Pinnacle 2012

National Research Conference on

"INNOVATIVE PARADIGMS IN CONTEMPORARY MANAGEMENT at S.B. Jain Institute of Technology, Management & Research, Nagpur Author: Mr. Kumendra Raheja Associate Professor, Marketing Indira School of Business Studies Pune

Co-Authors:

Dr. Deepali Raheja Professor, HRM Indyana Institute of Management Pune

Strategic Greening of Business Abstract

The doomsday clock is ticking away. Environment today is a global issue. Environment has, therefore, become a watchword. As the century begins, natural resources are under increasing pressure, threatening public health and development. Water shortages, soil exhaustion, loss of forests, air and water pollution, and degradation of coastlines afflict many areas. As we humans exploit nature to meet present needs, are we destroying resources needed for the future? Who is responsible for all these things? What can be done for a sustainable environment? One of the solutions can be an integrated and strategic approach adopted by the corporate towards environment as they are a major stakeholder with respect to the environment. The approach has to be holistic in nature rather than the simple hype or tactical opportunism. At a fundamental level, the approach needs to become a part of the organizational cultural fabric, flowing from the spirit of the firm into its strategy and, thereafter, into its tactical implementations.

Objective: The objective of this paper is to understand and analyze the approach to make businesses green. This paper argues that the organizations and the consumer at large would benefit from greening of the business only if it is strategically conceived & aligned by the organizations

Methodology The paper involves in-depth study of a global manufacturing organization to understand the measures, models, strategies, processes, use of information system undertaken by them to achieve strategic greening of their business and impact of the same on their competitive positioning.

Findings The paper finds that appropriate alignment of the objectives of greening will help the organization in both the strategic approach as well as tactical implementation

Originality The paper attempts to emphasize and appreciate the need of strategic intent while implementing the greening of business and its impact on the competitive positioning of the organization.

Key words Sustainable environment, green marketing, green procurement, green purchasing, environmental management system, green communication

Introduction: The Earth's natural environment is under increasing pressure from rising population and the escalation of industrialization. These forces are resulting in the destruction of resources, the pollution of the environment, and the degradation of the Earth's natural ecosystems. As the Pace of global change accelerates, the quality of the natural environment is being adversely impacted at a global level.

The World Commission on Environment and Development (WCED. 1986) warns that developing countries are facing an unprecedented environmental crisis due to the overexploitation and exhaustion of renewable resources. Mass poverty, rapid population growth and poor understanding are resulting in land degradation and deforestation.

The environment of the world is increasingly becoming the critical issue for not only people as customer but also all-level management in organizations of all areas of business. According to McIntosh (1991), people have begun to notice changes in the physical environment since 1980.

The first wave of environmentalism began in the late 19th century in the United States of America and was hallmarked by the preservationist-conservationist debates between naturalist John Muir (1838-1914) and Gifford Pinchot (1865-1946), the first chief of the U.S. Forest Service. Many of the early attempts to promote environmentalism involved simply setting aside relatively undisturbed natural habitats in parks or reserves, but little attention was paid to what was happening on land already occupied by human industry. In 1962, Rachel Carson's (1907-64) monumental book on the harmful effects of the pesticide DDT, Silent Spring, touched off another wave which took hold in the turbulent 1960s and lasted until the early 1970s. Much of the current environmental legislation stems from concerns raised during this period. In 1976, marketing scholars Karl E. Henion II, and Thomas C. Kinnear introduced the concept of ecological marketing as being "concerned with all marketing activities

(1) that have served to help cause environmental problems and (2) that may serve to provide a remedy for environmental problems."

