HBR Green at A Glance

Dont Bother
with the Green

Consumer
HBR Green
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Featured from January 23February 5
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In the spirit of going

green, we encourage
you to use this as it is
intended: an interactive
PDF, not to be printed out.
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Six Critical Conversations

about Business and the
Environment
This document is authorized for use only by LAWRENCE ROTHENBERG until February 2012. Copying or posting is
an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.
nvironmental issues arent a fad, and

climate change isnt just an emergency. Like
globalization, it is a force that will shape and reshape
the business landscape for decades to come. You arent
global just because you have a VP for Internationaland
you arent green just because you have a corporate
social responsibility group that pushes out a sustainability
report. Climate change, pollution, unchecked waste in
landfills, and other environmental problems are affecting
your competitive strategy, operations, government and
investor relations, supply chain, product ideas and marketing, financeeven your ability to attract and retain people.
The intensity of their impact will only increase.
Marketing
3 | Dont Bother with the

Green Consumer
Discussion Leader: Steve Bishop
Supply Chain
24 | You Are Only As Green

As Your Supply Chain
Discussion Leader: Brian Walker
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We launched HBR Green for two reasons. The first is

the sheer importance of the issue. The second is that in
addition to risks, there are opportunities. Serious money
can be savedand serious money can be madeby the
creative people who help the world to solve this problem.
The solution will involve energy conserved and waste
averted, and revenue in everything from infrastructure to
financial services, from consumer products to consulting.
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To help managers think about these risks and opportunities, HBR Green presented six conversations, one
every other week, involving environmental and climate
issues across key disciplines and corporate functions;
each conversation was led by one or two distinguished
business representatives. HBR invited featured contributors to join the online conversation, and they made the
forum more like a live conference, with discussion leaders
at the podium and a panel onstage. Prominent executives
from General Electric, Timberland, and other companies
joined the conversation; academics and environmental
consultants brought their expertise to bear. The audiencesmart, educated, interested people from all over
the globeshared their insights, stories, and opinions.
Ordering Information
To order copies of this report, visit
Discussion Leaders: Andrew J. Hoffman

and John Woody
Leadership
Discussion Leader: Sir Stuart Rose
No
Do
The Editors
41 | Winners and Losers in

a Carbon-Constrained World
51 | Staying Green in a Tough

Economic Climate
Weve presented the six discussions as a white paper

of sorts; each section begins with the discussion leaders
post and is followed by the online comments it generated.
To help with navigation and readability, weve written
headings, edited the comments, and added the HBR Green
logo to those written by our featured contributors.
We didnt aim for an all-purpose fix; no one shade of
green will work for every company. But togetherHBRs
editors, the experts we brought in, and our audiencewe
helped identify the issues and shape the agenda to better
position your company for the opportunities and risks of a
carbon-constrained world.
Operations
Corporate Governance
59 | Green Stakeholders:
Pesky Activists or
Productive Allies?
Discussion Leader: Judith Samuelson
Ethics
73 | Should Managers Have

a Green Hippocratic Oath?
Discussion Leaders: Rakesh Khurana
and Nitin Nohria
http://GreenConversation.hbr.org.
Dont Bother with the Green Consumer
Staying Green in a Tough Economic Climate
With evidence of an economic downturn and the use of the R-word growing,
Sir Stuart Rose, CEO of Marks & Spencer, wrote a timely post. Will executives
stay green in a tough economic climate? We are sticking to Plan A, he wrote.
There are compelling commercialas well as moralreasons to do so. Most
readers agreed, but there was a lot of hedging in the comments. Consumers
already marginal willingness to pay for green will wilt with their shrinking wallets. Companies like M&Sthe big ones that have made very public stretch
commitments (like carbon neutral by 2012)are on the front line. Reputations
are key. And it may be here, out of sheer necessity, that we will see the innovations needed to square hard economics with environmental sustainability.
Contributors fear that businesses who ditch the green when times get tough
will likely regret it in the future. The question is, will the reckoning come long
after the current executive teams tenure has passed?
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Kicking off the conversation, IDEOs Steve Bishop asserted that the green consumer was not worth pursuing: Youll either alienate your base of mainstream
customers, or get stuck in a green ghetto...virtuous, but limited in scope.
Some praised Bishops bold dont bother strategythe green consumer is
fickle. Others saw the environmentalist niche as the crest of a large wavean
indicator of markets to come. Readers generally agreed that you need to meet
your customers needs first and foremost. Green is not simply a marketing ploy
and it does not trump aesthetics, function, or price.
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HBR Green
at a Glance
You Are Only As Green As Your Supply Chain
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Since green products dont magically appear on the shelves of a welcoming

Wal-Mart, our next conversation focused on what kinds of supply chains are
needed to make a truly green product. Herman Millers CEO, Brian Walker,
began by telling readers that it takes a village to build a green product, and the
commentators concurred. What was interesting was how big the village got.
Green products need to be made with green inputs, so supplier support is critical. Getting that support requires moving away from arms-length relationships
and sharing costs and benefits. Convincing suppliers to innovate, find new solutions, and go with your strategy requires engagement, incentives, and market
power. But if closed-loop, cradle-to-cradle thinking is part of the strategy, then
the supply chain doesnt end at production, it has to include customers as well.
In many industries, the village has to include everyone, even your competitors.
The takeaway? No company is an island and you cant go green alone. Businesspeople cant help but be awed by those who undertake such a challenge,
and skeptical that it can be done.
Green Stakeholders: Pesky Activists or

Productive Allies?
Leading a conversation on green stakeholders, Judith Samuelson from the
Aspen Institute pointed out how far the relationship between business and
environmental groups has come since the early days of green activism. Successful partnerships with once antagonistic NGOs require relationship building,
mutual understanding, and respect for your partners goals and limitations.
NGOs increasingly want partners that are willing to work for green transformations of entire industries. Achieving these ambitious goals appears to lie in a
mnage--trois world of business-NGO-government collaboration. Samuelsons
lesson: Ignoring outside constituents is dangerous and working with them is a
new and essential core competence.
Should Managers Have a Green

Hippocratic Oath?
Do
No
In the final conversation, Harvard Business School professors Rakesh Khurana

and Nitin Nohria put, perhaps, the toughest question on the table. Should
Winners and Losers in a Carbonmanagers take an oath similar to the ones doctors take, to do no harm to the
Constrained World
environment? Comments, many from business school students and professors
Andrew J. Hoffman of the University of Michigan and John Woody of MMA Rearound the world, were mixed. Some thought an oath was necessary. One
newable Ventures in San Francisco made it clear
contributor lauded MITs Graduation Pledge
that despite lingering uncertainty, the ground has
of Social and Environmental Responsibility,
shifted politically and socially in the United States
which simply states, I pledge to explore and
Gregory
for action on climate change. If you dont know
take into account the social and environmental
C. Unruh
who the sucker is in the poker game, warned the
consequences of any job I consider and will try
summed up
authors, its you. The question for executives now
to improve these aspects of any organizations
HBRGreens 12
is how to position their companies for the climate
for
which I work. Other readers thought an oath
week forum and
policy endgame and subsequent economic rewould be a nice gesture, but that managers
was a featured
contributor. He is
structuring so that they arent the suckers. As one
would easily circumvent it. A few dissenters
the director of the Lincoln Center for Ethics
commentator mentioned, What keeps managers
disagreed with the general premise of an oath,
in Global Management at the Thunderawake at night? Uncertaintynot knowing where
saying that market competition served as enough
bird School of Global Management. The
the world is headed. In a carbon-constrained
of an ethics litmus test. What everyone agreed on,
Lincoln Center includes training in profesworld, innovation, stakeholder engagement,
however, was that the environment has taken on
sional ethics, corporate social responsibiland political influence become ascendant skills.
new importance in the realm of business thinking.
ity, reputation, and global sustainability.
Readers admonished companies to use political
The bottom line? The era of the unquestioned
Unruh is the author of The Biosphere
influence in a responsible way. After all, its the
dominance of shareholder value as the driver of
Rules (HBR February 2008).
future of the planet were talking about.
management thought and action is over.

Dont Bother
with the Green
Consumer
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on the face of it. A company wishing

Our work with Shimano yielded two insights: 1) everyone
to go green should focus on the green consumer, right? Not
fondly remembers biking as a kid; 2) highly technical sports bikes
so. Marketing to the green consumer has proved difficult, even
and lycra-clad salespeople in bike stores put off would-be everyday
downright dangerous, for companies large and small. Heres why.
riders. So Shimano pitched a concept bike to manufacturers that
Established companies fear alienating their base of mainstream
was intuitive and inviting. Mechanical components were hidden,
consumers by appealing to the green consumer, and rightly so. The
handlebars were stripped of complex controls, and pedals, were
majority of consumers seek to satisfy their personal needs before
well, just pedals.
considering those of the planet. Green for greens sake products ofThey called it the Coasting bike. Nothing to learn, just jump on
ten dont meet the basic needs that most people require from their
and go, like when you were a kid. Thats what gets people riding.
products. Take hemp clothing, for example. If green for greens sake
So wheres the environmental story here? Well, there isnt an exproducts could go mainstream, wed all be wearing hemp sweaters
plicit one. Shimano is addressing a human problem, not an enviand be happy about it.
ronmental one. By seeking the truth about what really matters to
Small, streamlined green brands that truly appeal to the envipeople and creating a great experience for them, the company is
ronmentalist consumer cant reach the mainstream. Those compaappealing to a mass market increasingly aware of our impact on
nies get stuck in a green ghettovirtuous, but limited in scope.
the planet. Coasting bikes tell the green story implicitly by inviting
The result is that most companies are stuck somewhere in the
people to engage in new, positive behaviorslike reducing greenmiddleand that turns out to be a very dangerous place indeed.
house gases by pedalinginstead of driving.
Weve all watched a company take a traditional product and tout its
For a company that wants to go green, then, the green consumer
green virtues. When the approach doesnt work all that well, they
niche is almost irrelevant. Im reminded of HBS professor Ted Levsimply take out a bigger megaphone. Hence the green-washing epiitts old marketing axiom that people who buy drills dont need drills;
demic we have today.
they need holes. Consumerswhether
So while the traditional marketing anthey are green or mainstreamdont simswer to the question, Should we market to
ply want green products, they want soluSteve
the green consumer? has been yes, the bettions to their day-to-day problems that
Bishop is a
ter answer is this: Instead of focusing on a
also make sense for our environment.
global lead of Degreen niche, focus on green behaviors that
The bottom line: Marketing needs to
sign for Sustaineveryone can aspire to.
define what sustainability means for their
ability at IDEO.
When we helped Shimano, an internacompany and then decide how to express
He focuses on
tional manufacturer of bike parts, create
those values in their offerings. Compaapplying design
a new bike platform, we didnt focus on
nies should stop trying to appeal to green
thinking to the issues of sustainability for
cycling enthusiaststhe biggest segment
consumers by building green myths into
IDEO clients. His experience ranges across
several industries including automotive,
in this marketor on the green niche.
the products they have and start creating
consumer products, and medical devices.
Instead we focused on a growth strategy
something realproducts that tell their
Hes helped design high-end awardwith a green outcomemore people
environmental story for them.
winning office furniture, packaging,
riding bikes and enjoying it. As a result,
So whats your story? Are you selling
instrument panels for hybrid vehicles, and
we turned our attention to the 161 mildrills or holes? What does green mean
medical injection devices, for which he
lion Americans who dont ride at all.
for you?
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t seems so logical
holds several patents.
Harvard Business Review | The Green Conversation | Spring 2008
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Dont Bother with the Green Consumer | marketing
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The challenge of true sustainability

product attributes into benefits that resonate with their customers.
Make hay while the sun shines. Thats an old adage I picked up
For example, instead of Kodak and Fuji screaming that its picture
from my dad, who grew up as a farm boy in Iowa. The summerwas the brightest, digital-camera companies tapped into consumers
timewhen the days are long and the sun is hotis the best time
underlying motivation for taking photographs, storing memories.
to grow animal feed for the coming winter. For green marketers,
This insight led to emphasizing attributes that were relevant and
the summer is now. But, as Steve Bishop points out, executives may
resonated with their customers.
not see a bumper crop in their fields.
In a similar manner, consumers motivation for purchasing
Curiously, branding is also a farm tradition. Searing an insignia
green products will vary. For some, the environmental
into a steers side was often the only way to tell the difference bebenefit will need to be translated into a
tween your livestock and mine. Today, a sewed on swoosh is often
personal onewhether that relates to biking with friends
the best way to differentiate pairs of sneakers.
and family is fun or buying this washer/dryer will save me a few
There are plenty of green branding efforts. GEs Ecomagina
hundred dollars over the lifetime of the machine. For others, the
tion.GMs Live Green. Go Yellow. BPs Beyond Petroleum. All
societal benefit of helping the environment is compelling enough.
are attempts to define sustainability within their industry. But
Because customer insights vary so widely, Levitts axiom is incomdespite any ecological advances they have made, all can be disparplete: It should read, Different consumers define what is a hole
aged as greenwashing by so-inclined environmentalists.
differently.
The real problem for companies hoping to sell green products
Ravi Dhar, Featured Contributor
is not the challenge of branding, but the
challenge of true sustainability. SustainYou wont sacrifice quality,
ability isnt a characteristic of any single
but youre leaning green
product: Its a system condition. Nature
Steve suggests that there are two distinct
Featured
shows us this. No ecologist would talk
groups of consumershis hemp-wearing
Contributors
about a sustainable tiger or a sustainconsumers who will sacrifice quality in the
able walrusit wouldnt make sense.
quest of a better environment, and everyWhat makes a tiger or walrus sustainable
one else, or mainstream consumers. The
Deborah Jones
is that it is a member of a larger commutruth may actually lie somewhere in the
Barrow, founder,
nity of organisms we call an ecosystem.
middle. According to pollsand borne
TheDailyGreen.com, a website to
The same is true of green products and
out by years of double-digit sales of such
guide consumers through the green
sustainable companies. They need a susproducts as organic foods, natural perrevolution
tainable ecosystem to support them. Green
sonal care products and hybrid cars, about
products need green production systems.
two-thirds of all U.S. consumers now have
Ravi Dhar, George Rogers
Green production needs green suppliers.
strong green leanings.
Clark Professor of Management and
Green suppliers need green energy. And so
What my 20 years of experience trackMarketing and director of the Center
the chain of green relationships goes
ing green marketing campaigns suggests
for Customer Insights, Yale School of
What marketers and executives need to
is that the most successful green marketManagement
communicate is not the greenness of their
ing underscores the primary purposes of
product line, per se. Instead, they would
greener products and adds environmental
Stephen Ramsey, vice
be better off engaging their customers in
benefits as a plus. How many of us buy
president of corporate environmental
a conversation about how the company is
Energy Star appliances because they save
programs, General Electric
fulfilling its ecosystem role.
us money? Or organic foods because they
Wal-Mart, for example, appears to recare presumed safer or taste better? Indeed,
Andrew Shapiro, founder
ognize that a sustainable product depends
Steves example bears this out. Shimanos
and CEO, GreenOrder, a sustainability
on a sustainable value chain behind it. It
bicyclea green productappealed to
strategy and marketing firm
may be that companies like Wal-Mart, not
the green tendencies of the mainstream
the green consumer, make the sun shine.
audience they sought.
Gregory C. Unruh,
The members of Wal-Marts greening ecoWhat would-be green marketers need
director of the Lincoln Center for
system better get to hay makin.
to avoid is something suggested by Steves
Ethics in Global Management,
remarksand what my colleagues, Ed
Gregory C. Unruh,
Thunderbird
School
of
Global
Stafford
and Cathy Hartman of the
FeaturedContributor
Management
Huntsman School of Business at Utah
Green is a marketing
State University, and I call green marketGardiner Morse, Senior
challenge
ing myopialeading with environmental
Editor, Harvard Business Review
A critical challenge in marketing is to
benefits at the expense consumers reasons
leverage consumer insights to translate
for buying certain products in the first
place. This approach is destined to fail, even with the greenest of

consumers; they, like all of us, go to the supermarket in search of
laundry detergent to get their clothes clean, not to save the planet!
Jacquelyn Ottman
Be authentic
It is not just what one says, but how one says it. People are
tired of endless advertisements, claims, greenwashing, and the
like. They seek authenticity and consistency in messaging, product/
service design, manufacturing, employee and community support,
and so on. Toyota has done this rather well with the Prius, providing both emotional and functional benefits that appeal to both
green and mainstream consumers.
Jon Ragatz
Discussion leader Steve Bishop responds:
perhaps conclude that you dont want to target the green consumer
because what you thought was a large minority is really a collection
of target consumers too small to bother with.
I really like Greg Unruhs post because I think a green ecosystem
will evolve, just as an ecosystem evolved around the concept of
quality and waste reduction when I got out of HBS in 1991. Just
as the automakers developed quality certifications (Ford Q1, for
example) and ISO 9000 came into its own, we see LEED really
becoming de facto in new construction.
I think you ignore the environmentally motivated consumer at
your peril. I deal with them every day and while green is not mainstream yet, the skills to design and manufacturer green products
and run a company in a more sustainable way are skills that will
take years to perfect, just as changing a company culture to build
quality with few defects and little waste was a multiyear process.
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The challenge of true sustainability
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Gregory C. Unruh brings up a great point about

the importance of a supportive ecosystem. By definition, for any green offering to be successful, it
must find its place in the systems its connected
withthe value chain, ecology, existing markets,
and (equally important, yet often overlooked) people.
If people are considered, it is usually in how they use or consume
supply. But whats happening on the demand side of the equation?
What do people desire? How might green offerings improve peoples lives? What green behaviors do they aspire to? Not addressing
questions like these is the reason many green offerings fail in the
marketplace and ultimately break the ecosystem they live in.
To follow Gregorys analogy, if the tiger lives in a perfect jungle
with an infinite supply of nutritional food that it doesnt like, then
the tiger wont eat. The consequences will be felt by the tiger and
the ecosystem. Similarly, companies clean up their
PJ Stafford, Green Irene LLC
Greenwashing is pervasive
Steve Bishop, Discussion Leader
Monica Oldham
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To create successful green offerings means creating something

real and desirable that allows people to engage in new positive behaviors. A conversation about a companys role in the ecosystem is
important for a companys CSR initiatives and in business-to-business conversations, but its not the way to connect with consumers.
What they need are solutions that fit their everyday lives and a way
to easily understand how they make sense for the environment.
As Gregory points out, retailers like Wal-Mart are making the
sun shine on sustainability with advances they made in their value
chains. The challenge for companies now is to make hay. Its up
to marketing execs and designers alike to be sure were making hay
that is desirable.
Some companies talk about being green far more than they actually help the environment. For instance, several car companies
run radio commercials touting their alternative fuel development
efforts, such as hydrogen fuel cells or a plug-in power system. These
development efforts have yet to yield anything substantial, other
than commercials and false bragging rights. These same companies
run TV commercials for vehicles that average less than 20 MPG
and lobby congress to resist passing laws to enforce higher fuel
economy standards. I would wager that the money spent on the
latter marketing and lobbying efforts far surpasses that spent on
green development.
While I heartily agree that companies need to determine consumer needs with their products, rather than develop a product
and then look for a consumer, they need to be honest about fulfilling the consumers needs. People have limited patience with empty
promises of someday. Even the most loyal customers will eventually tire of the promises and take their money elsewhere.
Take the example of Toyota, with its push for hybrid vehicles.
Obviously, these vehicles appeal to consumers who desire better
gas mileage and lower emissions. However, certain areas of the U.S.
allow single drivers to use high-occupancy vehicle (HOV) lanes if
they are driving hybrids. Individuals who are somewhat less than
concerned with the environment have admitted to purchasing a
Prius simply so they can use the HOV lane and reduce their commute time. The car companies who are still talking about their
green development efforts, several years after beginning them, are
losing part of their consumer base because someone else is fulfilling
their consumers needsa shorter commute.
Do
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supply chain, yet fail to create offerings

that are desirable to their customers.
There is no one green consumer

It has been my experience in helping consumers green their
home that for some, being green means saving energy and money.
Other homeowners think almost exclusively in terms of indoor air
quality and chemical-free living, and still others mean food quality, food miles, and organics. You can take this observation and
Target the heart of green consumer

