perception probably plays a role, but is far from conclusive. A USA Today/Gallup Poll conducted last May, for instance, found that 50% of those polled favored protecting the environment even if it came at the expense of the economy (as opposed to 43% of those favoring the economy even it if hurt the environment). But that number has fluctuated in inverse relationship to the health of the economy (with a low of 38% in favor of the environment and a high of 52% in favor of the economy just a few months earlier that same year.)

There are some important drivers for this. The world population is expected to reach 7 billion within the year and 9 billion by 2045 according to the latest available estimates from the UN. Some experts say that we’re reaching the earth’s natural "carrying capacity" while others cite the popular statistic that if we everyone lived the lifestyle of the average American, we would need 5 planets (from Global Footprint network ).

With the rapid growth of emerging economies, particularly in densely populated India and China, we could face some difficult decisions about how best to accommodate a lot of bright young, ambitious people on a rather crammed and finite planet. The price for natural resources like oil and certain precious metals have already reached once-unimaginable levels, for instance. It’s perhaps an indication of what happens when we have to share set resources among a growing world population.

Based solely on these rising costs, there’s an argument to make more efficient use of raw material and inputs such as energy. A McKinsey Global Survey Report released last August looks at the attitudes of executives towards environment, sustainability and biodiversity. Nearly half (43%) of respondents ranked climate change & energy efficiency as the most important environmental/social concern of their business. Businesses that can cut out excessive resource waste or leverage innovative technologies to drive out environmental costs will clearly have an edge in terms of pricing and public perception.

Throughout the month of April, the Process Excellence Network will be looking at these and other issues. Does Green process improvement exist? Is there a business case for it? What does it look like? How do you measure or value it? What role will new technology play?

Chris Reid from the US Environmental Protection Agency makes the case for applying Lean principles to address environmental concerns like carbon emissions, energy use, or process waste to help business achieve both environmental and cost savings. (If interested, you can register for his free webinar.)

Dr. Robert Hall, one of the founding members of the American Association for Manufacturing Excellence, warns of great challenges ahead and argues that we need to look beyond merely Lean techniques within companies to address the coming challenges, and have to learn to have a better quality of life not just for lower cost but by using less.

And this month the first Deming Files column looks at how Deming principles can be applied to sustainable development in emerging economies, and the second article makes the case for applying Deming and Goldratt’s Theory of Constraints to analyzing the failures of the Deepwater Horizon rig disaster.

Stay tuned for these and more throughout April and let the Green business debate commence!