In the late 1980s, a renaissance of environmental concern swept through the developed part of the world, sparked by fears of global warming, loss of the earth's protective ozone layer, destruction of tropical rain forests, and changing perceptions of mankind's place in the world. This "third wave" of environmentalism differed from earlier periods in two significant aspects:

1. the most pressing environmental problems were now seen as global, rather than local, in scope; and 2. businesses need to respond much more proactively and strategically

It is not surprising that environmental issues have been pushed onto the agendas of business and political leaders throughout global society. Fischer & Schot (1993) point out, however, that the reaction of business to these challenges has been fairly slow and has occurred in two distinct phases: from 1970 to 1985 companies strongly resisted the need to adapt to regulatory and public pressures, and managed pollution in an ad hoc fashion. After 1985, large companies in particular began to demonstrate greater environmental awareness, and increasingly incorporated environmental issues into their operations.

Corporate environmental responsibility has rapidly become an international business issue and, as a result, environmental policy is becoming strategically crucial for companies that wish to maximize competitive advantage. Increased environmental awareness among customers, shareholders and public interest groups is resulting in the exertion of considerable pressure on corporations for greater environmental stewardship and for public disclosure of detailed environmental policies, goals and achievements.

Approaches adopted by the companies thus far for being green

Over the years, green issues have been more and more talked about by business and industry, the media, politicians, decision makers, financial institutions, and the general public. There has been much discussion about the environment and the damaging effects produced by everyday activities. Extensive environmental damage has been caused by continuous consumption, marketing, manufacturing, processing, discarding, and polluting, along with several

environmental disasters (for example, the Union Carbide leak in Bhopal, 1984, and the Exxon Valdez spill in Alaska, 1989). Subsequently, environmental concern shifted from the local scale (such as air pollution), to an increasingly global scale (as in global warming).

There are various responses to green issues that companies have adopted. These range from: putting their head in the sand, taking a defensive approach, paying lip service to concerns, reactive approaches, following competitors, piecemeal ideas, green product promotion, green marketing, environmental management, greening the company, and aiming for sustainability. Until recently, improving environmental performance has been a question of legislative compliance and occasional reactions to external events and pressures. However, the extent of improving overall green performance depends on a companys motivation and its choice of strategy.

Leighton suggests that to date, companies have only really dabbled in environmental improvement. They have only done the easy things (like reducing packaging and buying recycled office paper), the pressing things (like eliminating the most carcinogenic substances from their operations and products) and the things that are costly in the short run but profitable in the long run (like new manufacturing processes that create less waste).

In other words, actual environmental improvement practices of companies have so far been rather piecemeal, for example, making only sporadic changes to specific products and practices. However, many companies would like to be seen as green. Company decision makers are increasingly communicating green credentials about their products, services, processes, activities, and so on, to the public through marketing and promotion, and company policies and reports.

Such divergent ways to approach the greening of business poses a very important question: Do organizations really understand what Being Green means?

Being Green: What Does It Actually Mean?

The scope of the meaning of green is considerable. It can relate to issues such as ecological concerns, conservation (planet and animal), corporate social responsibility (CSR), humanitarian concerns, fair trade, clean water, animal welfare, equality, and sustainability. Each of these issues alone is broad and complex. Therefore, even businesses that consider these issues are likely to interpret and incorporate them in a narrow way. The term green may also imply different things to professionals in various fields. In health and medicine, for example, greening may mean minimizing damage to human health; in business, the term may imply harmonizing corporate environmental performance with stakeholders expectations. There are many different motives for companies decision makers to want to go green. Although there may be a combination of reasons, there is usually a primary motive for wanting to go green. It may be for tactical reasons, such as avoiding fines for breach of environmental legislation, huge repair or remediation costs, costs associated with waste disposal, heavy taxes, bad publicity, or merely responding to competitors.

There is also the possibility for exploiting the idea, such as utilizing green as a marketing tool to attract further business and to paint a positive image. After all, if only some of the market is environmentally aware or active, perhaps there is an opportunity for market segmentation with those that are environmentally aware having a lower elasticity of demand of green products therefore potentially higher prices and profits, whereas the general buyers would have a higher elasticity of demand.