At TheDailyGreen.com, we intentionally target the middle 60%
on an imaginary bell curve of consumer greenness.
That being said, we find it important to remember who brought
you to the party, meaning we also program news and service journalism to excite the people who have been living the green life be-
fore it moved from fringe to mainstream. Not only is it the right

thing to do, but these people remain thought leaders in the movement, and they wield broad first-mover influence in their social and
business networks. In addition, the very robust eco-blogosphere
tends to be made up of movement greens, and as we know, online
green cred is conferred in some quarters among this constituency.
Consumer product marketers need to target the heart of green
consumer to meet their numbersbut they also need to engage the
deep green consumer for their products cred.
We have a funny how green do you want to be? quiz on the
site that lets readers self select where on the green-o-meter they
want to be at: http://www.thedailygreen.com/environmental-news/
how-green-are-you
Deborah Jones Barrow, Featured Contributor
Steve Bishop puts itstrikes me as, at best, an inefficient way for

companies to try to influence consumer behavior.
Gardiner Morse, Featured Contributor
Steve Bishop is right, but companies should

create greener products
I dont think we can adequately discuss whether companies

should bother with this category until we define it better. If we
assume its a niche (insert stereotype: granola eaters, Birkenstock
wearers) then sure, its easy to say that mainstream companies
should not narrow their marketing efforts to just that group.
But the green consumer category is evolving rapidly and increasingly hard to pigeonhole. Does it include a suburban mother who
buys organic produce for her family? A senior citizen who installs
new home insulation to reduce energy use?
Research firm Gfk Ropers 2007 Green Gauge study (www.gfkamerica.com) reports that 87% of American consumers say they
are very concerned about the environment. Yet consumers often
dont think of their purchases as explicitly green. Ask that suburban
mom why she buys organic and shell probably say, its healthier.
The homeowner may well explain that he insulates to save money.
Both consumers have made environmentally beneficial decisions,
whether or not thats their top priority.
To some degree, most of us are green consumers now, yet were
a different shade of green: both pragmatic and uncompromising.
In our research at GreenOrder, were increasingly encountering
this no sacrifices consumer who expects products that are more
efficient, less polluting, healthier, and more responsible, but who
doesnt want to skimp on quality, value, style, or convenience. (B2B
consumers are even more demanding, but thats another issue.)
Satisfying these consumers requires much more than savvy marketing. It demands a new approach to product developmentand
to business strategy generallythat sees green not as a marginal
niche, but as a source of value that all customers can appreciate and
will eventually expect.
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Greenness is not important to consumers
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Is there evidence that, all things being equal (price, performance,

convenience, etc.), the worlds consumers prefer green products?
My sense is that greenness is far, far down the list of qualities
the vast majority of people seek in the products they buy. They
want the product that satisfies their material needs bestdoes it
make a hole the size I want? Is it cheaper than alternatives? Does it
perform better? Will it cost less to own? Is it easy to buy? And so
on. Whether a product is green or not, I suspect, has relatively little
impact on most purchase decisionsparticularly when you look
beyond the rarified group of affluent, socially conscious shoppers
at Whole Foods.
I have a hunch that unless a green product delivers material
benefits that consumers cant get with a dirty alternative, it will
remain marginal. The Prius does offer such benefits (high fuel efficiency, HOV lane access) and consumers cant get enough. But
what consumer is going to toss his or her reliable, cheaper dirty
paper towels and dish soap for the pricier, poorer-performing green
versions? When companies make green products that outperform
dirty alternatives, consumers will buy them. Appealing to consumers presumed better selvesthe green behaviors they aspire to, as
Steve Bishop says Dont Bother. Do You Agree or Disagree?
Do
Some companies tout the

ecofriendly virtues of an
existing product, only to hear
claims of greenwashing. Others create offerings targeted
to the environmentalist
consumer and get stuck in a
green ghetto. Steve Bishop
of IDEO says dont bother
with the green consumer.
HBR Greens community
responded:
Its a waste of time

to market to green
consumers, because
they are suspicious
of the motives.
Green is context. Disregard

it at your peril, as U.S. car
makers did in the pre-$3-pergallon gasoline era, but dont
expect to gain competitive
advantage from green either.
Agree
Companies that authentically

market green products attract
customers who are more loyal,
less price sensitive, and more
likely to recommend their products to friends and family.
Disagree
Greenness is far
down the list of
qualities people
seek in the prod
ucts they buy.
The core issue is

identifying how
green is relevant
to creating value for
customers.
Companies need to focus

on embedding efficiency,
environmental performance,
and other green values into
core business goals.
The corollary is that greener products need to be, quite simply,

better products. And companies who succeed in bringing them to
market should be rewarded accordingly.
So perhaps Steve Bishop is right that most companies should
not bother with green consumers, but they certainly should worry
about creating greener products.
Andrew Shapiro, Featured Contributor
I dont buy green paper products
Not to diminish the marketing spin on going green, but that

value is a rounding error compared to the longer term competitive and profit advantages derived from smart investments in green
technology and practices.
Cal Mann
I would rather buy cheap and dirty coal power,

but Im open to suggestions
Dont bother with the Green consumerthe tag line stood out
for me personally as I am a shareholder and one of three chiefs at
an energy retailer/utility. We attempted to position an environmentally-friendly product in the market about six months ago as we had
been under the impression that there was a demand for the same,
and secondly, we actually and sincerely would like to see more optionality when it comes to electricity generation. While a green
product may not be a solid answer towards addressing the real issues around the core need for green products in general, seeing a
positive response from the consumer definitely helps on a number
of fronts including but not limited to creating a better regulatory
landscape and warranting investment for more innovation.
In any event, the traction has been dismal at best. Should
I get a bigger megaphone? At this point, the
only conclusion that I can draw is that green is still very much a
trend in the vast majority of the consuming publics mind; because
if you come right down to it, it appears that people would rather
buy good-o-cheap and dirty coal power. Open to suggestions and
thanks in advance.
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They dont meet my expectations. In addition, green advertising by BP and GE triggers my cynicism and turns me off on the
company.
However, I think Bishop misses an important aspect of the discussion. It is true that consumers speak when they buy products
but they also speak when they vote. I would support a candidate
who wanted standards for recycling even though I might not pay
extra money for a recycled product unless I was clear that it was
a quality product. And the organizations that find themselves on
the green side of practice as new legislation is put into place will
succeed.
I am convinced there will be new regulations in some form,
whether we like it or not. The stakes are simply too high for us to
wait for market-based solutions to solve this overall problem.
rP
os
t
George Lehman
Evidence backs up Steve Bishops idea
No
tC
Steves column was spot on. Our client had invented a new additive to latex paint that was green and was 10-20 times more effective than current biocides in preventing mold and mildew growth
on our houses.
To gain EPA approval for a new biocide requires $2 million and
2.5 years. We thought, because our new biocide was not only green
but it was also an ingredient currently used in foods, we would not
need to go through the expense and time for approval.
WRONG! Green didnt help nor did its current use in foods
with FDA approval help.
Most importantly, the market we wanted to sell to directly said
they would not promote green as the primary pull-through marketing mechanism. The new green biocide would have to be EPA
approved ($2M and 2.5 Years) as well as outperform the current
approved non-green biocides and be within three times the cost of
those existing systems, to be interesting.
Youre correct: There is not enough mass demand pull-through
for green at this point in time.
Phil Phillips
Do
There is one very good reason for companies

to green their products: profits
Using less fuel in Wal-Mart trucks will deliver meaningful bottom-line results for the company. Consumers likewise can benefit
from purchasing products that consume less energy; their family
budget will have more discretionary purchasing dollars left at the
end of the month.
AROD
Mr. Unruhs commentary comes closer

to hitting the mark
Marketing green products is not an either/or proposition. You

dont have to avoid marketing to green consumers for fear of alienating existing customers, or to customers with a more mainstream
purchasing rationale.
I dare say that a clever pitch could engage all consumers, green
or not, and have every one of them believing that they are getting
a great product and also helping the environment. Those consumers who are not particularly green-focused, will, nevertheless, pat
themselves on the back because the product they bought made
it easy to be green (contrary to Kermits lament) without having
to think too much about it. Their carbon-consciousness will be
slightly elevated each time this occurs, until they one day realize
that it has woven itself into their everyday protocols and behaviors.
Mr. Bishops philosophy totally ignores this possibility. Having
a dearth of ideas is no excuse for settling for the easy solution and
producing a vapid and cynical campaign. Greenness is here to stay
and more and more consumers will come to the party - some
willingly, some reluctantly.
But until companies quit trying to play the green card as a side
bet, just in case green is for real and not just a fad, and embrace
greenness as simply the proper course for the ultimate sustainabilitythat of our planetthen they will continue to do a disservice
to their customers, to the ecosystem, and to their own viability.
Until companies quit trying to play the green card as a cynical

mask of their true color (e.g. British Petroleum, who is trying to rebrand itself because it has the most egregiously poor environmental
record of any major oil-driller, not because it permeates their business philosophy), consumers will not believe what the marketers
are trying to tell them about their products.
Thank goodness for Wal-Mart! (I never thought I would hear
myself say that!) Wal-Mart has seemingly taken all of the criticism
of their business model to heart, and they are genuinely trying to
do the right thing. They are successfully overcoming a lot of bad
press, and bad consumer-relations by stepping up to the green
plate in many of their initiatives. They are not afraid to claim green
as Mr. Bishop would have advised them, and they are going to reap
benefits in every aspect of their operations because of it.
amongst whom we have to choose who we pursue (though that is

undoubtedly true in the short-term).
Ratheras we know well from the conventional marketplacegreen pioneer companies very often create the demand for
their goods and services, usually slowly and patiently over years,
and often because they themselves felt so strongly about the issues involved. Theyre sometimes ahead of the curve and creating
and marketing such products before there is any green consumer
segmentlarge or small.
So instead they have to doggedly educate some tiny receptive,
but not yet converted, slice of the public, sometimes one shopper,
one small store keeper, at a time. And they keep at it, gradually
growing the market, and their own businesses along the way. This
is not typically the way Fortune 500 companies roll out products or
marketing campaigns, but it is how the organic, Fair-trade, crueltyfree, allergen-free, etc. categories were slowly created over the last
20-30 years. They all started as niches ignored by the big players,
and in some cases a small player was able to ride the boom and stay
atop of their categories (Organic Valley, Earthbound Farms), even
after the much larger corporations and brands belatedly entered
the fray.
And, of course, those late-comers do need to pick from amongst
the existing segments unless they, too, decide to become a champion and educator in the field and work to convert the millions of
average consumers to green consumers.
So if you can think long term you might have more options
than you think.
op
yo
R. C. Alderson
rP
os
t
I agree, greenness is not important to

consumers
No
tC
Even though we are located in a wealthy area that favors ecological solutions, we find that few people will pay up for a product
merely because it is green. The product has to have a practical, and
even money-saving, hook before it will be adopted by a meaningful
market.
Imparting this knowledge to entrepreneurs can be difficult. We
at The Hive, a business incubator in Huntington Beach, CA, have
seen companies fail quickly in this space because they have an unrealistic view of their target market.
One mistake is to assume people will pay more for a green product. While it is true that people will pay a little more for a truly outstanding product, there must be an additional benefit. For example:
The Prius is a bit more costly than other cars in that size class, but
the attraction of being able to drive a hybrid car in the carpool lane
in Los Angeles gave the Prius a major boost. Also, as gasoline prices
rose the Prius became more attractive. It had been available for
some years prior to the gas crisis, and had not enjoyed outstanding
sales until the additional values of lower costs and the carpool lane
prompted people to buy.
Another mistake is to talk to the target market as if they share
your passions about green products. While they may, it should be
remembered that philosophy and reality are two different things.
Your pitch should be aimed at the average consumer and, if it emphasizes the green qualities of your product, it should be communicated as a side benefit to the product. Everyone wants to feel good
about purchases.
Victoria Duff
Do
Green companies build markets slowly

Here at Equal Exchange (a small organic, Fair-trade food company) our experience has given us a different perspective, but it
seems consistent with that of many other small companies who
helped pioneer one green category or another.
Basically we need to remember that the marketplace is not
static, with a fixed number of deep/middle/or lite-green consumers
Rodney North
Steve Bishop is wrong
It seems like most of the arguments against designing and marketing green products are straw men at best.
Who said a green product has to be more expensive or not as
effective? Clorox just introduced a line of green cleaning products
that dont cost any more than the competition and work just as
well.
Who said green messages dont resonate with a consumer? I guarantee you if you sell a dishwasher that costs $500 a year to run and
I sell an energy-efficient one that costs $10 a year to run, Ill sell
plenty due to the reduced cost of use. Green messag
ing doesnt mean were selling flowers

and puppies and blue sky.
Who said the greenness of a product has to appeal to the consumer at all to be profitable? If a company reduces the amount of
packaging they use by 20%, will the consumer care? Probably not.
But they just made their product more profitable by spending less
on packaging.
The big problem is that companies (and marketers) see green as
something that can be bolted on. Thats a recipe for failure. Green
has to be woven into the fabric of a company. Then everything
everyone at the company does will be viewed through a lens of
sustainability. Suddenly, its not something you do, but something
you are.
M. Morin

Who has advice for AROD?
Nancy Nichols, Editor of HBR Green
The real green consumer
Karen Janowski
Eco-labeling
Its also important to critically assess who is deciding what is

green. There is a lot of noise out there as to what is green (or in
reality, greener than something else). Lets not forget that many
standards and certification systems have been developed to exactly
draw that line in the sand. We are launching www.ecolabelling.org
to be a reference point on all those labels.
Anastasia ORourke
Co-Founder Big Room & PhD Candidate,
Yale School of Forestry and Environmental Studies
Advice for AROD: Start small, be patient
No
tC
Lets face it, if consumers want to be green theyre washing their

windows with vinegar, not with a product that comes in a recycled
plastic spray bottle with vinegar added. I agree that it is a waste
of time to market to this group, but the reason isnt that theres no
market, its that these consumers are, in fact, suspicious of the motives of companies that repackage old formulas to make so-called
green products. This cynicism is reminiscent of the way some oil
companies used to sponsor television shows about the wonder of
nature to mask issues in the industry, or how tobacco companies
sponsor art exhibitions.
To my mind, the real problem isnt how consumer goods companies can market to the green consumer, its whether or not that
particular consumer is going to be receptive to any message at all.
If we look at what does work, its in the service sectorgreen drycleaners, for example.
Traditional consumer goods companies wont truly change their
products unless their profits are declining, and unfortunately they
may turn to these consumers only as a last ditch effort. On the
other hand, service companies can offer green services without affecting their value propositions substantially.
Do
is a green consumer marketi.e. consumers

who prioritize sustainability above other product features. But,
this is a niche market. Some companies can target
this market and be financially successful (e.g. Burts Bees).
The real issue is that most consumersand business customersare looking for other (non-green) benefits first. As Steve puts
it, they want solutions to their day-to-day problems that also make
sense for our environment. That does not mean that product marketers can ignore sustainability issues when they are developing
market requirements for new products. It means that marketers
and product developers face the very interesting challenge of devising products that incorporate sustainability while still meeting
the customers other (in most cases, higher priority) needs. Its an
exciting challenge, full of real opportunity for those who like to innovate and want to beat their competition in the marketplace!
op
yo
I am struck by the quality and quantity of the posts and the

speed at which the discussion is growing. We started HBR Green
because we realized that the scope of the business transformation
that will be required to change traditional businesses to green
businesses is overwhelming. Despite our decades long tradition
of bringing the best of management to our readers piece-by-piece
and page-by-page, we understood that only by hosting a collective
conversation would we be able to encompass all the necessary vectors of this complicated topic. So whether you are from a Fortune
500 company or a small green company, welcome, and lets keep
talking.
Now, who has any advice for AROD? Hes a well-meaning executive with a green energy product. He fears that maybe people
really prefer coal. It is possible that some people, maybe the majority, will only think about their wallets, yes?
But we know that overwhelmingly polls show that people care
about the environment. So where is the disconnect? What is the
role of marketing in informing consumers about the choices they
are making? When can a company get out in front and lead the
consumer? When must they follow? And what should AROD do?
What happens if he grabs that big green megaphone? Can he really convert his customers one at a time the way Rodney of Equal
Exchange suggests? And, the real question of course that looms over
this discussion: What happens if he cant? Do our environmental
problems simply spin out of control?
rP
os
t
Jean Pagani
Most people look for non-green benefits first
Dont Bother with the Green Consumer is a catchy and provocative headline but it obscures the real issue. I believe there
Matters of scale and price influence your options in marketing

a green product. No doubt selling green power is very different
than selling fair-trade coffee as we do. For example, back in the 80s
we could sell less than $1 million of coffee per year to customers
scattered over 20 states and still operate and keep slowly growing.
Maybe AROD has to sell $50 million a year in one state for it to
work.
Instead of a bigger megaphone, AROD might try starting some
quiet, one-on-one conversations with his customersof course,
starting with the likely ones (members of the Sierra Club & other
environmental organizations). Ask for the opportunity to speak to
their local chapters (so were talking 10, 20, 30 people at a time).
Try to secure some endorsements and public support from such
groups, or really any group that is highly reputable. Many faithbased groups across the political spectrum are now advocating for
greener causes, especially the fight against global warming. They
might lend you a hand. Local city governments, schools, universities, high-profile businesses could all play this role, too.
Also, be patient. I know you may not have that luxury. But to
convert consumers, educate them, establish your legitimacy, or even
get peoples attention, six months is nothing. If you can hang in
there, show youre serious, and slowly build a foundation of public
awareness through a network of both individual and institutional
support over a few years, you might get there.
We had success with all those approaches. And as others have

pointed out here, regulations might as well demand these changes
of you anyway before long, so you might consider this a way of
hedging your risk even if it is a money-loser for now.
Rodney North
Consumers wont change overnight

Green products create awareness, which is an important signal
to consumers, which see that the companies are trying to do something about it. Yes, it is not enough to buy a green product (or one
labeled as such), but we also need to change the way we use these
products. If companies truly want to achieve CO2 emission cuts
for example, they have to provide the consumer with additional
information on efficiency.
Green for the planet, not just your business
As we can see, not all consumers are looking for something green.
But, green business is a new emerging business trend worldwide. I
do not think it should only stay as a trend, but it should be incorporated into the business and should be seen as a responsibility
towards the environment. I do not know how many corporations
really care about the environment.
Instead of targeting the consumer, I believe the corporation
should start to bear in mind that they green their products for the
world they live in and not merely for a business opportunity.
Elise
Market green, smarter
There is usually a mismatch between what consumers say and

their consumption pattern. A significant number of people will
claim they are for green products and the environment. However,
their purchasing behavior doesnt usually support their stated intentions. As pointed out already, the definition of the green consumer needs to be qualified. Furthermore, once defined, the size of
this segment needs to be quantified.
op
yo
Adrian
rP
os
t
Market to value-based consumers
No
tC
Producing products that last is a green thing. For many of us

who make personal decisions to purchase based on longevity as well
as value, the greenness is in not having to buy something again in
a year or two. As a toxicologist, I would suggest that marketing to
green consumers is less important than marketing to value-based
consumers.
I judge a products worth not only by whether it is green now,
but what expenditures were required to produce it and what are
the environmental consequences of disposing of it when it finally
wears out. Is it recyclable or re-usable, and is there a current outlet
for the product to be re-used in some way? Take the case of ethanol,
for example. Proponents of ethanol claim it is an environmentally
friendly fuel, but often do not take into account the fuel needed to
produce it from corn.
Having spent many years working for an environmental agency
and helping with environmental education, I would say that the
average consumer is very unaware of what sustainability really
means and is easily misled. While it is not the manufacturers job
to educate the consumer, explaining why a product is better for the
environment might make people recognize the value added by buying that green product the next time. But if it is inferior or does not
last, few rational consumers will buy the product again.
Since many of the people on this chat are marketers, they might
not like the idea of Use Less Stuff but consumers can pick up on
the idea that we consume and throw away a lot of junk! Again, buying wisely for value and durability is an environmentally sensible
thing to do.
mj calvey
Do
Greenwashing has made consumers skeptical
Firms need to tell their story better, and more convincingly.

Steves bike example is a good one, but the bikes could also be
made from recycled metals, etc. The story behind the green (or
blue) marketing message has got to be real, not just a fairy story
that marketers think consumers want to hear, otherwise cynicism
and skepticism will only increase.
Alan
I believe a company can create a green

image in its branding in a more low-risk and less
costly manner by segmenting the customer base and designing a

true green product for the real green customer. Developing a green
product for the mass market will most likely fail because the basic
needs across a large base will not be addressed through the product
attributes. Segmentation and product portfolio are just as important for this space as any other. I believe that by identifying the expectations of the green consumer segment and developing a specific
product a company can: (1) continue to sell traditional products
to the mass market and maintain its market share, (2) keep production costs low across the product portfolio, (3) market a unique
green product to the true green customer segment, and (4) use the
niche product to project a green image in its branding.
John Jaddou
Responding to AROD: Consumers expect

the company to pony up for green
Nancy and AROD say that there is a disconnect between what
customers say in surveys and what actually happens when customers find themselves alone in the privacy of Targets shopping aisles.
My personal view is that consumers expect the company to pony
up for green. Its similar in some ways to the quality revolution of
the 1980s. Can you imagine Ford Motor (remember Quality is
Job #1?) asking customers to pay a premium so that their door
handles wouldnt fall off after the 30-day warranty expired? Quality
is a market expectation, not an option. Green is quickly becoming
the same thing.
Gregory C. Unruh, Featured Contributor
New niches become mass market eventually

It seems evident that over time, a few activist designers and industrious individuals have been successful at pushing the market
into new niches that ultimately get picked up by a larger, more
10
popular market. Initial marketing in new and risky ventures to a

small group is still a necessary element.
I see parallels in this in other non-product environmental initiatives. For example, in Northern California, the lumber industry was feeling attacked by activists who were trying to save the
streams. Eventually, the lumber companies were advertising their
good stream stewardship as not only their idea, but also as a good
and popular thing to do to sell more wood.
Dan Trockman, Linden Hills Power and Light
Response to John Jaddou:

Cars are not coffee
We had this very discussion last week. One of our partners, who
doubts we can monetize a green marketing strategy, believes that
we should focus the green message on a niche of green customers.
I, on the other hand, strongly believe that we should target all the
customers.
No one wants to buy a new air conditioner or furnace. Nor are
they particularly interested in paying to have their systems maintained regularly. The hole they are all buying is home comfort.
And since they have decided to or are considering making these
purchases, the simple fact is that if you maintain your system regularly, you save energy (and money); if you buy a new, more efficient
system, you save energy; if you buy a programmable thermostat,
you save energy. This message is relevant or should be relevant to
every single customer. So, I agree, forget about the green customer.
As Steve said, focus on green behaviors that everyone can aspire to.
op
yo
John Jaddou suggested offering a range of products that includes

green products for the true green consumer. I think this can work,
but will sometimes backfire.
Toyota manages quite well to sell the ber-green-productthe
Priuswhile also selling its eight-cylinder, gas-guzzling Tundra
pickup and everything in between.
But in my own fieldscoffee, chocolate, and so onIve seen
very large, otherwise successful and brand-savvy companies try this
approach only to fail. They might offer one or two fair-trade or
organic products among dozens of conventional products, run big
ads and expensive PR campaigns touting the green products and
then wonder why the green consumers remain unimpressed, even
cynical, about these offerings.
rP
os
t
John Lee
Is green the new black?
Do
No
tC
Well, not quite. Several posts have pointed to a lack of compelling interest in green products and services because people are unwilling to pay a price premium or accept a quality discount. In my
opinion, part of the marketing challenge is frame price and quality
as may be done in traditional ways. Some examples:
What should go into a price of the productif you are a purchase manager in a silo, it is only the price paid and processing
cost in acquiring a product or service. If you are a CFO, it is the
Green consumers dont see segmen
total cost of ownership. Marketing to businesses, many firms such
tation or a diverse product portfolio.
as Philips and Dell have reframed costs by persuading companies
They see tokenism. If you talk to a few hundred of
them, or track the blogosphere, youll hear them say that if the
to think of TCO as opposed to unit prices for the widgets. Since
corporation really cared about environmental or social issues, why
consumers seem to have high discount rates, the challenge is to
are 95% of their products produced in the same old way?
persuade them to consider not just the price of a washer/dryer/car
Maybe a key difference between cars and
but the operating costs as well.
coffee is the difference between large and
Why stop at cost of ownership? What
small purchases and between oligopolistic
about reframing costs to include other
Resources
markets and highly fragmented, competicosts? Secondhand smoke was the real cost
tive markets. Consumers can choose from
that accelerated regulations to limit smokGreen Marketing Myopia
dozens of coffee companies, including
ing. Prior to that, people often said well
Environment
tiny local ones and some that are 100%
if s/he wants to smoke to death, its their
by Jacquelyn A. Ottman et al.
organic (and therefore trusted as authentic
choice. Naturally, these costs should be
and sincere). So the large corporate brand
seen as relevant to the buyer but these behas to compete with niche companies that
liefs can be shaped over time.
set a high bar for green authenticity. The large company is hard
Similarly, the benefits are broader than performance of the prodpressed to achieve that same level of green cred, especially with a
uct purchased. Why do people put stickers on their cars proudly
product portfolio that is overwhelming non-green.
mentioning the university they or their kids attend or support for
By contrast Toyota, or the local electricity provider, doesnt have
the troops or even placards for their favorite politicians. Obviously,
small, super-green competitors nipping at their heels. If you didnt
people live in a community and highlighting membership of a
like the Prius, or maybe one of Hondas early hybrids, there wasnt
community (whether it is Harley or eBay) makes people feel betmuch else to choose from.
ter. Giving that ribbon or any other visible token for donating to a
charity allows people to signal to others they are the kind of person
Rodney North
who cares for the community or certain causes. This in turn puts
This is a timely discussion for advertising
pressure on others.
I work for an advertising agency and we are currently debating
One study showed that more people recycled when a little notice
the green question for one or our clients, an air conditioning and
said how many guests who stayed in that hotel also recycled, not
heating service and repair company.
how important the environment was. Thus, while no one can see
11
what power you consume at home, taking something invisible and

making it visible (by putting a big star in front of their homes!)
communicates to the neighbors what the values are and might influence other neighbors.
So yes, costs and benefits matter, but it is important not to buy
into a common definition of costs and benefits.
Ravi Dhar, Featured Contributor
Green and quality
that meets consumer and societal expectations about lower emissions and sustained life style.
So, how are we going to accomplish these things? What about
nuclear power; incentives for cleaner coal and alternative energy
technologies? Do we need a carbon tax or a cap and trade program?
Should business focus on greening production in the developing
world (more cleanup for the cost?)
How do we or should we try to translate these big picture issues
to individual consumer decisions? How does the consumer separate
puffery from true? What is the role of the government vis vis the
market place to sort this out?
Stephen Ramsey, Featured Contributor
The spectrum of greenness
Snappy headline aside, to segment the market into green and

mainstream consumers does not reflect the marketplace reality
that consumer lifestyle behaviors and choices reflect a spectrum of
greenness. I might buy organic food, but drive a low mileage truck
because I need the towing capacity.
In my experience as VP of Marketing for two leading green brands,
the core issue was identifying where green was relevant to creating
value for our customers. Of course the yogurt had to taste good and
the laundry detergent had to work. But the yogurt tastes better because
of the natural ingredients, and the laundry detergent doesnt irritate
your skin because it doesnt include petroleum-based chemicals.
Consumers who choose green products do so because the products meet their needs. Period. But companies who authentically
market green products attract customers who are more loyal, less
price sensitive, and more likely to recommend their products to
their friends and families. Not a bad customer base to have, particularly in a downturning economy
Now as a professor of sustainable business, it is my strong opinion that companies who choose not to go green do so at their peril.
It is not a question of if a company should go green, but how and
when. Climate change is the environmental issue du jour, but there
are many other environmental challenges looming on the horizon
that will have a significant impact on how business is done. Companies who move now can create and enjoy the differentation advantages of incorporating green into their marketing.
op
yo
Consumers expect the products they purchase to be safe for

their health (and increasingly, the environment) and they rely on
the government and corporations to ensure that is the case. While
some consumers are highly educated about the environmental impacts about the products they purchase, others are not. Does that
mean that the less educated consumer does not want the products
they buy to be safe for the environment?
The auto industry had invented airbag technology in the first
half of the 20th century, but the technology was not broadly implemented in cars until the 1980s. Who is responsible for the deaths
that could have been prevented? Was the consumer to blame for
not demanding a safety feature they did not know about? Was the
auto industry to blame for not incurring the cost of implementing
the technology? Was the government to blame for not regulating
automobile safety?
rP
os
t
Who is ultimately responsible for pub

lic health and the health of the ecosys
tems we inhabit? The answer, of course, is that this is
tC
a shared responsibility and business plays an important role. As

we become more enlightened about the degree to which behaviors, processes and materials are sustainable or detrimental to our
health and our ecosystems, whether or not we choose to do the
right thing is a moral question.
Veronika
Ecomagination at GE
Do
No
The market for lower emitting and cleaner products exists and
is growing. When we started thinking about Ecomagination at GE,
we talked privately to various stakeholders, including some folks
who might be expected to cry GREENWASH. The response
was both interesting and unanimous. The folks we talked to said,
Weve been waiting for years for a company to say it can provide
products that help with important environmental issues and make
money doing it.
This common ground is essential becausewhatever some may
wishpeople are going to continue to drive, fly, use electricity and
expect their lives not to change very much. In the developing world,
the expectation is that improvement in quality of life should not
be affected by the drive for cleaner, greener, and more sustainable
products and lower CO2 levels.
Commenters have pointed out that we need better educated
consumers; increased number of sustainable products; by implication, product development processes that have sustainability
as a design/development criteria; andalthough no one has said
soto find ways to generate the electricity we need in a manner
Karen Martinsen Fleming
B2B is where its at

An interesting anecdote I heard today from a California utility executive: Although over 70% of their customers self-declare as
environmentalists when offered the opportunity to purchase climate neutral energy for a few bucks a month, less than 1% signed
up. It wasnt an entire loss, however. The company found that the
real green consumers were other companies rushing to demonstrate
how environmental responsibility. Actually, it makes sense: Corporations have reputations and brand equity that live or die on market
and consumer perceptions. Purchasing green is a quick and easy
step to burnish a companys eco-cred. Individual customers only
have to live with their conscience. That and their shrinking wallet.
12
Karen hit the nail on the head

You dont market the greenness of a product. You market what
the benefit of the greenness is to the consumer. And since when is
marketing a benefit NOT a mass market strategy?
M. Morin
Profound environmental illiteracy
Isabel Rimanoczy
Mainstream will go green
tC
The biggest market opportunity for green companies is somewhere within the general populationconsumers looking for quality products at a competitive price whatever their level of concern
for the environment.
Being biodegradable or sustainably produced are product attributes that may contribute to the perception of quality by both
deep green consumers and those who have not yet made it a priority to buy organic, sustainably produced, or recycled products.
From the research I have read, the potential size of a green market for a company depends upon the product category, so you really
cant clearly delineate between the green and non-green market in
some absolute sense. Food, cosmetics, childrens clothing, bedding,
and household cleaning products may have a larger green consumer
base because people are concerned most about what goes in and on
their own and their childrens bodies.
The key is to focus on the largest group of potential buyers and
what product attributes and features matter most to them. If the
fact that a product is green is only of peripheral interest to those
consumers, so be it.
In whatever way we can increase the market share for sustainably
produced, energy conserving, or recycled goods, its all good!
No
bottles & cans, will be lost in the shuffle. On Monday the percentage of these containers recycled will probably be well below
50% (Im confident that someone will know the actual number).
Why? Because the consumer probably bought the goods because
of price and/or taste, not because they were easily recyclablethey
are green products in a sense, but take a behavior to make them
work. If there isnt a supporting behavior (the habit of recycling
built up over time and the infrastructure to support it) then it
wont happeneven when the plan is to be green. How many trash
cans have recycling bins built into them? Would people use them
if they were? So green products are nice, but if the broad base (not
niche) understanding of the importance of the environment isnt
understoodthen whats the point? So behavior is critical, and if
international behaviorChina and India stand outisnt in sync,
industry will go to the point of profit in most cases.
Focus on behavior. The Prius example is a great
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To Steve Bishops phrase The majority of consumers seek to

satisfy their personal needs before considering those of the planet
I want to comment that while this is a fact, it is the result of a
profound environmental illiteracy. We can change that, since it is
a matter of educating, informing and sharing data. We all have
some opportunities, daily, to expand the awareness of others when
it comes to the impact of our behaviors on the environment, both
natural and social. Corporations and media have a huge opportunity and responsibility to educate consumers and communities.
And since everything is connected, it ends up being better business
too. We need to be aware of the Systems Myopia.
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Leah Edwards
Focus on behavior; focus on price
Do
Steve Bishop has an excellent point and Ive found the postings,
regardless of position, worth the time. The ability to impact our
environment depends in part on a shift, and Id argue a rather significant shift, in the habits and decisions consumers make. It also
highlights a weakness of the product cycle in many cases.
Lets look at the Super Bowl in a couple of weeksThat day there
will be millions of beverages consumed in bottles and cansand
the marketing will be fierce, and at $2.7M per advertising minute,
I mean fierce. Arguably the most recyclable mainstream products,
counter green example to me. The price

is so high that I have no incentive to buy
oneit is a status symbol, not a mass
market green product. Be realHBR readers arent
the mass market kind of folks. The Prius with a Scion price tag
would be real green product.
Isabel Rimanoczys post is about rightalthough Id add that
everyone is responsible for moving the importance of this issue
forwardnot just corporations and the media.
M J Fair
Our green product was not successful
We believed our products would save time, money, energy and

remove hazardous materials from the environment. Who could
want more? Since this product carries our clients label, it was offered at a 10% premium over old school devices that had been in
the market since 1958. When sales stalled, we realized we wouldnt
have a chance beyond attracting early adopters.
Competitors questioned the reliability of new technology, despite its benefits, placing doubt in the consumers mind: What will
you save if this new-fangled gadget does not last? We had to reinvent our position quickly otherwise performance in favor of profits
or the environment would fade to red.
Green was accepted after a price reduction to a point below existing products coupled with an unconditional warranty. We refer to this success as Green Shiftthe acceptance of products by
consumers where a suitable business model has been developed so
that relationship can continue. We now propose that Green Shift
can be created or accelerated by removing the consumers perceived
economic risk.
The consumer knows the positive impact of energy efficiency or
environmentally friendly products; however, they are unwilling to
accept the risk for creating a new economic foundation. Sharing
this responsibly via pricing and a quality statement made by an extraordinary warranty acknowledges market demands and has benefited the business through market share and scale of economies.
Joseph Gentile
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Dont bother wont work in the world

of apparel retail
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campaigns that serve them. One might draw an analogy to organic

food. A small but significant number of people are willing to pay
Although I agree that just being green is not enough to entice a
a premium, sometimes even a large premium, for what might be
customer to buy a product, I believe that affordable green products
called specialty green products. For these customers, the fact that
(Priced approximately 5 dollars more than the similar non-green
a product is green is a primaryperhaps the primarybenefit the
product in-store), are the way to go. Instead of replacing all the
product can bring. Its noteworthy that a lot of the people postproducts in a store with green products, a company could run a
ing here on behalf of those products and customers come from
line that they could do this with. Many apparel retailers have had
smaller companiesbut its also historically true that some pretty
success with this.
big outfits (e.g., Body Shop) can serve this group of customers. Its
H&M had a great line in their stores a few seasons ago that not
also noteworthy that the size of this segment varies by geography;
only was affordable, but extremely trendy and flattering as well. The
its lots larger in Europe, for example. Also larger in Europe is what
final bonus benefit was that the styles were
one might call the anti-non-green segment.
all made with organic cotton. Forever 21
For example, genetically modified foods
sold trendy patchwork waistcoats and tees
(Frankenfoods, they are often dubbed) are
Resources
made from recycled clothing. In addition
much less acceptable to mainstream Euto being green, this line was a great way to
ropean consumers than they are to North
Marketing Malpractice
use up fabric from styles that did not sell.
Americans.
Harvard Business Review
I firmly believe that apparel companies
Strand #2: Products that are made in
by Clayton M. Christensen,
can have a lot of success if they consistenta green way. For most consumers, green
Scott Cook, and Taddy Hall
ly run an organic cotton line that is only
isnt the primary benefitbut its nice to
made in green factories. But only if they
have. For me, its more important for a
price it at almost the same price as their
duvet to be warm than for it to be green;
current products.
all else being equal, Id pick the green one, but Id have to be sure
In addition to the sales benefit, a company will be perceived
they were equal. Regardless of the consumer preference, however,
as being green without too much risk on their part by going this
theres much to say for green product development and producroute. However the message of the line must be clearly advertised,
tion, not for the sake of greenness, but for the sake of superior
whether it is through hangtags, or store signage around the line in
product development and production. Im reminded of
order for it to be truly successful.
the great counterintuitive epiphany that
drove Total Quality Management: the realizaManjula Charles
tion that quality saved money rather than costing it. (Why is there
Marketing amnesia
never time to do it right, but always time to do it over? read a sign
I would say the biggest sin of marketers in general is marketover the desk of a production executive I knew.) Weve been talking amnesia, i.e., the unfortunate tendency to forget over and over,
ing (in strand #1) as if green is a cost; but might it not actually be
marketings basic premise: if it does not solve real user pain, forget
true that its a source of saving? That parsimonious design, developabout it. I just wrote a post elaborating on Steven Bishops article,
ment, and production would yield benefits in elegance and in cost?
at: http://lamarguerite.wordpress.com/2008/01/27/green-marketThat materials chosen and handled according to Bill McDonoughs
ing-remember-its-about-solving-peoples-real-problems/
cradle to cradle principles (ably described in Greg Unruhs Biosphere Rules in Februarys HBR) would result in better products
marguerite manteau-rao
with lower costs of production and ownership? That products that
Stevehow right you are
are green from the ground up could have fundamentally differIf I may, I think its worthwhile to add a few thoughts, though,
ent economics and markets from products that start dirty and are
because I believe that green attributes can and should actually encleaned up by re-engineered processes? Might there be, for climate
hance the ability of a product to meet consumers aspirations
in particular and green in general, an equivalent of W. Edwards
So, here is the shameless request to check out my blog for
Demings 13 points? And where would we find itor should we
more information: http://www.checkoutblog.com/entries/categostart drafting it here?
ries/144/default.aspx
Tom Stewart, Former Editor of Harvard Business Review
Rand Waddoups
Senior Director, Wal-Mart
Frankenfoods and Total Quality
It seems to me that there are two strands to this thread:

Strand #1: Green marketing.The consensus of what people are
saying seems to be that there is a niche group of consumers who are
eager for explicitly green products and responsive to companies and
Quality wasnt free, but is it green?

A big Thank You to Tom Stewart for seeing the forest for the
trees in our discussion. I am taken by point #2 and the idea of cost
savings. Perhaps what we are looking for from the Quality Movement is the equivalent of Joseph Jurans assertion that Quality is
Free. Actually, quality wasnt free. It required up-front investments
up-stream to design out wastes, but it paid for itself in the long
14

looks like a science fair project and requires maintenance, and I

probably wont recoup my costs in the time I own the home. Even
the most virtuous will have a hard time justifying solar. Yet solar is
focused on designing cheaper, more efficient panels (supply side)
and not addressing what the technology enables (demand side). It
offers no improvements to homeowners day-to-day lives, it is unable to connect with mainstream consumers, and the result0.1%
market share.
What residential solar needs is to design a new value proposition,
a real offering that creates value for people, and a marketing a message that engages people in a meaningful wayin essence, design
and marketing hand in hand.
Green market expansion
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run. Cleaning up and re-engineering existing processes for environmental reasons is an expensive proposition. This is why companies
prefer to leave the factory untouched and bolt on a filter or smoke
stack scrubber. This type of end-of-pipe technology still accounts
for over two-thirds of environmental capital expenditures. But it
has long been said that 80% of manufacturing and life-cycle costs
are locked in once the designer passes off the blueprints to the production team. It also makes sense that 80% or more of environmental impacts are also baked in at the design step. The numbers
point to an opportunity. Design out wasteboth
economic and environmentalat the beginning and you get a double pay off in greener products and greener
bank account.
In the energy arena, these win-win opportunities are legendary
and never seem to fail to surprise managers when they are discovered. BP thought it would be a serious stretch goal to reduce carbon
dioxide emissions 10% by 2010. They did it by 2001 (nine years
ahead of schedule) while generating over $600 million in savings.
Green is Free?
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Design and marketing are interdependent
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Toms comments get to the heart of this discussion:

designing green products (the supply side), and
marketing them (the demand side). As he points
out, both are inextricably linked. Dealing with
each separately leads to what we have todaygreen
products for a niche market, or a green message that rings hollow
with the mainstream. Together, they create offers that deliver true,
desired value and tell the green story themselves.
The best marketing execs realize this. They are not myth-makers,
they are designers. The marketing message needs the offer to back
it up. And the offer is the message, or it should be. Design and
marketing inform each other.
When disconnected, you end up in ARODs situation. What
I read in ARODs post is I tried green and my customers dont
want it. They dont get the message, they arent ready for it, or they
need to be educated about the value of the green product.
Companies often fault marketing for not connecting to or educating the consumer. However, its important to note that neither
marketing nor design will change people. The offer must be designed to fit their lives and communicated in a way that is meaningful to them for the marketing to work. In other words, there is
no such thing as people failure, only design failure. If you need an
educational campaign or a bigger megaphone to communicate the
value of your green offer, thats a sure sign of design failure.
For example, the solar (photovoltaic) industry has struggled a
long time with design failure in the residential space. If the promise of residential solar has been low cost, clean energy, and its
still less than 0.1% of energy generated in the U.S., is this because
people need to be educated about the virtues of residential solar?
Look at it from the homeowners point of view. To install a home
solar system, I need to put holes in my roof to mount a system that
The need for Green products is actually universalthough for

more people than less it is a latent/hidden need. Quite unlike
the way marketers created a need for soft drinkswhich certainly
could have been taken care of with plain water as welleveryone
on this planet stands to benefit from green products.
One very important point that we as human beings cannot overlook and that has been a part of civilizations since inception is the
regulatory framework. Some of the State electricity boards in India
have made it mandatory that an X percentage of the electricity production has to come from alternate/renewable sources of energy.
There has to be political and business buy-in for green products.
Once that is done the market automatically expands.
Gaurav Maleri
Reliance Capital, Mumbai, India
How do you define the green consumer?

I chuckled to myself when I read about the illustrious green
consumer, because there isnt a green consumer or a non-green
consumer. Instead, we have found a segmented landscape that, in
its entirety, might define the green consumer, and yet no two
green consumers look alike, even within

one segment. (Thats because no two people are the same,
green or not.)
We use the idea of enlightened self-interest when looking at the
green consumer. Two variables, enlightenment (or altruism), and
self-interest, each weigh in to varying degrees on a consumers decision making in the market. The majority of consumers will look for
one or more primary brand driver that satisfies self-interest (cost,
efficacy, style, convenience, taste, health), and then secondarily, a
brand driver that satisfies the enlightenment or altruism component which serves the greater good (and it can be easily argued,
another level of self-interest). Mainstream green consumers are
looking for the first, with the second providing a halo effect. The
very small population of core green consumers weighs the second
much more heavily, even outweighing self-interest at times.
But the drivers of green end up being mostly self-interest
related. For example, organic food is not driven
by environmental effect at all, but rather

health. Except for the Prius, hybrid cars are popular for mile-
15
On the one hand, Bubble Wrap allows companies to protect their

products with less packaging material compared to alternatives such
as loose fill or paper. Sealed Air, the manufacturer of Bubble Wrap,
also encourages customers to reuse the material as much as possible
to delay [its] final disposal and reduce the amount of materials
needed to manufacture new products. On the other hand, Bubble
Wrap is a petroleum-based material, a co-extrusion of nylon and
polyethylene that cant be processed at many municipal recycling
locations. Sealed Air has seven sites where customers can ship used
material for recycling, but customers have to pay for shipping and
the wrap must be free of tape, labels or any foreign materials. (In
this case, its important to note that the product is being promoted
as green by the retailer, not the manufacturer).
This example illustrates an inconvenient truth of many so-called
green products and initiatives: there are trade-offs that companies
and consumers must acknowledge and address. Negatives may still
Marty McDonald
exist, even if the net results are positive. Its like prescription drugs:
Green also means toxin-free
you can take a little purple pill to treat your heartburn, but you
I agree with Tom Stewarts assessment that there are two differmay have to deal with headaches, diarrhea, and dry mouth in the
ent threads here. I am almost hesitant to do it, but I think there is
process.
also a third.
Trade-offs exist because most products, manufacturing processes,
It has to do with growing consumer demand for products that
and supply chains were not designed with sustainability in mind.
are green in the sense that they are safer to use and toxin-free. Items
Although sustainability is weaving its way into the industrial world,
in this arena would be lead-free lipsticks,
change will occur slowly, so companies
paraben-free cosmetics, organic foods,
and consumers will have to manage these
green dry cleaning, plastic bottles that
trade-offs for many years to come. But
Resources
dont leach toxins, toys and jewelry that
what are the trade-offs? Unfortunately,
dont contain lead, etc.
you wont find the answer in most articles
The Biosphere Rules
This is a different consumer driver than
about green and sustainability.
shopping for green to reduce ones impact
For example, Ive read countless articles
by Gregory C. Unruh
on greenhouse gasses. People seem to be
highlighting the energy-saving benefits of
waking up to the possibility that long-term
compact fluorescent lights (CFLs). Acexposure to a toxic swill of these kinds of
cording to ENERGY STAR, if every
components might be at the bottom of some of the health issues
American home replaced just one incandescent bulb with an ENwe face as we age as a society. It is very personal and is connected to
ERGY STAR qualified CFL, we would save enough energy to light
the broader movement towards healthier living.
more than 3 million homes for a year, more than $600 million in
We find on TheDailyGreen.com that stories related to this variaannual energy costs, and prevent greenhouse gases equivalent to the
tion on green content are among the most popular on the site.
emissions of more than 800,000 cars. Its the feel good story of the
moment, which is why Ive replaced most of the incandescent bulbs
Deborah Jones Barrow, Featured Contributor
in my house with CFLs.
Defining green is not a trivial task
But I cant recall a single article shedding light (no pun intended)
Im learning that green doesnt go with everything, like those
on how these bulbs contain mercury, on how consumers shouldnt
strange-shade-of-green pants abandoned in my closet. The last time
throw them away in the garbage, or what to do if you break one
I wore them, all it took was a raised eyebrow from my wife for me
at home, as happened to me (see EPA site for what to do). Unlike
to head back upstairs, head-down defeated.
some folks writing on this topic, Im optimistic about Wal-Marts
These days, its me doing the eyebrow raising, as Im bombarded
commitment to sustainability, including its actions to promote
with ads and press releases linking green (as in environmentally
broader use of CFLs. But if you go to Walmart.com to buy a CFL,
friendly) with all sorts of products and services. Is Bubble Wrap,
youll see plenty of information about the cost and energy benefits
for example, a green product? The folks at Shoplet.com think so.
of the bulbs, but no mention of mercury or responsible handling
The product is included in the Shop Green section of its website
and disposal information.
(tagline: Save Money, Save the Planet), along with telephones,
Granted, the amount of mercury in each CFL is miniscule comcameras, pens, and other items that contain recycled or recyclable
pared to old thermometers. And earlier this year, lighting company
materials (apparently, recyclability is the only criteria Shoplet.com
members of the National Electrical Manufacturers Association
used in making its green selections).
(NEMA) voluntarily committed to cap the amount of mercury in
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age and petrol savings reasons, not environmental. In each case, a