On the other hand, the motive for wanting to go green may be because of pressures or influences from various stakeholders such as customers, employees, government,

interest/pressure groups, media, investors, financial institutions, the local community, and many others. Polonsky suggests that each stakeholder has the ability to affect the firm in three ways: directly threaten, directly cooperate, or directly influence business activities. However, merely reacting to stakeholders can lead to conflict of interests.

Some company decision makers have also become aware that there are both internal and external opportunities and benefits to becoming green. Examples of these include: cost savings, good publicity, financial gain, achieving competitive advantage, increasing market share, reducing risks, entering into international markets, and attracting potential employees. Approaches to these opportunities may be short or longer term.

There may perhaps be altruistic or moral influences, such as concern about green issues. Some decision makers may feel a sense of responsibility to the environment and the community, and therefore take a long term and strategic perspective. On the other hand, it may be that they feel they have to consider green issues because of the nature of their business and their environmental and social impacts.

A closer look at the multitude of motivations of the organizations to go green, it clearly brings out the wide landscape of what constitutes Greening of Business. Although all the above mentioned motivations are valid but would loose out in the long run if they are targeted in isolation, without adding much to the competitive edge of the organization. To represent a true green business picture, it is imperative that these motivations are targeted collectively by incorporating them into the strategy, thereby making them central to the existence of the organisation The organizations may ask, How can we achieve organizational and consumer objectives in more environmentally responsible ways? In true green business, environmental issues become an overriding strategic corporate focus rather than simply one strategic action. Strategic greening, then, often requires a change in corporate mindset as well as in corporate behaviour (tactics).

How should businesses achieve Strategic Greening?

In an attempt to understand the way in which the businesses can look at being strategically green, the authors undertook the case-based research of a multinational manufacturing giant having operations in over 45 countries. The authors intend to map the activities of the sample company

on a theoretical model for being strategically green. This model is the work of authors imagination and is open for testing & criticism.

Theoretical Model for Strategic Greening: The authors conceptualization of the theoretical model for strategic greening is based on the seminal work of Jacquelyn A. Ottman, Edwin R. Stafford, and Cathy L. Hartman on Avoiding Green Marketing Myopia. The article propounds that Green Marketing must satisfy two main objectives:

Improved Environmental Quality Customer satisfaction

The two pre-conditions to achievement of green marketing points to certain pertinent questions: What is the meaning of improved environmental quality? What are the major touch-points that would lead to improved environmental quality? Is there a link between improved environmental quality & customer satisfaction?

In the organizational context, the improved environmental quality would mean: conduct of any organized commercial activity in such a manner that it has minimal impact on the environment and the consumer

The above mentioned definition points at following distinctive actors that play a definitive role in improving the quality of environment:

INPUT

PROCESS

OUTPUT
Feedback & Improvement

This aggravates the thinking that for the improvement to take place, all the three actors need to act cohesively because any change in one triggers the change in the other.

An organisation is a collection of various such interactions that work in interrelated combinations to deliver goods / services to the customers which ultimately leads to the the customer satisfaction. Hence to be able to improve the quality of environment and deliver customer satisfaction, it is crucial to impact all such combinations collectively.

Crucial to the delivery of organisation wide impact, is the identification of all the combinations that form an organisation. The system thinking approach helped the authors to identify these combinations which authors refer to as Model of Strategic Greening. The model is divided into four broad dimensions:

1. Policy Interactions 2. Internal Interactions 3. External Interactions 4. Legal Interactions

The improved environmental quality depends on the performance of the organisation on the above mentioned dimensions. To map the scope of each of the dimension it is important to understand the individual activities involved (refer the model below). As stated earlier, this is a theoretical model and would need to be tested and validated for its practical applicability. In the interim, the authors applied this model for mapping the green practices of the sample company to assess the extent of greening in the organisation

Dimensions for Strategic Greening Policy Interactions

Descriptions Policy Interaction to minimize the impact on environment

RICOH (The case company) Case Reference The Ricoh Group's sustainable environmental management (1) aims at simultaneously achieving environmental conservation and profits. This policy is carried out through development of environment oriented technologies and in all activities conducted by

Green policy

Establishing 'Green' in the strategic intent of the company

Green Research & Development

Support research, investment or cooperation for developing Green products & clean technologies to reduce environmental impact

Green Human Resource Development

Incorporate greenness in Corporate culture through Corporate Environmental Awareness training Programs; Promote employee participation for green development; select employees based on their green quotient

all employees. Initiatives have been taken in the three core areas of energy conservation and prevention of global warming, resource conservation and recycling as well as pollution prevention for both products and business activities. To efficiently advance these activities, a basis for sustainable environmental management was established. QSU (Quick Start-up), Ricohs original energy saving technology, was developed to achieve effective energy conservation for copiers. It enables quick recovery from the energy-saving mode, allowing users to make copies whenever they need to. The energy-saving mode is automatically activated to minimize power consumption when products are left in standby mode for a certain period of time, and thus it contributes to energy conservation for customers who use Ricoh copiers. The Ricoh Group makes an effort to improve sustainable environmental management based on an "all-employee participatory approach." (2) This "allemployee participatory approach" means that all employees in all divisionssuch as R&D, product design, materials procurement, manufacturing, transportation, sales, maintenance/services and collection and recyclingparticipate in environmental activities. To improve environmental activities, internal benchmarks and know-how are provided to all employees from time to time to make them more environmentally aware. Alternatively, through training and awareness-raising sessions (3), Ricoh employees learn to become good global citizens, good Ricoh Group employees, and specialists in sustainable environmental management, and proactively encourage as many people as possible to join them in pursuit of sustainable environmental management. Case Reference In fiscal 2003, Ricoh developed the RECO-View RF Tag Sheet by combining RF tags with Ricohs own rewritable technology. A sheet is capable of being rewritten approximately 1,000 times, making it possible to cut CO2 emissions by 80% across its lifecycle compared to paper-based printing. Ricoh has long been working to reduce the use of packaging materials. In 1994, it started eco packaging which uses less cardboard. In 2001, it introduced further advanced resource re-circulating eco packaging (4) materials to the market. As of fiscal 2009, about 60% of its copiersor 46 models out of a total of 60shipped within Japan have been packaged in these resin-based materials that can be used repeatedly The Ricoh Group is promoting Supply Chain Management (5) in logistics for procurement, manufacturing, and sales, aiming to reduce CO2 emissions and costs. The Ricoh Group surveys all

Internal Interactions

Internal Interactions to Minimize impact on environment Producing the products with using less number of parts, sharing parts & using parts longer; reducing the use of environmentally sensitive substance; creating energy conservation & recyclable designs

Green Design (Product / Process)

Green Packaging

Using recyclable, eco-packages

Green Logistics

Transport goods with reduced consumption of energy and reduced CO2 emission, usage of recyclable racks

Green Manufacturing, Recovery & Recycling Processes

Waste management; energy efficiency; minimizing emissions & effluents; adopting just-in-time practices; inventory reduction; Environmental standards assurance; Implementing a recycling information system; Increasing the number & quality of collected items; improving the resource recovery rate; getting feedback on recyclable designs