specific product or service needs to take into consideration its audience and what their needs are. Strategic brand planning helps
unearth those needs and lead to consumer insights which help us
craft effective communications strategies.
After several national surveys and meta-analyses, we have found
that people for whom altruism and consideration of the greater
good factor into purchase behavior is marginal.
All of which begs the question, How does Steve define the green
consumer? Often, companies launching a product or service or
brand that has a green component (meaning environmental attribute) will target this small core green consumer first, and then try
and grow appeal outward, but must adjust messaging accordingly
to shift appeal from the enlightenment aspect to the self-interest
aspect.
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4) Entertain. Tell interesting stories about local businesses and

people who adopted it.
CKE
The importance of green cred in the

marketplace
Tom Stewarts comment reminds me of something we at

GreenOrder.com see with increasing frequency: Companies that
want to market green before they probably should.
Executives will say, Were doing all these terrific green things
but were not getting credit in the market. Can you help? We
will then review the companys environmental recordits principles and goals, operating practices, product features, and so on.
And it often turns out that the company is doing a lot to improve
environmental performance, but those actions may not be strategicwhich is to say, theyre not creating value for customers and
other stakeholders. The company then gets frustrated that theyre
expending resources to tell their green story publicly, but without
much in the way of results.
The issue here is one of priority: Unless they are real pioneers in
sustainability, most companies need to focus more on embedding
efficiency, environmental performance, and other green values into
the DNA of the company. They need to align their green initiatives with other core business goalswhether thats growth, entrance into new markets, cost cutting, etc. And they need to craft a
sustainability strategy that is: relevant to customers and other key
stakeholders; differentiated from the competition; credible to the
broadest array of stakeholders; and effectively messaged, so that
complex science is translated into compelling proof points.
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each 25 watt or less CFL at 5 milligrams (see March 13, 2007 press
release). Also, a coal-powered plant releases more mercury powering an incandescent lamp, over a five year period, than a comparably luminous CFL.
So, yes, the benefits of CFLs far outweigh the negatives. But if
these negatives are not recognized and dealt with effectively, are
we really making progress? Taking five steps forward and one step
back keeps you moving in the right direction, but eliminating the
backward step will get you to the final destination faster and with
less negative impact on the environment.
If recyclability alone does not define a green product, what does?
Being made from natural materials? Helping to lower greenhouse
gases? Asbestos is made by Mother Nature
herself and its insulating properties help reduce energy use,
leading to lower carbon dioxide emissions. Viewing asbestos from
this perspective only, its irresponsible for us to spend billions of
dollars on lawsuits and asbestos-removal projects to eliminate a material that can significantly lower our carbon footprint. But as radio
legend Paul Harvey reminds us each day in his broadcast, knowing
the rest of the story helps us to reach more accurate and complete
interpretations of history, people, problems, and opportunities.
Defining green is not a trivial task, especially when trade-offs
exist. Several organizations have developed certification programs
in this area, including MBDC and The International Oeko-Tex
Association. The Federal Trade Commission (FTC) is also tackling
this question, announcing in late November that its beginning a
regulatory review of its environmental marketing guidelines (last
updated in 1998). The FTC was planning to review the guidelines
in 2009, but because of the current increase in green advertising claims, the Commission is reviewing the guides at this time to
ensure they reflect todays marketplace. I hope this means Ill be
raising my eyebrows less next year.
As for my pants, the rest of the story is the same: theyre still
hanging in the dark corner of my closet. The holidays have come
and gone, and although I received several nice shirts as presents,
none of them match the pants. So Im going to wait a few more
months and see what happens on my birthday. If no luck, Ill give
the pants to my kids, let them make dragon and frog puppets with
the fabricafter I test the pants for lead, of course.
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Adrian Gonzalez
Suggestions for AROD: sustainable energy
Do
1) Enable community identification. Let consumers form their

own buying groups with volume discounts. Have their group affiliation and special rates show up in their monthly bills. Bigger
groups enable bigger discounts.
2) Have iconic symbol. Give customers artsy lawn statues or signage indicating their participation
3) Inform. Print an extra page in their monthly bills showing
that months spot prices and suppliers for the utilitys green energy. Also show how that compared with that months spot prices
and suppliers for dirty power supplied to the utility. Show how the
power got to their house.
Andrew Shapiro, Featured Contributor
How should companies pursue the green

agenda?
Steve Bishop makes the valid point that there is no room for
most large companies to exist exclusively in the green consumer
market. Thanks to effective marketing, people believe that consumption embodies their values. It is also true that people will go
out of their way to be consistent; if people buy products marketed
primarily as green, would those purchases open a Pandoras box of
ethical judgements? Would they question the car, the holiday, etc.?
The crux of this discussion is sustainability as a strategic issue.
Broader perspectives based on government, business efficiency,
consumer and inter-business relationships give a more substantial
measure of where the widespread green conciousness is heading.
What is needed is a strategy of increased resource efficiency. I
would not make this case on the recent groundswell of consumer
interest alone. I do make the case based on several mutually supportive drivers coming together. Firstly, as businesses look more
closely at manufacturing, packaging and transport they are realizing that this is smart business. Resources have a cost, and increasingly so too does all sorts of waste including greenhouse gases. An
example of reducing resource usage that I am familiar with is from
Boots, the pharmacy in the UK that is vertically integrated, making, transporting and retailing many of their own products. Boots
studied the carbon footprint of their shampoo and discovered that
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by using recycled PET in their bottles they could gain a green ad3. Manufacture with intent for recycling. (Carefully choose mavantage and save money. This works for their profits, the environterials, take care on choosing glues and resigns, decide on disasment, and the brand; in the UK it is striking that even people who
sembly method.)
arent at all environmental are often passionate about recycling and
Improving performance in these areas often leads to win-winconsider those who dont to be lazy. Recycled bottles are a subtle
win results for cost-environment-brands. However, businesses
way to use less resources, save money, and have a marginal advanshould also realize that there are very real risks of market loss and
tage over competitors, certainly an advantage with eco-shoppers
regulatory costs if innovations in these areas are not made.
but also with many average people.
Further reading:
But saving money, protecting the environment, and appealing to
Amory Lovins, Natural Capitalism
customers may not be enough; the real danger is Wal-mart, Boots,
Kenny Tang, Carbon Down: Profits Up
and British Telecom, and all the other organizations that are startWilliam McDonough, Cradle to Cradle
ing to add environmental performance to the criteria that they have
for stocking or procuring goods. Environmental score cards are enCalvin Jones
tering the arena and you dont want to come last (it will cost your
margins or even the deal) and the likes of BT are taking on proQuestions about Mainstream will go green
curement standards that forbid them from purchasing technologies
I received an e-mail about the comment I made previously and
that arent more efficient than the pieces they replace. Business is
thought I would answer the request to name a study that shows
being pushed by cost reductions from resource savings and pulled
that consumers have varying concerns about how green their purby demand from customers and other businesses. These forces are
chases are, depending upon the product category. One report I
acting now, but there are others which promise to become an even
had in mind was presented by The Hartman Group at the Green
more prominent concern.
Business Conference in San Francisco last November. See my post
Asia is in the ascendency, the developed world is undergoing a
about the presentation: http://ecopreneurist.com/2007/11/09/themassive expansion, our reserves of resources are not. Resource inefgreen-business-conference-entrepreneurs-step-up/.
ficiency, which under close inspection in recent time, appears to be
Yankelovich has also made a number of presentations about their
at often embarrassing levels, is going to become about the biggest
differentiation between green attitudes and green behaviors, claimcrime in business.
ing that behaviors, such as buying local fruits and vegetables, can
Reducing the amount of packaging on a product is an interesthappen well before the same consumers have a conscious concern
ing example of the sort of virtuous cycle that we need to be looking
for the environment.
at. Reducing the amount of individual packaging saves packaging,
Leah Edwards
it also saves boxes that these packages go into, which corresponds to
fuel usage. That is a small step, and Wal-mart is reporting these savSupermarkets going green
ings in the hundreds of millions. A larger change, the sort of thing
In the UK there is some consumer interest in green products, but
that might give you a real advantage, would be doing away with
as Tom outlined, the market divides into a relatively small though
products and selling services. If your customer needs large volumes
growing segment who are willing to trade price for sustainability,
of solvent which are expensive, perhaps
and the majority for whom price and peryou could start collecting the solvent once
formance rank well ahead of sustainability.
it has been used and purifying it before
Green consumer issues are having a
Resources
renting it out again. Du Pont decided to
significant indirect effect in particular
do just this. Or how about people who
on supermarkets, inasmuch as there is
Marketing Myopia
need good quality flooring? Sometimes it
growing consumer expectation that they
goes bare in small patches but the whole
should ensure their practices and prodby Theodore Levitt
carpet is replaced. Now flooring services
ucts become more environmentally sound.
are offered by Interface and an annual fee
Consequently supermarkets are addressis paid, carpet tiles are used and replaced
ing sustainability issues such as packagas required.
ing, delivery process, reducing use of plastic carrier bags with their
The key areas of work for greening a product (not necessarily
supply chains, as well as growing certain sustainable product lines
the brand) are:
such as energy efficient light bulbs. A year ago such action was
1. Minimizing resource usage. ( Can you remove packaging or
still quite novel, but as the level of engagement on these issues has
manufacture the product more efficiently, or even provide service
increased, most of the main supermarkets are now adopting simiinstead?)
lar programmes. Consumers may not elect to buy more expensive
2. Minimizing lifetime input. (Make made to last a brand priproducts that are labeled green, but, given a choice, they may elect
ority, offer repairs, reduce energy use and promote as energy savto do the weekly shopping at the supermarket that they perceive to
ing)
have the greener agenda.
Vanessa Havard-Williams
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Green industry is expanding but disorganized
that they are paying for). Many seem to feel that it is not they as
an individual that should be paying to protect the wider society.
Companies that are truly green should surely offer these benefits as
standard, because if they charge the customer for them, then they
cant really take the credit themselves. As has been noted though,
the environmental issue does present many cost-saving opportunities, and as a catalyst for innovation can create a wide range of commercial opportunities if companies are open to explore new ideas
and business models.
Tom Greenwood
What does green mean?
Getting away from the trees in the forest and soaring high up,
I have come to believe that we have only accidentally overlapping
ideas of what we mean by green. Recovering toxic materials from
CPUs and recycling copy paper are quite a bit different, even if
some claim them to be somewhat the same.
In a real sense, everything produced falls into categories of: inert, biodegradable, reusable, and recyclable; if none of these, then
TOXIC. These all require very different approaches.
I suggest a three-axis (3D) model to provide an organizing perspective: How serious the issue (product), Intensity of concern by
a relevant audience, and How Many Dollars to rectify. It is only
the barest of starts, but will obviate the tons of ink so ungreenly
expended talking past one another using the same words and meaning different things.
tC
op
yo
This is a highly important discussion for us at LivingECHO.

Were constantly researching the Green Market Segment and were
finding a lot of conflicting information out there. However, I
would have to agree with a previous poster stating that the average
consumer does have an increasing awareness of sustainability and
environmental awareness.
Recent reports find that 72% of U.S. consumers believe their
purchases have significant impact on society and on the environment. Shockingly, 71% of consumers also mention that they are
somewhat likely or very likely to pay a 10% premium on green
or sustainable products.
The fact is that the green industry is expanding and is highly
disorganized. As our government is doing very little to address the
issue of global warming, more Americans are looking towards businesses to lead the way in sustainability. They are expected to do
this by either offering green products and/or by minimizing their
carbon footprint through sustainable practices in the workplace.
I do agree with Steve Bishop in the sense that marketing outside
of the core green consumer is imperative for the purpose of expanding that segment base. Although, I disagree in the sense that I think
that the environment should still be the focal point in the marketing campaigns. People need to get the point drilled into their heads
that our environment is in crisis and more needs to be done.
We feel that corporate social responsibility (CSR) is going to
play the leading role on the green stage and then trickle down to
the general public. It is corporations that got us here in the first
place, so we think corporations should take on the responsibility
of reversing the tide. LivingECHOs strategy for creating a more
sustainable world includes: an eco-friendly comparison shopping
site for the retail and wholesale consumers, a central networking
space for business solutions, open source information, the ability
to self-publish at no cost, and the ability post eco-friendly products
of your own.
Closing the gap between the green consumer and the non-green
consumer is based on price and image. If green products
rP
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No
are just as cheap, useful, and look just as

good or better, then the public will fol
low.
Abram Santa Cruz
More on greenwashing
Do
Here in the UK, there has been huge cynicism developing lately
about companies green credentials because businesses have gone
mad sticking eco and green on everything they possibly can.
This is actually reflecting badly on companies in many cases. Those
benefiting are those that treat their customers as intelligent people,
and demonstrate their greenness with integrity and transparency.
In many ways its those shouting about it that appear the least authentic.
Then I think cost is the other big issue, because no matter how
environmentally friendly many people would like to be, few are
prepared to pay a premium for it unless it comes with additional
benefits such as improved quality or performance (but then its
Hugh Sloan
Response to Andrew Shapiro: GE versus BP
Andrew wrote: It often turns out that the company is doing

a lot to improve environmental performance, but those actions
may not be strategicwhich is to say, theyre not creating value
for customers and other stakeholders. The company then gets frustrated They need to align their green initiatives with other core
business goalswhether thats growth, entrance into new markets,
cost cutting, etc. I like that. Weve seen companies that have done
that successfully (or successfully so far): GEs Ecomagination initiative (which Andrew helped design, right?) (1) gave GE a new
way to drive cost-cutting, which is deep in the companys culture
but can always use fresh impetus (2) created a market pull for the
companys new GE Infrastructure business unit, which was an agglomeration of assets in energy, water, and other areas that wanted
an organizing theory, a strategic vector, and (3) provided a rallying
cry for the companys decision to build up its marketing function,
which had been deliberately left to rust for some 20 years. Presumably it had other benefits as well, but thats a pretty fair description
of how Ecomagination was strategic for GE.
On the other hand, British Petroleum (I mean, BP) also had
and has strategic reasons for going green. It, too, has done a pretty
good marketing jobgiving itself a pretty green flower logo for
its gas stations, producing classy beyond petroleum commercials.
The company also spent, and spends, a lot of money in pursuit
of renewable energy sources and in developing carbon sequestration technologies, etc. I was at a conference in London a couple of
19
Tom Stewart, Former Editor, Harvard Business Review
Sell products that do no harm
require us to do? Second, and often the most difficult, how can we
do so in ways that create value for our business? Managers trip up
on both these questions. First by doing things that, while may be
good for society, have no real ties to the business. Second, by doing the right thing from a social or sustainability perspective, but
failing to structure it in a way that creates business value. Solving
both of these problems simultaneously requires real leadership and
insight.
GE versus BP: Whats different?
GE and BP are both making real efforts in their

pursuit of sustainability and marketing them aggressively. Toms question gets to why BPs message
isnt sticking as well as GEs. Whats different? The
answer can be found in the offer.
op
yo
weeks ago with BPs chief scientist, who spoke not only eloquently
but with solid, smart business sense about BPs strategic vision of
the future of energy. The companys long-term future is clearly dependent on its being able to operate and profit in a carbon-constrained world (a topic well discuss later on HBRGreen.org).
Now, both companies also have their environmental back pages
and theyre not all pretty: PCBs in the Hudson, problems in Alaska,
etc., etc. So the fact that BP isnt beyond petroleum (or beyond reproach) doesnt explain why it didnt get traction but GE did. What
I wonder is this: What could BP have done differentlyor what
should BP do differentlyso that it can actually develop and sell
to a green consumer? Anything? Or is there something in the GE
vs BP comparison (or some other comparison you think is better),
that sheds light on this green-consumer topic, or on how to get a
strategic approach to green products?
rP
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No
tC
Consumers, by and large, want to make the right decisions,

yet manufacturers and producers do not make it easy. If there is a
cheaper cleaning product, which contains VOCs for example, and
a slightly more expensive brand which contains no VOCs, the consumers on average will select the lower cost product.
The sellers of the product containing harmful VOCs are culpable in contributing to the problems left for society to deal with
while they keep their shareholders happy with a higher profit.
Responsible producers, interested in providing viable solutions,
should be selling products that do no harm.
Im glad individuals are taking their small steps but we really
need big leaps. Greenwashing should not be allowed. By default
we are licensing companies to continuously contribute to the cumulative problems for short-term economic benefits at the expense
of long-term health benefitswhich affects green and non-green
consumers.
The consumer is at the end of the chain and relies on responsible
suppliers to provide products which have everyones interests at
stake. Consumers will make informed choicesbut the marketing
noise often drowns out the better choices. As long as companies
can legally make and market any product meeting their legal requirements, then voluntary standards will only appeal to the minority of green consumers.
Although this focus is on greenI think it should shift to the
broader issue of reducing carbon emissions and conserving resources. The carbon emission reduction issues are industrial-based and
make the green choice issues pail by comparison.
Do
larry berglund
Response to Andrew and Tom:

The real management challenge
For companies that have gotten past the debate over whether
they have responsibilities that go beyond increasing shareholder
wealth, creating jobs and useful products for the market and following existing laws (this debate still continues in many quarters)
the challenge is twofold. The first is what does this responsibility
Long Term Versus Short Term

Because of its business structure, GE can offer consumers ways
to address sustainability now, in the short term, with things like
compact fluorescent lights (CFLs), perhaps the most visceral embodiment of green today.
BP does not have that luxury. It realizes

petroleum is going to stop being a viable
business and is pursuing a slew of real,
long term solutions in low-carbon power, like car-
bon sequestration, solar, wind, and biofuels. But with immediate

energy needs to meet, their most tangible offer to consumers in
the short term is still gasoline, one of the most visible catalysts of
climate change.
Marketing campaigns, regardless of how sophisticated they get,
rarely speak louder than what it is the company offers to consumers,
which demonstrates the thesis of this discussion: The offer is the
marketing message.
Real, Relevant, and at the Right Time
What companies like BP are struggling with is making their real
long-term accomplishments relevant in the short term. Lets look
at BPs gas station concept. Its an admirable feat of green construction, but how does this make its investments in low-carbon power
or carbon sequestration relevant to me today? After all, until biofuels are available, Im still buying gasoline.
To make long-term efforts as relevant as CFLs, BP might engage
people in new ways at their primary touch pointthe pump. What
if my receipt revealed how much of my gas purchase will go into
low-carbon power development, or for repeat customers, gave me
a low-carbon efficiency rating? What if carbon sequestration came
with each gasoline purchase?
Perhaps the key for BP is to get beyond the traditional touch
point and create new offers that are as relevant to consumers everyday lives as CFLs. What if every BP station offered plug-in fuel consumption meters like those found in hybrid vehicles, but worked
20
for any car? What if they gave prizes to the least carbon-emitting
drivers?
What kind of new positive behaviors would these concepts inspire, and how would they change their relationship with consumers? Initiatives like these start new conversations rather than having
the same conversation in a louder voice.
But whats most gratifying is the number of other rich insights

weve unearthed in the process:
The action gap

While over 70% of their customers self-declare as environmentalists, when offered the opportunity to purchase climate neutral
energy for a few bucks a month, less than 1% signed up.Gregory C. Unruh
Personal needs come first

What my 20 years of experience tracking green marketing campaigns suggests, is that the most successful green marketing appeals
underscore the primary benefits of greener products and incorporate environmental benefits as an added plus.Jacquelyn Ottman
op
yo
Implicit vs. Explicit

Timing is also important and Andrews comment about timing
is a good one. Most companies feel that if they invest time and
energy in pursuing green, they need to leverage it immediately. But
real green efforts can be marketed either in an implicit or an explicit way. Had BP been implicit about its efforts at the new station,
then explicit when they had an offer to back up the green message,
theyd be in a better, more credible place. The station concept is a
good idea, but it does underscore the important decision market
executives must make between implicit or explicit messaging (more
details in the podcast).
rP
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Values
The final point is about values. Any business wanting to connect
with people on the issue of sustainability must, as Andrew points
out, [embed] green values into the DNA of the company. But
values go beyond metrics or business goals. They are emotional.
Beyond Petroleum has wonderful aspirational values. What BP
can focus on now is expressing those values in their offer.
Make it core to the business strategy

companies need to focus more on embedding efficiency, environmental performance, and other green values into the DNA of
the company. They need to align their green initiatives with other
core business goals.Andrew Shapiro
GREEN versus NATURAL versus ORGANIC

versus LOW CAL
Its about behavior, not things

Yes, it is not enough to buy a green product (or one labeled
as such), but we also need to change the way we use these
products.Adrian
The ability to impact our environment depends in part on a
shift, and Id argue a rather significant shift, in the habits and decisions consumers make. It also highlights a weakness of the product
cycle in many cases.M J Fair
One of these terms (organic) has an agreed upon definition,

while the others dont.
It strikes me that most of these terms are marketing wash. Already the green movement has been discredited, in my view, by the
flood of green products. There will be a robust market for ill-defined green products just like there was for low-cal cookies.
People wont pay a premium for green alone

One mistake is to assume people will pay more for a green product. While it is true that people will pay a LITTLE more for a truly
outstanding product, there must be an additional benefit.Victoria Duff
tC
No
Isnt the consumer really asking, Give

me what I want, but put the politically
correct, currently fashionable label on it?
Paul Baier
Discussion leader Steve Bishop wraps up:
Thank you, everyone
Do
In two weeks, weve had almost 80 insightful posts

from a diverse group of responders: marketing execs of companies large and small, consultants, designers, VCs, heads of utilities, academics, not to
mention Gardiner Morse and Tom Stewart of Harvard Business Review.
The original thesis, Dont bother with the green consumer,
seems to have held up fairly well throughout. As Ravi Dhar affirms
If you think of [green] as a niche, believe me, you will remain a
niche.
Connect to consumers through value and values

Green pioneer companies very often create the demand for
their goods and services, usually slowly and patiently over years,
and often because they themselves felt so strongly about the issues
involved.Rodney North
Consumers, by and large, want to make the right decisions, yet
manufacturers and producers do not make it easy.Larry Berglund
In my experience as VP of Marketing for two leading green
brands, the core issue was identifying where green was relevant to
creating value for our customers.Karen Martinsen Fleming
Educate the consumer
[We have] a profound environmental illiteracy. We can change
that, since it is a matter of educating, informing and sharing
data.Isabel Rimanoczy
21
Note: Although this came up a number of times, my position

remains the same: If you need an educational campaign to communicate the value of your green offer, thats a sure sign of design
failure.
Seek competitive advantage
those companies that can demonstrate that their products
provide positive environmental benefits and address consumers
needs are and will continue to enjoy a competitive advantage and a
positive reputation for innovation and social responsibility.Stephen Ramsey
matic increase in their renewable energy customer base (hundreds

of thousands). They have also increased the minimum percentage
of their base renewable energy package from 10 to 20% and still
saw sales increase.
The above company also owns another retail brand in another
country. Management in that company is unclear about what to
do with climate change and how it canwill affect their business
or customer perception. They also struggle with getting their green
offering off the ground. Owned by the same corporationjust different management.
There are also renewable only energy retailers that have not seen
their base grow as much. There are many factors that can help customers buying from you. Transaction buyers will always look at the
cheapest price and think of green lastbut there is an increasing
customer basethat will buy a skirt or dinner less to become sustainable and that is another indication that we are changing and
sustainability is becoming a value.
As for Arod, I would go back to the drawing board and explore
what went wrong or why it did not work.
The reality is though that if as a consumer, you are struggling to
pay your home loan and make ends meetyou may not have the
money to pay extra for renewable energy and hence are forced to
buy the cheap stuff that is not good for you.
A start up energy company in the Netherlands took advantage
of the deregulation of the market in 2002. Their objective was to
supply to their customers what was better for the environment and
more sustainable. They engineered their entire business so that
they could call a prospective customer and say: Would you like
to spend less on your energy bill and would you like it to be 100%
renewable? The obvious answer was yes and the result was that
the company was sold after 3 years for some 150 million Euros
to a British conglomerate. No billboards, no TVjust call centre
operators.
I think the title is a bit black and whitebut sometimes that generates a lot of opinions and views and an interesting threadlike
these 80 odd posts. I think it would have been more appropriate if
the quotation marks were used for the word bother rather then
green.
As far as educating people and failure: There are campaigns that
focus on alcohol abuse and smoking and the value of not consuming them. In Congo they have billboards that communicate that
raping a woman is not good. Sometimes you cannot get away from
educating the customer and I think we do not know the sustainable
alphabet very well and hence there will be a lot of requirement for
education. So the component of failure can be people NOT redesigning their behavioral patterns. And of course there is a lot to be
said for the strength of simplicity.
op
yo
We also had a number of great questions. I think it would be

most appropriate to wrap up with this one from Tom Stewart:
Might there be, for climate in particular and green in general, an
equivalent of W. Edwards Demings 13 points? And where would
we find itor should we start drafting it here?
The points above are a great first draft. Thanks again and I look
forward to seeing how the thinking on this topic evolves from
here.
rP
os
t
There is no longer a quintessential

green person
Do
No
tC
There now are shades of green and University of Tasmania has

even done extensive research on how many shades of green there
are, their associated attributes and their demographic. You can even
see that George W. Bush is a shade of green, based on statements
he makes today about climate changeregardless if you doubt his
integrity. If you would have heard him make these statements three
years ago you would have wondered if he had joined the greens.
I think in the end it is about being sustainable, which causes
balance and takes away risk. Today the words carbon and green
are heavily usedbecause the words mean something to us and
put things into some context. Over time, people and business will
abuse these words and we will come up with other words to describe becoming more sustainable.
Todays customer is quite informed. They
share opinions and ratings of companies, and it may well be that
companies that have never thought about being sustainable are going to suffer over the next decadesif they are engineered in a way
that does not allow them to change. The ones that started down
the sustainability path years ago will have that advantage over their
competitors.
Recent UN research echoed by many other research reports indicate that because of climate change, the concept of the environment
or green has moved away from being a cause to being a core value
(Maslow). Thinking about sharing these values with your customers seems to be the next logical step. Globescan recently conducted
research across 22 different countries where 81% of the people in
Australia expect they will need to pay more for energy due to climate change. Do they want to pay more? No of course not.
Now while all of this is nice research, here are some numbers (for
Arod): one of the largest energy retailers in Australia has seen a dra-
Hans de Kraker, Sydney, Australia
Being green is a side benefit

We develop GIS software for businesses and governments. Green
to us means building and delivering technology that helps them
make better decisions. Many of the organizations we work with
dont look at the whole picture when they make decisions. This
22
costs them money and impacts the environment. Our technology

allows them to take a geographic approach to problem solving. We
dont market this as being green but being smarter.
Linda Hecht
Hemp is a bad example
Im targeting the average consumer
Im currently engaged in a university project and its on green

roofs/walls (using plants, not painting them). My work is on targeting the average consumer, not the green ones for the reasons you
have stated so clearly. To me its obvious that if you want to market
something, dont look at the current market but at the future market and take the technology-push route. The average consumer who
doesnt see the point in making any effort towards curbing greenhouse gases, recycling, walking when they can drive, etc., is not going to give a positive response to building a garden on their rooftop.
However, if the point is raised that it will reduce their expenditure
on electricity by increasing insulation, use rainwater harvesting for
toilets to reducing water bills (where they pay) and other cost-cutting benefits, and even some aesthetic ones like birds, bees, fruit
(whether blueberries or apples) and so on, then the market uptake
will increase substantially, although it wont capture everyone.
So thats my view on it, and Im keeping your article to refer to!
op
yo
I enjoyed the article, but I do need to point out a flaw in using

hemp as an example of a green niche product that cant break out
into the mainstream. Hemp is hamstrung by the ridiculous tariffs
on imported hemp, not by any deficiencies in the fabric itself (it
cant be produced here since we dont want the farm workers and
factory workers catching a buzz. /snark). I would be happy about
wearing more hempand not because of any green attributes, but
because it is a wonderfully wearable and long-lasting fabricif I
could afford it.
rP
os
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Sarah
Do
No
tC
Sid Cullipher
23
You Are Only

As Green As Your
Supply Chain
op
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Featured from February 613
rP
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Supply Chain
Do
No
tC
ears ago Herman Miller decided to become an advois burned. We decided not to use it and did not allow our suppliers
cate for the environment, both because we believed it was
to use it either.
the right thing to do and because we saw the potential for a
2. Refine your goals and put them to paper. We aim to
clear business benefit. Ever since, weve been refining our processes
be fully sustainable by 2020, but were holding ourselves accountto put our aspirations into practice.
able to interim goals along the way. For example, by 2010, 50%
Our Perfect Vision campaign, launched in 2003, includes green
of our sales will come from products that conform to our Design
goals such as no landfill waste, no hazardous waste, no air or water
for the Environment standards, and we aim to reduce our environemissions from manufacturing, and the use of 100% green energy,
mental footprint by 80%. That means paying attention not only to
all by the year 2020. We cannot reach these targets without engagmaterials, including their chemical ingredients, but also to sources
ing over 200 suppliers in the ongoing task of greening our global
of energy, manufacturing processes, and packaging. We dont want
supply chain.
to reduce our impact in one area while ignoring it in another. Nor
As weve examined every aspect of our supply chain, weve
do we want to move our environmental impact upstream into our
learned one key lesson: A business can only be sustainable through
supply chain.
a holistic approach to design, raw materials, production methods,
3. Embrace transparency and meaningful metrics.
packaging, shipping, recycling, and even marketingacross the enLike any other management issue, what gets measured gets mantire value chain. Its far too complex an undertaking for any organiaged. At HM, we award points through our Supplier Quantification
zation to go it alone. You know the saying, It takes a village to raise
Process for formal environmental programs and active waste-reduca child. Well, it takes an entire supply chain to green a company.
tion programs. We rate our suppliers according to how effectively
Here are three things we recommend to companies working
they are working to help us reach our goalsfrom researching
with their suppliers on the long-term goal
alternative materials to incorporating our
of going green.
measurable targets into their flow charts.
1. Design your products with
And this is the crux of the issue: Were not
Brian
sustainability as a core principal.
only looking at our suppliers, but at our
Walker
At Herman Miller, we have a design-driven
suppliers suppliers.
is the CEO of
culture, so we spend a lot of time thinking
We have 12 years to go before reachHerman Miller,
about how to create our products.
ing our self-imposed deadline. By forcing
the office and
In 2001, when we were creating our
change outside our company as well as inresidential furMirra chair, we had been working with
side, we believe we can achieve this goal.
niture company
architect Bill McDonough and chemist
By following these three steps, we believe
known for its classic designsfrom the
Michael Braungart, both leading-edge
other companies can reach their green
Eames Lounge chair to the modern office
cubicle to the Aeron chair. The companys
environmentalist thinkers, toward their
goals as well.
furniture appears in the New York
vision of a cradle-to-cradle design that
How green is your supply chain? How
Museum of Modern Art and in museum
embraces sustainable materials in a closedmuch leverage do you have to improve it?
collections around the world, but its the
loop life cycle. As a result, we eliminated
What are your metrics for making it work?
companys long-standing environmental
the use of a chemical called polyvinyl
Does it take an entire supply chain to green
goals and socially responsible reputation
chloride in that chair. Now, PVC is dua company or do you think you can go it
that has gained new currency in todays
rable and inexpensive. However, it releases
alone?
marketplace.
toxins during manufacturing and when it
24
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You Are Only As Green As Your Supply Chain | Supply Chain
Do
No
tC
op
yo
Going green alone is impossible

also requires cooperating with our competitors. Sun and its comWith the complicated web of suppliers that ultimately contribpetitors often use the same suppliers. If we each impose differing
utes to almost any product these days, it is virtually impossible to
green requirements relative to reporting carbon emissions, and
think about reducing the environmental footprint of any given
waste disposal, etc., very little will get done, and what does get
company in isolation. Herman Millers inclusion of its supply
done will be very expensive. So we cooperate in these areas using
network is essential to its environmental strategy. Undoubtedly, a
standardslike the Electronics Industry Code of Conduct (www.
change in process or material at one point in the manufacture of
eicc.info). If we are all asking our suppliers to do the same thing we
a product will have ripple effects and it is critical to factor in the
have a huge amount on leverage and we reduce the costs involved
environmental impact of these effects. So it is, indeed, necessary to
in compliance. This is not very different than agreeing on standard
green the entire supply network.
screw sizes or memory designs.
However, the story doesnt end there. Making products recyclable
Kurt Doelling, Featured Contributor
is necessary but not sufficient. To close the loop, the products actually have to be recycled. Here, things get
Culture plays a role
messy. Once products get in the hands of
Im curious to know Brians thoughts
consumers, companies usually lose control
on to what extent Herman Millers deover their disposition. Even if a company
sign-based background/culture has played
Featured
attempts to establish a reverse supply chain
a role in their embrace of DfE and susto process discarded products, it must rely
tainability. It seems that companies with
Contributors
on consumerswho are notoriously unrea strong design and innovation focus (e.g.
liable suppliers. For some products, the
Patagonia) have been amongst the earliest
reverse supply chain actually works pretty
adopters and biggest champions of susOsvald M. Bjelland,
well. Take for example automobiles. When
tainability.
executive chairman, Xynto
youre done with an automobile, you have
Im also curious to hear others thoughts
every incentive to dispose of it somewhere
on what the SMEs do to help move their
John Davies, vice president
other than your driveway. The car usually
supply chains. Its one thing if youre a Walof sustainability forum, AMR
goes through several rounds of secondary
Mart or even a Herman Miller; its another
Research
markets, but eventually, when it serves
if youre a 50-person company. Thoughts?
no functional transportation purpose, a
Alexis Morgan, Sr. Manager, WWF
Kurt Doelling, vice
junkyard will happily take it because there
president of supply management, Sun
is still intrinsic value left in the material
I have to second Kurt
Microsystems
of the car (primarily steel, which can be
Doellings remarks
effectively and efficiently recycled). So in
We handle coffee, tea, chocolate, etc.,
Jib Ellison, CEO, Blu Skye
this case, everyones incentives are aligned:
and our single greatest green achievement
Sustainability
consumers dont want eyesores in their
has been to source about 95% of these
driveway and junkyards and recyclers can
crops from certified organic farms. That
Deishin Lee, assistant
make a decent buck recycling cars.
is only possible because a world-wide
professor, Harvard Business School
For other products, everything doesnt
network of farms, certifiers, exporters,
fall into place so nicely (think electronmanufacturers, trade groups, government
William McDonough,
ics, furniture, clothing, or just about any
agencies, etc., more-or-less, eventually (afcofounder and principal, McDonough
other durable good). This is why Herman
ter decades of insufficient coordination)
Braungart Design Chemistry (MBDC);
Millers Design for Environment criteria
established common standards.
president, William McDonough
are so important. It is essential to make
Similarlythough with fewer playand Partners; coauthor of Cradle to
the product recyclablea process that
ers and easier coordinationweve benCradle: Remaking the Way We Make
involves the entire supply network. Once
efited from, and contributed to, a set of
Things
recycling becomes technically feasible, we
Fair Trade standards. However, due to
have to make it economically attractive,
their popularity, new, and often weaker,
Andrew Mangan,
both for consumers and players along the
competing standards have been created.
executive director, United States
reverse supply chain.
Theyre popular with manufacturers beBusiness Council for Sustainable
cause the lower standards mean obtaining
Deishin Lee, Featured Contributor
Development
a green seal-of-approval at lower cost.
Standards among
But, of course, this creates confusion in
Roger Martin, dean of
competitors
the marketplace and threatens to underthe Rotman School of Management,
We have found that cooperating with
mine the higher bar practices.
University of Toronto
our suppliers to green the supply chain
Rodney North
25
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Do standards stay high in low-cost regions?
HMs goals unrealistic without supplier buy-in
I appreciate the fact that Herman Miller is incorporating sustainability into its designs while maintaining such high aesthetics
and functionality. My question would be how far does
The goals you have taken for 2020 are indeed stretched and look
impossible unless the dirty job is passed on to the supplier; in that
context greening of the supply chain is indeed important. The same
set of goals should apply to the suppliers and suppliers supplier;
then only your goal has a meaning. You cannot become a green
organization without your suppliers being green.
By the way, if you are using thermoset plastics (e.g. table tops),
rubber (e.g. bush), passivation (e.g. screws), pigments (e.g. in thermoplastics), anodizing (e.g. aluminium), gluing (e.g. threadlock),
painting (e.g. anticorrosion), lacquering (e.g. scratch resistance)
etc., unless there is a quantum leap in technology covering all these
areas, do you still think that your goals are achievable?
Another important issuewould you like your supply chain
to be green or sustainable? My experience with supply chains is
that green issues are manageable with training, audits and C&P
actions; sustainability issues like health and safety, wages, labor
issues, governance, corruption, human rights, etc., are difficult
to manage. Do you consider these as part of your supply chain?
In other words, is it OK with you that your
the companys supply chain extend into

low-cost regions where environmental responsibility
poses so many challenges (lack of experience, poor data collection,

lack of infrastructure, etc.)? Those kinds of issues can necessitate a
great deal more capacity building and patience in some industries,
however much leverage the OEM possesses I think Wal-mart is
probably experiencing this phenomenon.
Bruce Klafter, Applied Materials
Communicating standards to brands
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My background is in agriculture. Through my position of CEO

of The Organic Compound, Ive been active in what I call purification of agribusiness supply chains originating in developing countries. The base of these supply chains consists of a myriad of small
farmers and small to large traders and manufacturers.
In our work we organize small farmers and link them with big
brands. We approach brands with what we think is a strong argument of how their involvement in the supply chain can substantially improve on many aspects in the triple bottom line consistency
of their supply chains.
To my knowledge we practice a novel way of working, which
builds on standards set by organic agriculture and Fairtrade. The
standards however are both our opportunity as well as our impediment. For a brand or an intermediary in their supply chains these
product standards are the reference point, the main line of communication of green/ethical standards. However, to us the standards
are the starting point for dialogue; a lot more needs to be achieved
in order to achieve complete ethical/green supply chains, which
benefit all in a meaningful way.
As I said, we believe and can prove that in our case, more can
be gained on the bottom line issues through our proposal for more
open, transparent, proactive, top-bottom-top supply chain cooperation. The thing is however, that we have a hard time communicating this to brands, even to brands who on the outset indicate a
willingness to participate in developing sustainable supply chains.
In practice, brands show reluctance in assuming a (in my opinion
crucial) leadership position in their supply chain network to influence their supply chain partners and bring about change. The upshot is that everybody keeps to communicating through standards
and no bridges are built.
I am curious to know what people think:
1. Is this pattern Ive described recognizable in other supply
chains?
2. Do you think this pattern stifles innovation opportunities towards sustainably developing supply chains?
3. And if so, what could you then advise as a strategic approach
in opening dialogue with brands and building the case for closer
involvement?
Hoping to hear your thoughts...
Bart Doorneweert
products are greeneven if they have

been made by children through forced
labour?
L. Ramakrishnan
Making HM model universal will be difficult
Herman Miller has created a great model. If they can achieve

the goals theyve set over the next 12 years, theyll make a huge
difference and theyll be a model for many of us. Now the question
is how this kind of model can become almost universal. If were
really going to solve the problem we have to achieve something
like this in the biggest value chainsfor products like oil, food,
automobiles, etc.
The biggest value chains may involve different challenges from
those for things like furniture. Their very size often makes inertia
much greater. And huge parts of the value chains are in remote locations where some people may not be as sensitive to environmental management as people in the developed world. Moreover, they
often lack the tools to transform their work. Think of the supply
chain for oil itself. The world will be using it in huge quantities for
decades to come. And producing and transporting oil, and creating the infrastructure to do this, involve huge amounts of energy,
creating much carbon and other waste. Much of the value chain
for oil involves national oil companies of less developed countries
and/or by consortia involving oil firms of developed and less developed countries in remote areas. Achieving energy efficiency in these
places will require a lot.
Remarkably, all three of Brians principles work well for huge
value chains. The oil industry isnt going to be redesigning its core
product any time soon, but it is designing production, refining,
and distribution systems all the time, and the sustainability of our
civilization can be a core consideration in each one. Similarly, clear
goals and clear, transparent metrics can guide companies in the
biggest value chains as in small ones.
26
But then we need to understand the enormous difficulties involved and develop solutions. For example, improving Gazproms
value chain within Russiaa big source of both waste and pollutioninvolves improving Gazproms technology. Western
watchdogs have legitimate concerns

about what happens to Western high
technology when it enters countries like
Russia and China. But the world cant be said to be seri-
ous about its energy and environmental crisis until it is bringing the
right technology to bear in the places where the biggest parts of the
problem are likely to be generated. Companies with solid experience in technology transfer and in working responsibly with the
Wests regulations need to partner with key players in the big value
chains to re-engineer big parts of the world economy.
Osvald M. Bjelland, Featured Contributor
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However, in the largest value chains we have to think in terms

of huge networks involving players we dont often consider and frequently assume will be enemies of sustainability. Fortunately, there
is evidence that more of these players can be brought into the game
and can accomplish a great deal if they get the right cooperation
and help. Im involved with a consortium called the Global Leadership and Technology Exchange (GLTE) that includes Gazprom in
Russia, Tata Group in India and the World Trade Centers Association of Korea, among others. Many executives in top companies
from emerging markets recognize that effective energy and environmental management is where the world is going and has to go. Not
all of them see this, but there are enough to allow huge progress on
global supply chains to be made. But they need help.
For developed-country businesspeople, the first step is alertness
to the huge opportunities in improving these value chains. The
decisions of Deutsche Bank, DNV, and other developed-country
firms to join the GLTE suggest that this step is to a significant
extent accomplished.
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Indirect benefits of HMs model
Sustainable development, across the world economy, will grow

with the accumulation of individual efforts in many sectors; climate change and other challenges have no
magic solution. Herman Millers initiative
shows great leadership and will directly
impact its suppliers and entire value chain.
But it is also important to understand the
indirect impacts of such work.
Herman Miller CEO Brian Walker knows it takes a village
Suppliers that are now required to proto build a green product. As this conversation heated up,
vide more environmentally friendly mawe saw just how big the village needs to be. Below is a
terials will seek to market those to other
look at the supply chain challenges that generated the
manufacturers whose products will also be
most discussion.
improved. And while Kurt Doelling did
not elaborate in his post, industry consortiums like the EICC provide a platform to
19%
address social as well as environmental isDeveloping and managing standards when integrating suppliers
sues (and will have the benefit of reducing
overall supply chain costs).
12%
At this point in time, the most imporThe need to cooperate not just with suppliers but with competitors
tant indirect benefit of Herman Millers
initiative is raising awareness about sus10%
tainability and how companies can make
Transfer of proprietary or sensitive technology to emerging markets
practical change that will have an impact.
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It Takes a Village
10%
Use of ecolabeling to inform consumers
7%
Do
Getting consumers to be reliable suppliers of postconsumer material
7%
Redesigning the supply chain for sustainability
5%
Fostering a culture of sustainability from the top down
John Davies, Featured Contributor
The system in a room

approach
Brian Walker is absolutely right that
greening a supply chain takes a village.
And, as goes the mantra, it is good business. Maybe surprisingly, the opportunity
is particularly rich in greening an existing
supply chain where there is often significant waste and inefficiency. This is caused
by two key factors:
1. Unintended consequences: Consider
the Christmas sales season. The manufac-
27
turer has to get its product specs to China by X date in order to

hit the shelves in time. But invariable, last-minute design changes
often lead to factory workers doing massive overtime. Overtime
limits are breached and the factory has generated enormous waste,
both in terms of time and materials.
2. Misaligned incentives: Look no further than the magazine on
your coffee table. The publishers focus is total circulation, since
this determines advertising income. Wholesalers are concerned
about the profitability of each magazine they sell. The result is a
supply chain where more than 60% of single copy (non-subscription) magazines are never sold. While most are recycled, this still
results in massive waste of energy, time, and materials.
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A paradox and a challenge
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Herman Miller is to be commended on an exceptional sustainability program (disclosure: I sit in an Aeron).