processes and promotes efforts on a global scale, including the improvement of cargo-carrying efficiency through reviewing packaging materials and mixed packing, modal shifts among warehouses, direct deliveries to customers, and by optimizing transportation routes through the introduction of the milk run system. Ricoh has adopted the strategy to impact changes in its production / manufacturing process under following three categories which results in organisation wide impact: Energy Conservation / Prevention of Global Warming (6) Resource Conservation / Recycling (7) Pollution Prevention (8) In cooperation with Ricoh Engineering, the South Plant of Ricoh Namazu has incorporated various environment-friendly designs and facilities into its new employee cafeteria building. Key eco-friendly features of the new building include: Solar panels Cooling through outside air Natural lighting & green lighting equipment High performing insulation material Landscaping The Sustainable Environmental Management Information System at Ricoh (9) is designed to identify and promote the progress of sustainable environmental management. The system utilizes the Environmental Impact Information System to collect and process data on environmental impact and the Environmental Accounting System to collect and process data on environmental costs and effects. The collected data are processed and analyzed to identify the integrated environmental impact of overall operations; draw up environmental action plans; support decision-making in sustainable environmental management; promote environmentally-friendly design; improve activities by each division; process Corporate Environmental Accounting; and disclose information to the public & government (i.e.) Environmental Reporting System

Green Infrastructure (production & nonproduction) & Green internal consumables

Creating office infrastructure that helps in energy saving, green certifications, green purchasing of internal office consumables.

Environmental Management Information System

Environmental impact assessment, accounting & reporting

External Interactions

External Interactions to Minimize impact on environment Purchase goods from, or develop partnership with, a council which supports sustainability; purchase goods with less environmental impact; support suppliers in implementing green practices; selection suppliers with high green quotient

Case Reference The Ricoh Group has in place the green procurement policy (10) that promotes green procurement activities that place emphasis on green partnerships (11) with suppliers. The purpose of green procurement is to reduce the environmental impact over the entire lifecycle of Ricoh products and to reduce the costs to the Ricoh Group and its suppliers by using resources and energy effectively. These activities aim to contribute to

Green Procurement & Green Partnership

global environmental protection and reinforce management practices of the Ricoh Group and its suppliers. The Ricoh Group Regards All Suppliers, Customers, and Recycling Companies as Green Partners in Reducing Environmental Impact and Costs. Communicating the green / ecological attributes of the product to the customer; Marketing products that have less environmental impact; providing accurate information to the customers on the organizations environmental activities; Educate/train/encourage customers for their participation in recycling/ reducing waste/ reusing products Educate & encourage public at large for their participation in recycling/ reducing waste/ reusing products; providing accurate information to the public at large on the organizations environmental activities Provide after sales services to help customers improve their environmental contribution Multiple ways adopted by RICOH to communicate with the stakeholders and customers: Issuance of Sustainability Reports (Environment) Environmental reports issued by business sites Production of TV commercials on the environment (generic & product specific) Print ads highlighting the environmental impacts of its product/s Environmental web site Exhibitions, trade fairs Environment Management Network - Global Eco Action

Green Promotion

External Communication & Community Liaison

Green after sales services

Total Green Office Solutions (TGOS) (12): A Ricohs solution that helps visualize and reduce the environmental impacts occurring throughout a cycle of selection, use and recycle of Ricoh products and services at the office, while improving workflow & minimizing cost. Case Reference The Ricoh Group established the REACH (13), a European regulatory framework on chemical substances, Compliance Working Group with 180 attendees from the production division (including the general sales division) in February 2008 to solidify Ricohs REACH compliance system. The core mission of the working group is to develop a system that will allow it to collect and manage chemical substance information accurately and efficiently from partners both upstream and downstream in the supply chain, including manufacturers of materials, chemicals, and parts, as well as Ricoh Group production facilities, and to provide the information to customers upon their request. The Ricoh Group is fully able to comply with REACH requirements and is ready to respond promptly to future development of the regulations.

Legal Interactions

Compliance to the regulatory framework

Environmental Laws

Compliance to the existing environmental laws, internationally recognized certifications

The detailed study of the organization in consideration (RICOH) and mapping of its activities on the proposed model leaves no doubt that it has achieved fairly significant level of strategic greening. The INTENT (Policy interactions) has very well translated itself into the ACTION (Internal, External & Legal Interactions). It has been successful in mitigating the environmental

damage by strategically aligning its green activities, which not only achieves better environmental performance for the organization but also the economic benefits in the form of increased savings in cost and better competitive positioning.