As Deishin Lee alluded to in her initial response, the reverse supply chain is the weakest link, and often the elephant in the room.
Normalizing the human relationship with our ecosystem should be
a key objective of any sustainability effort. Some things just cannot
be sustainable enoughbottled water imported to the U.S., for example. The local solution will always be less energy-intensive, and
therefore more efficient.
HMs long-term objectives are thatlong term. Consumers raised on a diet of instant gratification often do not have the
patience for long-term efforts to come to fruition. We need a sea
How to fix these issues?
change in the demand and use cycle of our products to reach these
The most powerful approach we know of is based on putting the
objectives collectively.
System in a Room. All parts of the supply chain, as well as key
This is the paradox, and our challenge. We are driven to differenexperts and other stakeholders work totiate our products for reasons of strategic
gether in the same room at the same time.
advantage, but we all need the consumer
The room is configured into round workto act in a sustainable way. We confuse
Resources
ing tables of 6 to 10. Together, the group
our message to the point where we are
develops a common understanding of the
managing Green vs. Sustainable. And
Cradle to Cradle: Remaking the
situation, identifies strengths to be leverthe consumer buys on feeling good. Kurt
Way We Make Things
aged, creates a vision of a more sustainable
Doellings example of Sun Microsystems
North Point Press, 2002
and profitable supply chain, identifies and
demonstrates that a level of cooperation
by William McDonough and
Michael Braungart.
rapid protypes solutions and agrees on
is essential to achieve sustainability within
the actions needed to make these changes
an industry supply chain.
a reality.
What other examples are there of simiIt is through working with the whole
lar kinds of cooperative behavior from
systemwhether its the magazine industry working to reduce
within the sustainability field? What parts of your supply chain
its waste or the Dairy or DVD industries aligning to reduce their
cannot be sustainable?
greenhouse gas footprints for products sold to Wal-Martthat
Ewan OLeary
breakthrough sustainability improvements will be found. This
approach works because face-to-face interaction and focusing on
Response to Matthew Schupbach:
common goals, such supply chain partners can achieve benefits
Educating consumers is key
collectively that none could achieve on their own. And its highly
Companies should educate consumers on the impact that prodefficient: activities that would take months with one-off conversaucts supply chains have on the environment and provide them
tion can produce results in 2-3 days when all the important player
with an easy way to make choices based on comparing environare together.
mental impact. Such education and transparency will also enable
This is the fastest way to align interests, find breakthrough soluleading companies such as Herman Miller to be rewarded for their
tions, and embed lasting change.
early investments in environmental sustainability.
Even though it might be hard for corporations to obtain full
Dave Sherman and Jib Ellison, Featured Contributors
transparency on their supply chain and despite the fact that it is
Do consumers care?
difficult to convey this information in a simple manner without
Consumers today look for green products, which is a good
compromising its scientific integrity, a few leading companies have
thing. However, in the past, and even now, these green products
started very valuable pedagogical efforts.
have come with no supporting evidence or qualification.
A good example is Patagonia, with their
For example, a product could be labeled green even if only one
Footprint Chronicles. On a dedicated website (www.
of the many components of the product is green.
patagoniafootprint.com), consumers can follow several of the comDo consumers actively research or even care how much of the
panys products from cradle to cradle (by 2010, all Patagonia prodproduct is truly green?
ucts will either be recyclable or compostable, with collection points
Or as Tom Stewart says, do consumers care about the shade of
at the stores which, to my knowledge, will make Patagonia the first
green?
truly cradle-to-cradle company). Supply chains are represented on
an interactive map of the world, and their impact (both the good
Matthew Schupbach, Director of Strategic
Planning & Analysis, Harrahs Entertainment
28
and the bad) is assessed in terms of distance traveled, CO2 emissions, waste generated and energy consumption.
Another example is Timberland. With its Green Index, the
company has started printing supply chain information on some
footwear products boxes, with a simple 1-10 ranking that spans
three categories: climate, chemicals, resources. All 30 million pairs
of shoes that the company produces every year are supposed to be
labeled by 2009.
As more and more companies start disclosing this kind of information, one issue will be standardization. Although international
standards exist (ISO 14000 series) for collecting environmental impact information, it would be useful to agree on general guidelines
for communicating results so consumer, as is the case, for example,
with nutrition labels.
HMs process took years to set up
As a long-standing supporter and partner in Herman Millers

transformation, I completely agree with Brians statement about
the challenges and opportunities in pursuing ecologically-intelligent design. MBDC worked with Herman Miller to create a Cradle
to Cradle(SM) design framework to benchmark and continuously
improve all products through innovation and creativity. Herman
Millers goal of optimizing all products required the company to
deepen and intensify its engagement with suppliers and enlist them
as partners in the process.
The scale of the goal also can require more complex interactions
among companies and their supply partners. For example, there
must be much more trust, collaboration

and education when asking your suppli
ers to evaluate their products against a broad set of toxicity crite-
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Lionel Bony, Senior Consultant, Rocky Mountain Institute
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Response to Matthew Schupbach: Ecolabels
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We have been looking into ecolabels and found that you can
map out the relative shades of green of labels on the following
dimensions:
single environmental attribute (such as energy use) or multiattribute (energy, water, toxin reduction, etc)
focus on a single part of the products life cycle (e.g., just use
phase, or just raw materials) or covering the full life cycle.
Now that our team are becoming known as label geeks we are
fielding a lot of questions along these lines, and not just from our
family members (calling us while bewildered in the natural foods
aisle). Companies and procurers are also trying to get their heads
around what all these different labels and standards mean.
As per Brian Walkers original point #3, designing measurement
systems to understand what environmental qualities companies
are receiving enhances the credibility of the whole greening endeavor. Aside from legitimacy, the good thing about using a well
constructed label is that all of those metrics can come directly from
their criteria.
Anastasia ORourke, www.ecolabelling.org
No
Response to Anastasia ORourke:

What happens when attributes are in
contention?
Do
For example, your product might be carbon-neutral, but you

use offsets purchased from a tree-farming operation that evicted
local villagers from their land in order to plant trees. How do you
manage these conflicts?
The carbon offset industry is under review by the Federal Trade
Commission to ascertain whether claims made by offset and Renewable Energy Credit (REC) retailers are at all misleading. Our
industry (disclosure: I run an offset-related startup) has received
considerable media attention, some pretty negative, and we have
to respond. One way we have responded is with the Center for
Resource Solutions Green-e for Climate program, due for launch
in the next few days. No doubt we will learn much from the consumer response.
ria to fully characterize materials as opposed to a free of approach,

representing a limited set of restricted substances taken from current government regulations.
Characterizing and screening materials requires companies to
expand their communications efforts with their suppliers in ways
that are new and unfamiliar, but necessary for eliminating the concept of waste, optimizing material health and maximizing the safe
recyclability of products. For example, in addition to dealing with
sales staff, companies will interact with senior management, design
engineers, health and safety officers, and marketing and legal staff
to explain the introduction of new material selection criteria. Most
companies who are serious about embedding sustainability into the
DNA of their operations discover that educating and vesting suppliers in the process is key to a successful implementation strategy.
Herman Miller found it needed to dedicate staff for several years to
visit suppliers, educate them about the material evaluation process,
and engage their cooperation in helping to achieve the companys
DfE goals.
Becoming a more sustainable company is hard work. It takes
years for companies to find their compass, define their trajectory
and gain operational momentum in implementing their strategies.
Despite the apparent complexity of the issues, one thing that all
companies can do tomorrow is to signal their interest in specifying healthier materials from their suppliers. Regardless of what a
companys sustainability goals arematerials with greener chemistries, components designed to be easily disassembled and recycled, or products made with renewable energythe fastest way to
green the supply chain is to choose suppliers that help the company achieve its new design objectives. Such coalition building will
change a suppliers mind-set from but this is the way its always
been done to what can we do tomorrow?
I applaud Herman Miller for its leadership and tangible improvements. The company has taken on the mantle of ingenuity for
the environment and created traction throughout the supply chain.
It is rewarding to see long-term vision come to fruition.
William McDonough, Featured Contributor
Ewan OLeary, CEO Offset Collective
29
Smaller steps necessary for some

companiesfor example, the by-product
synergy process
graphic ring. They also have produced an increased appreciation for

the related environmental and social benefits.
American industry consumes 22.5 trillion Btus of energy each
year and generates around 7.6 billion tons of solid waste. All kinds
of companies are becoming more interested in reducing their contributions to these numbers because they want to survive and prosper. In order to do so, they would benefit from collaborating across
their fence lines with their neighbors as well as through their supply
chains.
Andrew Mangan, Featured Contributor
Green paradoxes in Singapore
I suspect that my country, Singapore, is very brown despite all

the professed governmental efforts at green initiatives. I wish more
data was available on a global comparative basis (e.g., the energy
consumption per unit of GDP).
Singapore has developed a Greenmark Scheme to rate buildings.
Example 1: Use of new technology glass panels would earn
points but as we are one degree north of the equator and at an
affluence level to afford air conditioners for most offices/homes, I
fail to understand how glass as opposed to concrete could be rated
more green.
Example 2: Design of private residential apartments invariably
do not provide for drying yards and dryers are even included in
some upmarket apartments. No matter how energy-efficient dryers are, they cannot be more green than using our blazing tropical
sun!
Example 3: The trend in private residential estates is having (a)
water features which consume 24/7 electricity to keep the water
cascades, fountains or infinity pools in operation instead of tapping
on the luxuriant growth of tropical foliage. And where we have
estate trees, we dont let up with our ambient spotlighting 12/7
instead of limiting such ambient lighting to 4 prime hours!
Yet world environmental bodies laud Singapores green initiatives. Am I the only one missing the picture? Can somebody tell
me please?
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I am another admirer of Herman Miller and its leadership example, which clearly demonstrates the value of having someone
at the top to inspire and champion sustainability. Leadership like
HMs stimulates employees to work together to find new ways of
achieving sustainability without worrying about risk. On the other
hand, many who are leading the change to sustainable development are not at the top of companies, and they need to find ways to
overcome the risks involved so they can move ahead. This can mean
taking smaller steps, which when successful, can lead to greater opportunities.
Collaborative efforts at the supply chain, community or regional
level offer opportunities to engage a range of people from companies, city and county departments and community organizations in
seeking solutions to common issues like energy, waste, water and
climate change. The processwhether through supply chains or in
communitiestakes time and patience, as Bill McDonough says,
but trust and comfort can be as important as mandates.
The business councils by-product synergy process is based on this
kind of cross-industry collaborative approach. The process provides
manufacturing facilities with opportunities to reduce pollution and
save energy and money by working with other plants, companies,
and communities to reuse and recycle wastes. The process brings
clusters of facilities together to create closed-loop systems in which
one facilitys wastes become anothers raw materials. Organizations
involved in by-product synergies form a legally protected network
of enterprises in which process-knowledgeable experts can safely
explore reuse opportunities. Participants sign agreements that spell
out deliverables and address barriers, such as confidentiality issues
and intellectual property rights. The methodology introduces local
public and private sector partners and enables them to take ownership of the network as an ongoing collaborative program.
In one recent example, a quality assurance leader at a Chicago
bakery joined representatives from 11 other food-related companies and city departments to focus on long-term projects involving
alternative fuels, composting, anaerobic digestion, and changing
regulations. This collaboration resulted in a doubling of the bakers
recycling numbers within a matter of months and led to a goal of
50% reduction in waste in 2008. The baker said his senior management approved, but got really excited when they received sustainability mandates from Wal-Mart, one of their top markets.
Another example is a Japanese industrial project led by the Mitsubishi Chemical Corporation, called the Mizushima Regional
Cooperation Complex, which began in 2000. The initial project,
supported by the Japanese government, involved development of
synergies among several chemical companies, oil refineries, steel
companies and a power company. All recognized that the aging
industrial infrastructure required a dramatic increase in productivity if they were to remain competitive with newer plants coming on
line. Motivated by the desire to cut costs, enhance revenues, and
retain market share, these collaborations have expanded to include
a growing number of industries and service firms within a geo-
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M.K. Khoo
Response to M.K. Khoo:

The Energy use/GDP trade-off
Wikipedia has an article about energy efficiency that includes
this revealing chart (http://en.wikipedia.org/wiki/Image:Gdp-energy-efficiency.jpg) showing the energy intensity of the largest 40
economies in the worldSingapore falls just below the cutoff. But
if you look at a publication by Singapores Ministry of Trade and
Industry (http://app.mti.gov.sg/default.asp?id=148&articleID=58
42) you can find Singapore just about on a par with the Netherlands and Australia.
The data on the second chart suggest that theres a typical energy
use / GDP trade-off. From a macroeconomic (or macroclimatic)
point of view, breaking that trade-off is one of the most important
challenges facing the world: If China and India develop with GDP
/ capita ratios that follow the line on the MTIs chart, were all
30
is becoming part of companies core competencies and values. Businesses must become agents of environmental change. Companies
have the human, economical, and political resources. They have access to the best talent in the country. And lets be honest here, they
now have a real self-interest in global repair.
Pete van, Jr.
Response to Tom Stewart: Developed world

uses too much energy
Id like to thank Tom Stewart for pointing me to Wikipedias

chart (although I dont see little red dot Singapore in Wikis chart
unless the rest of the world thinks Singapore is part of Malaysia)
and to the MTI article.
At the rate we are going, we will get Toasted, Roasted or Coasted
to varying degrees, depending on each of our countrys latitude and
sea level! (As in the proverbial truth: It takes two hands to clap!)
Indeed, China, India, Africa and other emerging economies are
entitled to development and to a human standard of living with
electric lights in every home that is no longer a mud house and
have cars and central air-conditioners/heaters but only for the really
affluent. Hence, pricing could be used effectively to curb excesses in
our throwaway consumerism.
Indeed, the West can hold NIEs to account for carbon emissions. Indeed, too, the Western economies (particularly in the
North American continent) can hold themselves to account by
curbing their past excesses which are relentlessly continuing into
the future.
Why the urban sprawl? Why not return some of the urban
sprawl back to nature and quickly load the carbon credit into your
own backyard. Isnt it more within your immediate control than
some cross-border forest in Papua New Guinea which we should
nonetheless continue to preserve/manage as part of our world citizenry?
Why does the wife drive a SUV to ferry two kids to school whilst
hubby spends an hour each way in the family sedan to/from work
and the happy family heads out of town for weekly megamart grocery shopping in the family truck? Three vehicles for a family of
four? Even the not-super-rich need an extra summer home?
Can (and will) NIEs avoid the mistakes of urban sprawl and excesses of the developed world that perpetuate the Vicious Cycle already triggered by the West? Singapore has, in my opinion, already
gone down the road of the Western excesses (e.g., our property laws
facilitate (even encourage) deconstruction of private apartments
from the first day of occupation in the name of urban renewal) and
residential blocks of 20 years age (!) are ripe for demolition when
my fridge made in Japan is still frightfully cold after 20 years.
As rightly pointed out by Tom Stewart, Kurt Doelling and Bill
McDonough, China could be the green lab
test-bed; carbon arithmetics are long overdue and industry
standards are sadly incoherent.
Whilst waiting for rigorous and comprehensive carbon credit/
tax structures to be developed and negotiated; whilst waiting for
definitive industry standards and other certification benchmarks to
be agreed upon; whilst waiting to be Toasted, Roasted or Coasted,
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cooked, literally, simply because there are so many people in those

lands.
That creates a special opportunity and urgency around the topic
of this thread, green supply chains. People in emerging economies
rightly protest against being held to a standard of carbon-constraint
that those of us in the U.S. and EU didnt bother with during our
development (and in the U.S. arent much bothering with now,
from a policy viewpoint), so how dare we, the argument goes, hold
BRIC and other emerging nations to a stricter standard?
Yet how can we not?
As Bill McDonough argued in a prescient HBR article in 2004,
China can become a green lab for the world, and companies deriving supplies from China can help that happen, and in the process help to change the development = carbon arithmetic. There
are two potential sources of value in thatthree, actually: (1) a
more efficient supply chain, protected against the (inevitably to be
imposed) cost of carbonthere are likely to be terrific first-mover
advantages from being first on this learning curve; (2) a benefit to
the global commons; and (3) the development of technologies and
processes that may prove to be of immense resale value in emerging
economies that are 5, 10, or 15 years behind China, and also in
developed economies, where economic value of carbon thrift can
only grow.
I have a question, however, about a topic that was introduced
early in this discussion by Kurt Doelling of Sun. He rightly points
out the value of industry standards. Certainly if I were say, a contract manufacturer in Singapore, Malaysia, or Taiwan, Id find it
extraordinarily difficult to deal with separate demands from each
of my customers, not to mention, perhaps, separate standards for,
say, Sun products destined for the U.S. vs. the same products destined for the EU. At the same time, however, the history of industry standards in this kind of area has not been one that fills the
breast with confidence. You dont have to be a Na
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derite to realize that industry standards

have often been determined by the low
est common denominator, and then been watered
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down from there.

What can companies, NGOs, and policy makers do to capture
the obvious advantages of industry-wide standards while avoiding
their equally obvious problems?
Business has a responsibility
Do
My opinion is divided on whether the influence of corporate

America is being fully engaged as a change agent for good in the
effort to save the planet, or if communication leaders are more concerned with helping their companies influence elections. Do they
support the merging of sustainable communities, corporate responsibility, and environmental legislation?
It has been several years since my business partner and I began
seeing green values moved into the mainstream of corporate best
practice. As a Green party activist it has become an integral part of
my involvement in corporate communications, especially for large
companies. It is no longer just a concept for corporate culture, but
31
can developed economies extend their green technologies to NIEs

on an URGENT grant or aid basis?
M.K. Khoo
Losing sales to the less green?
argued (and will be arguing in my next book) that design thinking

is a key to competitive advantage in 21st century business and one
reason is the need to solve the great mystery of how we are going
to move forward economically, so that more poor are pulled out of
poverty, without terminally wrecking the planet. This will take abductive reasoning, not just deductive and inductive reasoning; that
is imagining what might be not just declaring what is (or is not).
Third, I like the use of metrics. It creates the necessary tie between the expansiveness of imagining possibilities and the nuts and
bolts of making sure they actually transpire.
I have one suggestion and this links to the wonderful contribution of Bill McDonough and his cradle-to-cradle metaphor. And it
links to the point above about the problem with the value chain going forward from the manufacturer (as opposed to the supply chain
going back) being out of the control of the manufacturer. It begs
the question: Should HM only lease and rent
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While HMs efforts are clearly laudable, the company is profit

driven. Customers of Timberland, Patagonia, and, perhaps HM,
are very green aware and would probably pay a price premium for
products, and they understand the merits of less waste and carbonefficient operations and product transport.
But, how many customer purchase decisions will be made simply emotional, perhaps based on a minimal green effort? HM
may lose sales in these situations to less green competitors, those
that can deliver value with lower prices or other services. Did truly
low fat cookies sell more than reduced fat cookies?
For firms who sell into very green-aware businesses (HM for architects perhaps), these efforts seem at, a minimum, an important
marketing investment. But green product standards (like percentage of post-consumer recycle content for paper) seem essential if
HM and others want to influence purchase decisions for competitive advantage.
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Paul baier
Does the supply chain include distribution?
tC
This is a great article and Herman Miller is a refreshing company

working in the right direction with realistic goals and time frames.
As a procurement professional responsible for Ethical and Sustainable purchasing, searching for companies to source and develop
partnerships with companies like Herman Miller was both challenging and rewarding.
One observation: These target goals and values need to filter
down into the distribution chain for Herman Miller.
If the distribution chain is weak and unable to deliver on the
service aspect of delivering the product, the rest of the green efforts
are lost.
Victoria Wakefield
No
Imagining chairs with no PVC

and one suggestion
Do
I like the Herman Miller approach for several reasons.

First, the thinking and the eventual goals arent a product of
linear extrapolations of the past. This is important for our poor
planet because if we just try to take the regression line down a few
degrees or get back to where we were a few years ago, we arent going to make it. In addition, linear extrapolations leave far too much
uncharted territory out of the equation. We have to imagine possibilities that dont currently exist to produce the best resultsand
imagining chairs with no PVC rather than reducing the intensity of
PVC use is that kind of imagination that is needed.
Second, I like the use of Herman Millers design capacity. Alexis
Morgan speculated on its role in Brians approach and I would conjecture from my experience with Herman Miller (many years ago
during the launch of the Aeron chair) that design thinking has a
lot to do with the possibility imagination referred to above. I have
furniture so it can get it back in order to

complete the cradle-to-cradle cycle? I think
such cradle-to-cradle maintenance of ownership is going to be increasingly mandated by governments (and there are pieces of it in
Europe already). HM is in a product category in which it could get
ahead of the game and show how it can manage the sustainability
of the whole experience of using its furniture.
Roger Martin, Featured Contributor
The Herman Miller article is inspirational

I commend Brian Walker and his BOD for taking on the cradleto-cradle challenge while staying responsive to HMs shareholders.
They are providing the necessary leadership to increase awareness
and Im sure their competition have felt the heat get turned up.
This is the long-term view which is necessarythe cradle-tocradle model is not cost justified in the short-term but is more than
justified in the long-term. The ability of HM to adapt their strategy
will benefit many related businesses. When the supply chain cleans
up its actit does it for all and not just for a few. This initiative
will spread and I dont think we will see suppliers revert to previous
lower standards once they also commit to the long-term benefits
for all.
larry berglund
Response to Paul Baier:

The bottom line is the environment
This all makes fascinating reading, if strongly reminiscent of
much of Max Frisch in Biedermann und die Brandtstifter. Quite
possibly it is inspired all-round by the best of intentions in some
direction or other; but Paul Baiers comment crystallizes the problem. For as long as the economic bottom line comes first, then the
environmentor any other interestmay (in simple terms) go to
hell: that is to the point that the consumers are all deadat which
time a change in practice (rather than mere attitude) may occur.
May I recommend anyone in any doubt on this minority interpretation considers, in a sequence of their choice, the following:
Chapter 14 of Lyotard, J.-F. (1979). La Condition postmoderne:
rapport sur le savoir. Paris: Les Editions de Minuit.
32
Michael Jensens article on the impossibility of maximizing

more than one (economic) dimension (2002). Value Maximization, Stakeholder Theory, and the Corporate Objective Function.
Business Ethics Quarterly 12,ii, pages 235-256.
Naomi Kleins recent interpretation of the disastrous effects on
global economics by the absurd idealism of the Chicago School
lead by Milton Friedman. (2007). The Shock Doctrine: the rise of
disaster capitalism. London, UK: Penguin Allen Lane.) If all this
reading is too time-consuming, interested parties may wish to view
a recent documentary film on liberal capitalism entitled There will
be blood.
Otherwise it seems, there is nothing more to say practically until
capitalism in its invariably destructive mode is changed or swept
aside as previously feudalism was.
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perfectly balanced streams of multiple products on a continuous production line, will have no interest or incentive to recycle.
Recycling actually threatens to throw

their well tuned system out of whack. As
Do
No
tC
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Osvald Bijelland notes, the largest and most complex value chains
face the greatest challenges.
So established value chains have substantial inertia that has to
be overcome. What can companies do? Kurt Doelling and Andrew
Mangan point to one strategy. Sun is helping to lead its industry
towards collective sustainability solutions. For recycling this may
mean standard design principles and materials shared across the
industry. This would make Sun or HPs products equivalent from a
recycling standpoint. While this may give their marketing departments the hibbie jibbies, doing so would create scale economies
that make the economics of recycling attractive for the industrys
David Bevan
suppliers. Its eco-cooperation, where ITC companies compete on
Response to Tom Stewart and Rodney North:
computing power but cooperate on sustainability. David Shermans
Standards driven by customers
putting a system in the room seems a good technique for collecTom Stewart raises some concerns about standards that are simitive approaches. Just steer clear of the antitrust bogeyman.
lar to those raised by Rodney North earlier in the thread. That is,
Tom Stewart and Kurt Doellings most recent comments, howstandards tend to get watered down and
ever, highlight the difficult challenge of
reach the lowest common denominator.
fostering successful industry standards.
He asks, what can NGOs, consumers and
Success with eco-cooperation would buck
Resources
companies do?
the historic trend. But there are other apStandards are driven from consumers.
proaches. Patagonias Common Threads
Building the Green Way
Consumers want to know that the prodprogram relies on a close partnership
ucts that they are buying were not built
between Patagonia and its major fiber
by Charles Lockwood
with forced labor and, increasingly, are
supplier to recycle their polyester fabrics.
not recklessly abusing the environment.
Shaw Industries, in contrast, has chosen
Even companies like Sun Microsystems
to go it alone and vertically integrate the
that are not consumer brands feel the pressure directly from our
entire process. The company now has the capacity to completely
large corporate customers that are.
recycle the nylon fiber in its carpet. In the coming years we will see
In our industry, companies often break away imposing a new
diverse innovations as companies seek to close the last mile of
requirement so that they can appear greener than everyone else.
their cradle-to-cradle loops.
Then one of two things happens. (1) The standards body adopts
GREGORY C. UNRUH, Featured Contributor
the new requirement, or something similar so as not to become irrelevant or (2) the supply chain imposes excessive costs back on the
Brand can erode overnight from false claims of
breakaway company who quietly drops the new requirement.
greenness
This tension between companies trying to create green PR comIt is wonderful to see Herman Miller leading the charge in
petitive advantage and standards bodies subsequently adapting that
what Bruce Piasecki, author of World Inc. terms social response
can move the standards forward in a positive way.
product development (see www.worldincbook.com if interested).
Herman Miller is gaining access to new markets with environmenkurt doelling, Featured Contributor
tally and socially superior products that compete on price, perforRecycling is the next step
mance and quality, but also on social need (as Piasecki defines as
Herman Miller has gone a long wayperhaps furthestin getan advanced state of capitalism where products actually respond
ting sustainable product design right. For those looking to the next
to environmental and social challenges throughout their life-cycle).
horizon, it is Deishin Lees point about actually getting the prodHerman Millers design for environment approach is gaining them
ucts recycled that exposes the next major challenge.
competitive advantage and access to new market opportunities for
L. Ramakrishnan and others make the point that many compatheir products. What will be interesting to see, however, is just how
nies are passing the recycling buck up the supply chain by asking
integrated they can align their supply and value chain over the longfor recycled content in purchasing requests. Like most companies,
term, particularly if recycled products become just as constrained
Herman Miller doesnt do recycling because it doesnt produce
as natural resources as demand for greener products increases in
its own input materials. It relies on its suppliers to close the loop.
this rapidly growing world.
But many suppliers, especially petrochemical manufacturers with
33
ability and durability requirements as well. Thus it will be a strategic and essential requirement for firms to work with suppliers (not
just require of them) to offer product innovations that keep pace
with demand for greener products that achieve cradle-to-cradle
status. We know that plastics, for example, can only be fully reused
a couple of times before their grade deteriorates so much that they
cannot be reincorporated into new products. Thus new products
will require an infusion of new materials at some point in their
life-cycle, and this places new demands for environmentally-benign
materials (as well as continued demand for natural resources).
As this exciting area of social response product development
plays out it will be interesting to see how suppliers and OEMs
collaborate on achieving win-win solutions. I believe however, that
industry-wide partnerships and consortiums that include government, NGOs, consumer groups and corporations in the evaluation
of complex product and supply chain issues (legitimacy of claims,
labeling and reporting, life-cycle assessment) up front, like the
Shaw Industries example alluded to, will be lasting models for replication, even if they take courage, care and long term commitment
to achieve success.
op
yo
Recently, the heads of two of Japans largest paper companys

(Oji Paper and Nippon Paper Group) issued apologies after they
claimed the recycled content of some of their paper lines were
greater than they actually were. See the ENN story http://www.
enn.com/pollution/article/29560. The stock performance of both
Japanese companies declined after the news broke. And the potential impact on their customer loyalty, brand and the Japanese
recycled paper industry is yet to be fully determined, but one could
believe there will be some negative returns. From a supply chain
point of view two large firms, Fuji and Xerox said they would no
longer procure product from Nippon Paper. Now thats some serious bottom-line backlash.
This gets me to my point: adding legitimacy to energy, environmental and sustainability claims by product manufacturers is a
necessity in this 24-7 faster paced world where data and information is readily available on products and where corporate brand and
reputation can literally erode overnight from false claims.
The swiftness of information has accelerated the pace of commerce and the severity of market conditions (price of energy, convergence of climate change and carbon on corporate reporting,
availability of materials) is shaping the futures of firms like Herman Miller and hundreds of other corporations that seek to reduce
the risk profile of their firm. To legitimize energy, environmental
and sustainability claims there needs to be more
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education, awareness, transparency, re

porting and accountability. The role of citizens,
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governments and corporations is equally important in creating

this greatly needed legitimacy and its in each stakeholders best
interest to ensure appropriate product claims and labeling can be
disclosed and validated.
Gregory C. Unruhs discussion of Shaw Industries and Patagonia
are great examples of two firms working through their challenges
on product recycling respectively. In the case of Shaw Industries
(http://www.shawfloors.com/About-Shaw/Carpet-Recycling) they
are on the board of directors of the Carpet America Recovery Effort (CARE), a joint industry-government effort to increase the
amount of recycling and reuse of post-consumer carpet and reduce
the amount of waste carpet going to landfills. Shaw Industries is
working with other CARE members including U.S.EPA, Interface,
Mohawk Group, Inc., Milliken & Company, The Carpet and Rug
Institute, among others to alleviate any concerns over how carpet
is recycled and how to measure and report. Shaw Industries is also
working on defining a sustainable carpet standard known as ANSI
Sustainable Carpet Assessment Standard (SCAS)- NSF 140 (see,
http://www.sustainablefacility.com/CDA/Articles/Sustainable_
Flooring/BNP_GUID_9-5-2006_A_10000000000000117283
and http://www.nsf.org/business/standards_and_publications/pdf/
NSF_140-05-DS.pdf ). The ANSI NSF 140 standard is looking
into life cycle assessment, product labeling, use of biobased materials, and product reclamation (end-of-life product management)
issues for carpets.
As corporations are constrained by natural resource availability
(and carbon), its possible they will also be constrained by availability of recycled materials that can achieve their product quality, reli-
Mark Coleman, Senior Associate, AHC Group, Inc.
How to respond to skeptics
Herman Miller designs and makes furniture targeted at a niche

of costumers that can actually afford a $1,000+ chair. A skeptic
would say HM has gone green because he can afford the ride.
Now, in order to counter this skeptic, what arguments can we
extract from the HM supply chains and apply to say IKEAs 20 dollar-a-seat case? Does it all boil down to the design of the product, or
do we also need to take a broader perspective, like the way in which
supply-chain governance itself is designed?
My guess would be both. Well-tailored supply chain organization can often bring about huge cost savings that can (help) offset
any extra costs incurred by suppliers to produce in a sustainable
manner. Rewarding well-performing suppliers is one way, penalizing non-compliance another. But the most creative and effective
results are brought about by dedicating resources to your suppliers
in joint sustainable development of your supply chain. This can
sometimes even entail rethinking the set-up of your value chain in
order to match it with your desired supply chain (thanks for bringing this phrase to mind, Mark Coleman). My two-cents is that this
would be the most cost-effective avenue for approaching such an
endeavor and it is most likely to produce results and continuous
improvement to any supply chain that would stifle any critic.
Bart Doorneweert
Response to Tom Stewart:

How to capture the benefits of standards
We feel that the right way to approach and utilize standards in a
situation like this resembles the way East Asian countries like Japan
and Korea used them when they were poor. With the possible exception of some European businesspeople who have dealt with high
energy taxes for decades, were all operating in an underdeveloped
world when it comes to energy conservation. In poor countries
34
equipment has become a critical factor in customer buying decisions. We have incredible innovation around energy efficiency in
everything from chip design (those multi-core processors that you
now see everywhere are much more power efficient than single core
counterparts) to data center architecture. My prediction is that this
competition around the energy efficiency of our products will do
more to reduce greenhouse gases than anything being done in standards bodiestotally agree with Bjelland and Wood on this point.
Kurt Doelling, Featured Contributor
Natures standards dont hinder innovation
Standardization is actually a key element in the sustainability

of the biosphere (see The Biosphere Rules in this months Harvard Business Review). Nature uses a few standard
materials and solar energy to produce

everything we see. With millions of different species
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dozens of opportunities to improve things are obvious, but there is

a web of unwritten (and sometimes written) rules that discourage
change. Similarly, our economies are built around wasteful practices, and changing the rules is a huge endeavor.
Standard-setting helped Japan and Korea overcome the inertia
of poverty, but it was only a small part of the overall effort. Japan
had lots of standard-setting bodies and visions that showed how
it might become more like the developed countries. Generally these
helped give companies a sense of what was the minimum they had
to do to survive.
But Japan succeeded only because companies competed by going way beyond the minimum.
Similarly, we need standards to tell people the minimum they
need to do. So far, it seems likely that most of them should be
voluntary. The Electronics Industry Code of Conduct that Kurt
Doelling of Sun mentioned sounds great.
But we can imagine the bureaucracy and infighting that must
occur as people try to make this code more stringent. The electronics industry supply chain is one of those huge supply chains whose
efficiency will determine the survival of the planet. Standards will
be important and their impact can be powerful. But if we think
standards can do the whole task, were not thinking straight.
So we need standards, but we need to recognize their limits. And
we also need companies competing to take environmentalism beyond the standards. If the environmental crisis is going to be defeated, well see not only gentlemanly competition but messy kinds.
Greenpeace has recently campaigned against Apple cell phones. In
the future there will no doubt be times when activists campaign
against manufacturers and products that conform to all the carefully developed formal standards that have been set by industry
groups. More proactive companies will win sales as a result.
For suppliers and others, this will sometimes be unpleasant and
unfair. But thats how effective capitalism works, unfortunately.
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in the world, natures standardization obviously doesnt constrain

innovation. Nor competition. Species compete constantly on innovation. Those most fit to obtain and utilize natures resources flourish. Its the basis of Darwinian evolution. I expect the same thing
will happen with business sustainability: Standards will emerge that
ensure materials are recycled and energy efficiency is optimized, but
also allow companies to compete on meeting the customers needs
in differentiated ways.
Response to Bjelland: Oil, cars will never

follow HMs model
In Sun Microsystems business we do cooperate with competitors and an example of work in progress is in setting standards for
reporting of greenhouse gas emissions in the supply chain. You
would not want Dell, HP, IBM and Sun each going to our common suppliers and asking them to do this in different ways.
I agree that standards can only go so far. But the really exciting activity is driven by competition. A server will burn far more
energy during its useful life than it will in its manufacture. The
cost of powering and cooling equipment in a data center is close to
the cost of acquiring the equipment. The energy efficiency of that
attempting to develop production, refining, and distribution systems with lesser environmental impact, the task is costly and often
like pushing water uphill.
Oil and gas are certainly big sources of both waste and pollution,
not only in Russia but nearly everywhere, and environmentally
friendly technology throughout the entire supply chain must be
developed and deployed to combat an advancing potential environmental crisis. However, contrary to Mr. Bjellands claim of an
tC
Response to Bjelland and Wood:

Competition is the key to progress
I must disagree with Mr. Bjellands view that the Herman Miller
model can become almost universal. This is simply wishful thinking. Brians principles work well for consumer goods but the value
chains for oil, automobiles, and capital goods are fundamentally
different.
Achieving energy efficiency for consumer goods has little similarity with achieving energy efficiency for oil and gas exploration,
extraction, transportation, and distribution. Oil and gas products
cannot be designed with sustainability in mind as the raw materials
involved are finite and new commercially viable sources must be
continually found and developed.
While everyone agrees that effective energy and environmental
management are essential for the future of our planet, the global
supply chains in oil and gas are moving targets and increasingly
costly to maintain.
As Mr. Bjelland rightly points out, the oil industry

Robert Chapman Wood, San Jos State University
No
Question
Is there a connection between culture and successful environmental work? Are there any distinguishable characteristics in a corporate culture which succeeds with its environmental work?
Do
Joachim Hansson
isnt going to redesign its core product

any time soon, nor will the gas industry. While both are
35
energy crisis, the world is not running short of oil and gas. Reserves
are increasing and not decreasing. The real issues lie elsewhere,
namely in protecting these assets, getting them to market and to
points of distribution and consumption, continuously, efficiently
and at affordable cost. To achieve that end, better and more commercially efficient technology is urgently needed, and that is where
a global pooling and exchange of technology can have a major and
beneficial impact.
Ricardo Cerdan
Senior International Advisor, Centrica Energy
What consumers want
of wild-caught seafood, we risk an ever diminishing supply. When

that happens, new businesses may emerge to serve our compliance
needs, but we will have lost the chance for a truly optimal solution.
Reactive answers are never as interesting or compelling as proactive
ones.
Dave Sherman and Jib Ellison, Featured Contributors
Response to Bjelland:
Sustainability measures in India
Osvald M. Bjelland mentions Tata Group from India. The

group has also developed some kind of tools that I thought should
be brought to the notice of this forum. Called The Tata Index
for Sustainable Human Development, its a matrix through which
Tata companies can implement, direct and measure the social development endeavors they are involved in. The index revolves around
three main parameterspeople, programmes and systems. Across
all Tata group companies, work is measured in the light of this
elaborate index. The underlying theme was to have a link between
the activity and the goal of improving in the quality of life of the
communities we operate in.
If one can further align such initiatives with the suppliers and
other entities in the value chain, things might be much easier, especially with measurable objectives and clear purpose.
A lot has been happening in some other big Indian corporate
houses as well. Reliance Capital Asset Management Limited came
out with the first fund in the country by the name of Reliance
Natural Resources Fund, a fund with a strong focus on alternative
sources of energy as wind and water etc. With over 1.5 million
investors and over $1.4 billion it clearly shows that these many people had some faith in the concept. I strongly believe that whether
its a manufacturer or a service provider, the scope for designing of
products and services with Green Goals is immense. And the way
this product launch has succeeded clearly shows that what impact a
corporate can have across the value chain. Not only did it manage
to garner assets and over 1.5 million investors but also in mobilized the support of several thousand distribution channels who
canvassed for this product.
However, the challenge is to have these initiatives in a structured
and ongoing basis rather than on a sporadic basis. Only then some
meaningful difference can be made to this world.
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A consumer wants two things: yield from the product and ease
of disposal. The fact of our lives is that the consumer pays to buy
and pays to dispose. If society can find a way to make disposal even
a little bit profitable for the consumer then sustainability has real
potential.
Manufacturers are relying on consumer conscience which is
fleeting. Reward their bank account, not their conscience, and they
will willingly play a vital role.
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Syd Stowe
Competitors working together is critical
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Competitive differentiation can and should be achieved through

design, function, service, and quality. There is no need to compete
on issues of human or ecological health.
The computer industry understood this when its top competitorsHP, IBM, and Dellgot together and formed standards
around fair labor practices, specifically regarding children. Of
course cheap labor allowed one company to pass along lower costs
to its customers, but once the abuses became public, these companies banded together and formed a new standard.
Today we realize that sustainability can not only drive improved
standards, but be an amplifier of business. It could be the tide that
raises all boats, moving industry far ahead of regulation and in
a profitable way. Take the livestock business. It is unquestionably
problematic environmentally, the most recent revelation being its
large contribution to the greenhouse effect in the form of methane.
But what if the problem was the solution? There is an opportunity
for the agriculture sector to unite and harness the power of poop
(manure). What it would require: a more efficient and economical digester, an innovative business model, and the intermediaries
to build, operate and maintain the digester. It would also require
coordination with utility companies to establish a fair price for this
energy being provided back to the grid. How? Again, by assembling
representatives from the entire supply chain in the same room, in a
creative way, to create a common vision and the collaborative systems to accomplish it. But for this effort, we sequester harmful gas,
further reduce our dependency on oil, and our countrys floundering farmers would have a much needed ancillary revenue stream
The greater, the more systemic the change, the more cooperation
is required. And, to be sure, business has an advantage here. If we
do not come together and create businesses out of these collaborative opportunities, government will begin to regulate, or, in the case
Gaurav Maleri, Mumbai
Can the Herman Miller model be replicated

elsewhere?
Its my hypothesis that the critical variable that allows and motivates HM to make this commitment and to stick to it is not their
unique industry, their fat margins, or the particular nature of their
business model.
Brian Walker mentions that HM initiated the program because
we believed it was the right thing to do and because we saw the
potential for a clear business benefit. This phrase indicates that
HM leadership committed to their Perfect Vision campaign (or
at least to the beginning of the project) before they knew what the
payback would be.
36
Transformation and transportation
Great article. I have been working on various green supply chain

initiatives and feel that this field will play a critical role in ensuring our practices change to meet the anticipated cap emissions. At
the end of the day, two of the key carbon producing activities are
T&T (transformation and transportation) and these capture the
essence of most supply chain processes. Our internal supply chain
analysis as well as pilot projects with some of our clients have led us
to conclude that a major paradigm shift is needed to make a positive impact. The typical business tendency to favor local metrics at
the expense of trading partners wouldnt work in a green supply
chain setup. In fact, while one can improve its inventory rotation
by pushing inventory upstream or downstream, any such disruption that causes extra carbon emissions hurts everybody.
In other words, nobody can fool the environment! We all breathe
the same air. Thats why we preach a comprehensive green supply
chain strategy, one that has to include a number of tiers of the chain
to ensure that joint collaboration helps stabilize the system and
hence minimize emissions. We also anticipate that as the value of
carbon increases as a result of stiffer regulatory environment, many
supply chain practices will be revamped. For instance, a sourcing
strategy would need to be revised with carbon as a new variable. A
Chinese factory might not be as appealing as a Mexican plant for
a U.S. company if the former has a much higher carbon footprint
than the latter.
Instituting a culture of environmental responsibility within the
supplier community will also help encourage best practices in green
supply chain management.
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This is a backwards step compared to most business decisions.

Clear payback usually precedes approval, and every possible initiative must have a fairly certain return that exceeds the hurdle
rate established by leadership before it can be implemented. This
discipline provides a useful filter for most tactical initiatives in
profit-oriented companies, but serves as a blocker for sustainability initiativeseven when those sustainability initiatives have great
payback potential.
We all know that most industrial processes waste huge amounts
of energy, and create unnecessary, expensive waste. In almost every
case, it is much less expensive to save energy than to buy it.
But, if the benefits of sustainability are so obvious, why are the
returns from sustainability initiatives so difficult to identify in advance?
First, most executives and managers understand their own businesses cold, but their expertise is focused on fine-tuning current
processes. Its impossible for most of them to see a radically different way to get the job done. Even if they could see a better way,
their compensation plans and management objectives keep them
focused on other issues.
Second, radical energy efficiency attacks
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big, systemic issues that almost always

stretch beyond functional organizational
boundaries, and often beyond the boundaries of the com-
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pany itself, to their suppliers and customers. How do you get those
disparate parties, with different motivations, to work together?
How do you even get them to commit the time to do so?
Third, different from most straightforward profit-making initiative, many sustainability initiatives require a fair amount of analysis
and design up-front before the payback can even be estimated. And,
since they are new approaches, they carry a fair amount of risk. It
takes a lot of courage for an executive to risk getting fired in order
to drive a pivotal project, even if its the right thing.
The critical variable that allowed HM to drive their Perfect Vision campaign was the moral leadership of senior management,
their willingness to commit to the right thing to do when the real
business benefit was still potential. They took a leap of faith.
If senior management is committed to sustainability, then crossfunctional and cross-corporate teams can spring up to pursue complex, high-payback opportunities. People have the right to fail, if
they do so intelligently. No one has to bet their job in order to do
the right thing. And the company might come up with innovations
that give them significant competitive advantage.
Over and over, I see this pattern: companies that
Do
are successful with sustainability initia

tives are led by executives that have a
personal passion for these issues, leaders
that lead with a moral imperative. And, sometimes these executives

make decisions to do the right thing even when the payback alone
does not justify them.
Michael Potts
CEO, Rocky Mountain Institute
Mondher Ben-Hamida
Brian Walker, discussion leader, responds:
Inside the Herman Miller supply chain
No landfill waste, no hazardous waste, no air or

water emissions from manufacturing, and the use
of 100% green energy, all by the year 2020. These
are some of the goals Herman Miller laid out in our
sustainability plan for our supply chain. There have
been a great many comments and questions, and in response, Ill
try and address several questions on topics such as closing the loop
with the reverse supply chain; the role of company culture in driving sustainability initiatives; how SMEs can influence supply chain
vendors; cooperating with competitors on industry standards; and
how to stay sustainable with a global supply chain.
Kurt asked what we use as a substitute for PVC and how it
better meets our goals
From a design and engineering standpoint, PVC has tremendous breadth of potential physical properties, so there is no universal replacement for this polymer. Weve chosen polypropylene,
a common replacement for PVC, in an effort to reduce our footprint by decreasing the amount of toxic chemicals released into
the environment throughout the materials lifecycle. Polypro is also
recyclable, retaining performance characteristics through multiple
37
uses. And of course were constantly looking for other materials

with equal or better attributes.
related associations and programs (the U.S. Green Building Council, Cradle-to-Cradle, the Business and Institutional Furniture
Manufacturers Association (BIFMA), West Michigan Environmental Action Councils collaborative waste-to-energy, composting,
and recycling programs, and others) that impact our industry and
that we believe offer credible benefits to customers, society, and
industry. Its true that industry competitors look to differentiate
through their socially responsible practices, but as was noted, this
is often primarily a first movers advantage based on recognition as
a founder/leader. If the programs are to be meaningful, they need
critical mass to drive change. We and our competitors understand
this and have generally been cooperative through our industry associations, or by independent decisions to adopt proven programs
that have economic benefit.
As ours and other industries adopt programs, we need to keep
in mind some key points: While the standards must be meaningful,
some companies are earlier in their journey, so standards need to
enable them to gain a foothold and then push them to move along
the adoption curvetiered certifications like the Cradle-to-Cradle program and the LEED standards. The standards and related
metrics and testing protocols must also be transparent and enable
multiple sources for accreditation, so that competition among the
service providers can keep related costs manageable. This is particularly important for smaller companies and those new to the socially
responsible movement. Great standards will be
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Alexis Morgan asked what influence Herman Millers culture