Conclusion:

Greening has become popular among organizations who are striving to balance economic gains with environmental performance in the face of growing pressures from customers, regulators, NGOs, and other stakeholder groups. The four dimensions of Strategic Greening identified herePolicy interactions, Internal-interactions, External Interactions and Legal

Interactionhighlight the implementation requirements for organizations trying to reduce waste and improve environmental performance along their value chains. As organizations vary in business nature, scope and scale, there is no single universal solution for Strategic Greening. It is important for organizations to carefully design and prioritize the Strategic Greening dimensions to address the specific needs of their business segments.

Policy makers should formulate proper environmental regulations and voluntary measures to achieve strategic greening. Complying with regulations is not the only consideration for organizations who embrace strategic greening. Leading organizations often move ahead of legislation in order to reap the benefit of cost saving and serve as role models for others. Legislation should not be taken as the sole mechanism to promote green behaviors.

Concluding in favour of strategic greening, the approach has to be holistic in nature rather than the simple hype or tactical opportunism. At a fundamental level, the approach needs to become a part of the organizational cultural fabric, flowing from the spirit of the firm into its strategy and, thereafter, into its tactical implementations.

References: Environmental or Green Marketing As Global Competitive Edge: Concept, Synthesis, And Implication - Vuttichat Soonthonsmai, Burapha University, Thailand (2007 EABR (Business) & ETLC (Teaching) Conference Proceedings)

Green Companies or Green Con-panies: Are Companies Really Green, or Are They Pretending to Be? Monica Saha and Geoffroy Darnton (Business and Society Review 110:2, 117157

Reevaluating Green Marketing: A Strategic Approach - Michael Jay Polonsky and Philip J. Rosenberger III Silent Spring - Rachel Carson's (1907-64) Avoiding Green Marketing Myopia - Jacquelyn A. Ottman, Edwin R. Stafford, and Cathy L. Hartman (Environment Science & Policy for sustainable development June 2006, Volume 48, Number 5)JUNE 2006
VOLUME 48, NUMBER 5

Case Specific

1. RICOH Group Sustainability Report (Environment) 2010; pg no 8 2. http://www.ricoh.com/environment/management/system.html 3. http://www.ricoh.com/environment/communication/education/01_01.html 4. http://www.ricoh.com/product/resource/03_01.html 5. http://www.ricoh.com/product/logistics/02_01.html 6. http://www.ricoh.com/environment/office/logistics/01_01.html http://www.ricoh.com/environment/office/energy/index.html, http://www.ricoh.com/environment/office/energy/01_01.html, http://www.ricoh.com/environment/office/energy/06_01.html, http://www.ricoh.com/environment/office/energy/02_01.html, http://www.ricoh.com/environment/office/energy/03_01.html, http://www.ricoh.com/environment/office/energy/05_01.html, 7. http://www.ricoh.com/environment/office/resource/index.html, http://www.ricoh.com/environment/office/resource/02_01.html, http://www.ricoh.com/environment/office/resource/03_01.html, 8. http://www.ricoh.com/environment/office/risk/01_01.html, http://www.ricoh.com/environment/office/risk/02_01.html, http://www.ricoh.com/environment/office/risk/03_01.html, http://www.ricoh.com/environment/office/risk/04_01.html

9. http://www.ricoh.com/environment/management/info_system.html 10. http://www.ricoh.com/environment/guideline/pdf/gps_e.pdf; pg no 4 11. http://www.ricoh.com/environment/guideline/pdf/gps_e.pdf; pg no 3 , http://www.ricoh.com/environment/product/procurement/02_01.html and RICOH Group Sustainability Report (Environment) 2010; pg no 52 12. RICOH Group Sustainability Report (Environment) 2010; pg no 52 13. http://www.ricoh.com/environment/product/risk/02_01.html