as a design-based business has had in our drive toward sustainability, and what SMEs can do to move their own supply
chains
For our part, the values of our founding family, specifically DJ
DePree and his sons, Max and Hugh, established our culture and
commitment to social responsibility and environmental stewardship. Id encourage you to read Maxs bestseller, Leadership Is an Art,
for more than I can share here. But it is worth noting that our first,
formal environmental statement dates back to DJ, in 1953, and
many aspects of our current approach to products, manufacturing,
and our buildings, can be clearly traced to the DePrees and the
people they surrounded themselves with.
To the second question, and in agreement with the comments
of John Davies and others, SMEs clearly dont have the same influence as a vendors larger customer, which suggests big companies
do have a leadership responsibility as we make the transition to a
sustainable economy. But dont underestimate the potential speed
of that change and the business opportunity that thousands of
SME customers represent to suppliers who get on board. A growing number of reference sources is available for sustainable vendors
through national, regional, and local business and environmental
advocacy groups. For our part, weve brought together customers,
suppliers, and our competitors in our own environmental conferences, creating opportunities for networking and shared learning.
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Bruce Klafter asked how far we extend our efforts internationally, in regions and business cultures that may be less sensitive or sophisticated in environmental considerations
We have a global sourcing strategy and are dealing with the challenges that you mention, but the great majority of our suppliers,
in both number and spend, are based in the United States. That
said, the same rules, procedures, and policies apply to international
suppliers. We use international assessments and agreements that
are similar to those used in the U.S., but they add language on
issues like child labor. The opportunity moving forward is engaging developing-world suppliers to work with us in working with
their next tier. This may be a cultural issue or an issue of trust, so
it takes time and a good deal of relationship building to get at this
next level of opportunity, but we believe there is recognition and
a desire to achieve sustainability among good companies worldwide. Meanwhile, we are committed to these metrics throughout
our global supply chain.
Bart, Tom Stewart, and many others have raised several interesting issues surrounding the development and use of industry
standards in materials, recycling, and elsewhere in the value
chain, and their benefits and risks
Judging by the number of comments, this subject looks like it
could be its own blog! For Herman Millers part, weve taken an
active role in the creation and promotion of several standards and
slow to have impact if the cost for par

ticipation in time and money is deemed
too high. Likewise they cant be watered down to meaning-
less green-washing, but that becomes increasingly unlikely with the

growing sophistication of media, customers, and watchdog organizations, as noted in Mark Colemans example.
To the need for viable, closed loop recycling programs and
industry collaboration, let me also mention an interesting pilot
program weve had underway with some of our largest competitors, through BIFMA, our industry association. In the search for
an economically viable way to separate and reclaim component
materials, BIFMA approached the State of Michigan Department
of Corrections to explore prison labor. These inmates are already
employed in industry, often in competition with the private sector.
The government and prisoners want employment opportunities, to
teach basic work skills and provide a productive use of prisoners
time, but private industry and labor dont welcome low cost competition subsidized by their taxes. With a recycling operation, we
believe there is potential for a cost-effective means for waste separation that performs a public good, meets the goals of the prisoners
and the Corrections Department, and meets a private sector need
rather than competing with industry. And given the number and
geographic distribution of corrections facilities, there is a potential
existing infrastructure to satisfy one of the most challenging points
in the value chain.
There are many competing standards, though, and that is where
non-profits, governments and NGOs come in. They need to collaborate to enable companies (and their supply chains) to work toward
common criteria that can be used anywhere in the world. For ex-
38
ample, the LEED program in the United States and the BREEAM
standards in the United Kingdom both have merit, but having a
unified standard would be ideal.
else in common: a long-term family-inspired business culture that

does not over-emphasise short-term shareholder returns.
But we are now observing an interesting phenomenon in business. Companies previously accused of being some of the worst environmental culprits, notably in energy, are formulating thorough
and far-reaching environmental compliance policies. They are not
doing so for philanthropic reasons or just to be good corporate
citizens. They are doing so because there is now a clear bottomline benefit from being pro-environment. More efficient energy
management systems and lower emission production, while often
requiring significant capital investment, leads to lower long term
costs and net savings. This is about more than cleaner plants. It is,
as Brian Walker said at the outset, about the greening of the supply chain. Better use of raw material extraction, supplies, transport,
packaging, logistics and even customer relationship management
can all benefit the environment.
Member companies of the Global Leadership and Technology
Exchange, the business consortium I helped set up, have realized
sizeable savings by running their business in an environmentally
friendly way. This was not achieved by coercion, regulatory threats
or additional fiscal burdens. It is achieved by a common realization
that being green is good for business, with the benefits measurable
in terms of net margin as well as reputation. Our challenge is to
explain that equation in a more compelling way, encouraging companies at every part of the supply chain to make business sense from
operating in a more efficient and sustainable way.
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L. Ramakrishnan questioned the extent we work with our

supply chain to achieve shared social responsibility (beyond
green) and how dependent we are on technological advances
to achieve our goals
Im proud to say Herman Miller is committed to ensure that
our suppliers, no matter where they are located, understand the
value of being a sustainable business. This is an expectation of anyone doing business with Herman Miller and as such our Supplier
Qualification Process includes social metrics beyond green that
closely mirror those established by SA8000 (Social Accountability
International).
Our Design for the Environment Standards review the chemical
content of all materials down to 100 parts per million. This means
that we are screening materials like pigments, additives, adhesives,
and even residual monomers inside polymers. Technologically, we
are dependent on advances in materials, transportation, and many
other aspects of the supply chain. We need advancements that are
both environmentally sound and cost effective. PVC is a good materials example. The truth is that PVCwith its durability, performance, and application rangeis very difficult to replace at a price
that customers are willing to pay for. Were doing it, but its a costly
and going slower than wed like. We can all enhance the potential
for technological advances by creating more market demand and by
our willingness to share in R&D investments. Herman Miller has
seen some success with that approach and I believe technological
advances can accelerate as more companies embrace sustainability.
Note: For some of these points Ive consulted Drew Schramm, senior vice president of supply, and Gabe Wing, manager of Design
for the Environment and a chemical engineer by training.
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Brian Walker, Discussion leader
The usual culprits are turning a corner
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The exchange of views about supply chain sustainability exposes an apparent gulf between business and environmental interest
groups. Many of the business contributors, myself included, are
embracing pro-environment measures because we recognize the
very real challenges posed by climate change and energy scarcity.
Some industry critics argue that companies are arriving too late
and with too little to make a difference. Large parts of the business
community are also accused of half measures and cosmetic gestures
when it comes to sustainability. This is particularly true when those
measures are espoused by companies whose products are part of
the problem: oil, aviation, motoring and power generation, among
others.
That may have been true in the past. Environmental business
models were often confined to relatively small companies, such as
Patagoniamentioned earlieror large enterprises such as IKEA
of Sweden, a company that has invested in sustainable forestry and
energy efficient production. Both those companies have something
HMs lofty goals push company in right

direction, but zero rhetoric may be harmful
As a former executive in charge of environmental health and

safety (EHS) at several global industrial companies, I can appreciate the true nature of the zero goals set by Herman Miller in its
perfect vision campaign. Such goals from senior management are
not those that must be exactly met, they simply push the organizational culture in the right direction. Since we dont live in a perfect
world, these goals will without a doubt not be met, but do effectively challenge to the organization to think differently, and disrupt the status quo. The possibility of quantum leap change is the
upside of such zero goals, but there are downsides to not setting
more realistic, continuous improvement goals, so zero generally
is not the right EHS goal for most organizations.
If one references back to the first books on Sustainability (Paul
Hawken, The Ecology of Commerce, 1993; John Elkington, Cannibals With Forks, 1998) a major aspect is the notion that social costs
and environmental costs and business economic costs all be considered in a perfect world. Neither author really suggests zero impact,
but rather that all aspects be considered (measured) and cared for.
The total elimination of anything is rarely the best outcome. The
business landscape is littered with the unintended consequences
of such corporate initiatives. And when dealing with international
suppliers, setting such zero goals becomes code words for not reporting such things. One should only effectively set a zero goal
39
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after the organization has a well established and audited metric

tracking system in place.
At age 12, this corporate initiative at Herman Miller is old
enough that I am sure its goals are good for its organization because
its relevant EHS Management Systems are mature and its metrics
have been tracked long enough to assure the data is robust. But
When you really look at what are the best green/sustainability

metric options, the answer for each industry/company will be a bit
different. Responsible executives must conduct a realistic gap analysis of what the real Triple Bottom Line gap is for their organization.
Adopting the metrics that are used by another organization, or the
metrics that happen to be within the current agenda in Hollywood,
is not a recipe for social, economic, nor environmental good. Take
time to set the right goals. Such has more impact, at least in the
EHS profession, than pretty much anything else.
ways a good idea. But regarding EHS metrics, care is needed in

what is measured as you might get it to the detriment of what you
dont measure.
There are a lot of options for goals that companies can consider
in the green/sustainability arena other than zero anything. Some
sustainability metrics might help prevent devastating injuries to
people working for suppliers. One doesnt help the social side of
Elkingtons Triple Bottom Line by having excellent safety programs
within the company but not measuring and auditing rigorously the
human impact of international outsourcing. Others may help an
organization in all three Triple Bottom Line areas, such as helping
prepare for the new regulation REACH, that will effectively prevent the selling of products in the European Union 11 years from
now if steps have not been taken to protect human health and the
environment through the early detection of intrinsic health hazards
of chemical substances.
Kyle Dotson, www.dotsongroup.com
Small companies can green their supply

chains, too
As a very late response to Mr. Morgans question regarding

whether a small company can be as effective in motivating the
supply chain as a new one: apparently they can be. My colleague
Beatrice Kogg of IIIEE, Lund University has the proof where she
found out that a small scale textiles company
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it would be folly for other organizations

to set zero goals just because Herman
Miller did. Yes, everyone should focus on metrics; thats al-
from Sweden has been equally, or per

haps even more, successful in motivating its
supply chain, which practically extends across the globe. Beatrice

would have shared her views herself, but she is awfully busy finalizing her Ph.D. The good news is that, in couple of months, you
will be able to find a more useful answer to the question.
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Murat Mirata
40
Winners and
Losers in a CarbonConstrained World
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Featured from February 14March 4
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Operations
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heres an old saying in poker: If you dont know who

companys position on climate change and develop a strategy to
the sucker is in a game, its you. Well, business can be a lot
create opportunities. The goal of any business strategy is to control
like that. Concerns about global warming will spur massive
your future business environment. Consider examining the followmarket changes, whether they come from changes in regulations,
ing three steps as you prepare to develop a climate strategy.
capital markets, consumer demand, or something else. Companies
1. Know your carbon exposure. Create an emissions inthat are indifferent to these shifts may be blindsided.
ventory and assess your carbon footprint; then you can ask how
Most observers believe that new regulapotential changes in policy and market
tions will soon create a market price for
price will affect the positioning of your
carbon. That fact alone will affect energy
products and services in the months ahead
Andrew J. Hoffman is
pricing and availability, creating a ripple
and in the long term.
the Holcim (U.S.) Professor of Sustainable
effect throughout global value chains.
2. Take action. Once you know your
Enterprise at the University of Michigan,
And as in any market shift, there will be
footprint, reduce it. Then assess your busia position that
both risks and rewards, winners and losers.
ness opportunities in doing so.
holds joint
Businesspeople need not have a personal
3. Influence the policy-develop
appointments
view on the science and they dont have to
ment process. Policies will set the rules
at the Stephen
resort to calls to do the right thing. There
of the game and change the competitive
M. Ross School
are true strategic reasons to reduce greenlandscape, favoring certain actions, comof Business
and the School
house gas emissions. Scanning the business
panies, and industries. But to gain a seat
of Natural Rehorizon for opportunities to protect assets,
at the table, you must first take credible
sources and Environment. Within this role,
improve the bottom line, and enhance topaction and develop legitimate expertise to
he also serves as associate director of the
line innovation is precisely what compabring to bear.
Frederick A. and Barbara M. Erb Institute
nies are expected to do, and shareholders
In the end, you dont need to study phofor Global Sustainable Enterprise.
demand no less. Since regulation is part of
tos of receding glaciers or pore over the latthe business environment, any company
est scientific reports to know that climate
John Woody is a Deal Associthat can foresee business opportunities in
change is already happening. Just look at
ate at MMA Renewable Ventures in San
the formation of environmental legislayour marketplace, your competitors, and
Francisco, where
tion is practicing what is expected of their
your boardroom. Some companies are
he works on the
managersit is called capitalism.
adapting out of near-term operational nedevelopment
and financing
And that is how you should think
cessity, others are acting to mitigate longof renewable
about climate change. The question to
term strategic vulnerabilities, and the
energy and
ask is whether your company has an ecomost forward-thinking are devising ways
energy efficiency
nomic opportunity to be green vis--vis
to profit from clean energy and efficient
projects.
your competitors; then you must ask how
technology.
and when you can take advantage of that
So your only question in a carbonHoffman and Woody are the authors of
opportunity.
constrained world is this: Will you be a
Climate Change: Whats Your Business
If you want to be a winner in a carbonwinner or a loserand how are you going
Strategy (Harvard Business Press, May
capped world, you and your management
to figure it out?
2008).
team must do a careful analysis of your
41
No company can afford to ignore climate

change
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Winners and Losers in a Carbon-Constrained World | Operations
of corporate climate change impacts received broad coverage. Simply put, it is becoming increasingly unacceptable not to know your
carbon footprint or not to have an emissions reduction game plan.
So whether you are in the new economy or an old industry, a
big player or a small business, focused on local or global markets,
climate change strategy has become a core element of strategy and
a business imperative.
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Hoffman and Woody call it a market shift. In making the case

for a business focus on the issue, they highlight the change in energy prices and the spillover into pricing of other resources.
There is, however, an even broader logic for folding climate
change (and environmental thinking more generally) into your
companys core strategy. In fact, four distinct drivers are combining
Dan Esty, Featured Contributor
to make environment and related energy issues a critical point of
competitive differentiation in many industries.
Stakes are high: Are you still playing
First, as everybody knows, energy prices are up. At over $100/
yesterdays game?
barrel, every company (as well as every community and family!)
The sucker-in-the-game poker saying is the perfect lead-in to
needs to recalibrate its investment in energy efficiency. Compared
this discussion. Professor Hoffmans three-step strategy is strategito a few years ago (when oil prices hovered around $30/barrel) the
cally appropriate, but its analytical precision does not convey the
optimal level of energy conservation is now much higher. Resourcmessage of how brutal this game will be played. The major stakes
es put into green building design; energy efficiency in computers,
on the table will bring out the best (e.g., innovation) and worst
servers, and information systems; efforts to cut electricity use by
(e.g., political treachery) in mankind. Indeed, worst-case scenarios
improving the efficiency of lights, heating, and air conditioning; as
include global famine and warfare.
well as logistics optimization, and other activities with an energy
In my travels throughout the corporate world, I have witnessed
dimension are much more likely to pay off now.
the excitement generated by marketing programs such as GEs EcoSecond, new climate change regulations are coming. With the
magination. Judging from the mounting media coverage, the green
field narrowed to Obama, Clinton, and McCain, we know to a
buzz is approaching a roar. But the strategic attention by executives
high degree of certainty that the next president of the United States
appears to be focused on grabbing the green marketing winnings
is going to support more aggressive action to limit greenhouse gas
and not on strategically positioning to hedge ones bets for this longemissions. While there are still some obstacles to congressional acterm game. The best marketing minds may be currently at the table,
tion, both the House and Senate look poised to pass some form of
but what about the rest of the team? The corporate environmental
carbon charge in 2009. So companies with high carbon footprints
managers with whom I talk appear to be consumed by day-to-day
face a competitive disadvantage that is likely to grow in the comregulatory-required tasks. In other words, they are still playing in
ing years.
yesterdays game.
Third, in some industries, nature is impinging in ways that could
To Professor Hoffmans list Id add a fourth step: Check to
have significant business effects as the impacts of climate change
see if you have the right players with the
such as global warming, sea level rise, changed rainfall patterns, and
required skills. Like no-limit hold em at
more intense windstorms emerge. So if you are in the ski industry
the World Series of Poker, this game is
(facing reduced snowfall), you need a climate change game plan
not for the faint of heart. I believe that business
(more snowmaking?) even if the government has not acted.
executives today do not fully understand the urgency or the stakes
Finally, a widening array of stakeholdinvolved. It takes resources to aggressively
ers is now asking about corporate strategy
and comprehensively pursue the first three
related to climate change. It used to be
steps. From what Ive encountered, few
that environmental questions came from
companies are yet ready to make even this
Featured
government regulators and the occasional
limited commitment.
Contributors
environmental group. But today you have
Richard MacLean
to expect inquiries about carbon emissions
Executive Director
Dan Esty, Hillhouse Professor,
and reduction efforts from the communiCenter for Environmental Innovation, Inc.
director of the Center for Business and the
ties you operate in, employees, customers,
http://www.Enviro-Innovate.org
Environment, Yale University
and even capital markets. Nothing like
Wal-Mart CEO Lee Scotts sustainability
Climate change strategy at
Michael Potts, CEO, Rocky
Mountain Institute
initiative, including a promise to improve
Shell
energy efficiency and reduce greenhouse
Climate change is a pressing strategic
Peter Schwartz, cogas emissions not just within his stores but
issue for energy companies and has moved
founder and chairman, Global Business
up the companys supply chain, to motifar beyond the realms of the environment
Network
vate companies large and small to step up
and sustainable development teams that
to the climate change challenge. Likewise,
flagged its importance over a decade ago.
Gardiner Morse, Senior
the Carbon Disclosure Projects SeptemWhilst we see oil and gas maintaining
Editor, Harvard Business Review
ber 2007 release of its most recent report
an important role in society for many
42
years, we must nevertheless put in motion a series of major initiatives to manage our carbon footprint going forward. These include
the development of carbon capture and storage and advanced biofuel technologies, more focus on energy efficiency both for us and
how our customers use our products and importantly for today
ensuring that our voice is heard as policy approaches are developed.
The latter has a profound impact on the profitability of deploying the technologies we are developing. In our business, the rules
governing emissions trading, biofuel mandates and low carbon fuel
standards will be pivotal to the success or otherwise of these technologies.
Without such an integrated approach to the issue, as highlighted
by Hoffman and Woody, value will be lost.
David Hone, Group Climate Change Adviser, Shell International
tionsbut also ones sins of omission: the opportunities that exist

outside the four walls of the business? Is there a framework for
each?
(2) I want to hear from Wall Street (or maybe the City). Whats
going on among (a) institutional shareholders, such as pension
funds, etc.: Are they pressing companies to disclose carbon footprint as a risk? (b) investment bankers: Does carbon footprint enter
into their calculations in deal-making, and if so, how? Ive heard
one European CEO in an energy intensive business say, My question is, am I sitting on an asset or on a liability? and (c) securities
analysts.
Maybe we can rope some of those Wall St. types into this discussion.
Market is betting on proven technologies
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Response to Hone, MacLean, and Esty:

Are CEOs missing the point?
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Markets may be overly optimistic on the prospects for short-term

Yes, yes, and yes, to the previous three comments. And yes, but
coordinated global action on climate change, whether through cap
in another sense, or perhaps two:
and trade or any other form of mandatory greenhouse gas reduc(1) Strategy. At a dinner of technology executives a couple of
tion targets. Yes, the three remaining U.S. presidential candidates
months ago, there was a smart, interesting presentation about clifavor cap and trade and would represent a significant shift from the
mate changebasically a plea to put this on executive committee
Bush Administration. But the details of their proposals may not
agendas. Like the old line at the beginning of Hill Street Blues,
fully align with EU goals in the post-Kyoto process, particularly on
the message was, Lets do it to them before they do it to us. Most
questions related to the use of international carbon offsets. China
of the audience were Silicon Valley CEOs
will also be unlikely to respond to U.S. acor equivalents; some were involved in
tion in the short term, given the precariGreen Grid activities (www.thegreengrid.
ous state of their coal-dependent power
Resources
org), some not. A lot were entrepreneurs.
grid as demonstrated by weather-related
One of the latter, a fabulously outspoken
disruptions in recent weeks. China is also
Competitive Advantage on a
woman, broke the consensus by saying,
likely to bristle at any U.S. legislation that
Warming Planet
in essence, Yeah, yeah, yeah, been there
includes a tariff or sanctions clause targetHarvard Business Review
done that, and theres no there there. She
ing imports from states without hard caps
by Jonathan Lash and
Fred Wellington
went on to say that her company had
on GHG emissions.
done a zillion things to try to clean up.
In this context, the most promising
Recycling, two-sided xeroxing, cutting
technologies for clean energy and energy
down on bottled water, lowering (or raisefficiency may be undermined by the lack
ing, depending on the season) thermostats, yadda yadda, and that
of regulatory visibility. Indeed, with $100 oil and growing market
it hadnt amounted to a hill of beans. Her bottom line: Im in the
fears of a coal shortage in Asia, it hardly seems like the market is
software business, not the energy business, and this climate stuff is
betting big on clean energy crowding out fossil fuels anytime soon.
none of my business.
In this context, clean energy technologies that are more mature
Well, it is, actually. This company in particular, which Im not
and proventherefore less riskyare likely to outperform more
naming because the dinner was private but which some of you
exotic, unproven alternatives. In our book, that is a bet on natural
might be able to identify, makes software that is used in transporgas, nuclear power, and hybrid vehicles over cellulosic ethanol, sotation, construction, and manufacturing, among other industries.
lar, and carbon capture and sequestration.
Theres probably a huge strategic opportunity for them to develop
Ian Bremmer, Eurasia Group
software that helps their clients make and operate/control products that are dramatically more efficient. Indeed, that company
Think you can steer regulations to your
can probably do more to reduce carbon emissions by what it sells
advantage? Not so fast.
than it could EVER do by making its own carbon footprint small
What keeps managers awake at night? Uncertaintynot
enough to fit into Cinderellas glass slipper.
knowing where the world is headed. Firms are great at chanBut the CEO couldnt see that virgin-territory of opportunity
neling resources toward the pursuit of some particular goal. The
because she could see climate only in terms of her own operations.
problem is in choosing that goal. Where do you put the mark
My questions: (a) how do you help this woman? and (b) How
on the horizon for the firm to head toward? If you choose the
does one audit not just ones sins of emissionthat is, in operaHarvard Business Review | The Green Conversation | Spring 2008
43
arehow better their share price is performing and how easier and
cheaper it is to raise capital, how much their sales have increased,
how many new products are coming through, how much innovation has increased, how happier their investors and customers are.
And thats down to market forces and regulation.
We should be concentrating on reducing the impact of climate
change on business rather than business impact on the environment. There is already enough environmen
tal regulation and enough legal weight

behind the stick that governs corporate
conduct to ensure that environmental
damage is limited. By putting corporate response to cli-
mate change into the hands of the CSR department (or outsourcing it to an NGO for that matter), we are approaching the issue
from the wrong directioncompanies that do this not only miss
the point of responding to climate change they are also in danger
of missing the boat of opportunity that it affords.
Climate change is a boardroom issue. It should be handled as
a strategic component of change management because developing
a response to climate change will bring about a complete business
transformation from oily chrysalis to wind-powered imago. The
social responsibility is government responsibility; the same as it is
for education, health care and welfare. Undoubtedly business has a
part to play in delivering these services not because it should, but
because it can. Those companies will be the winners because they
will focus on their core business activities, whatever the weather.
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wrong goal, much time and energy gets wasted, and the firm
may never recover.
Right now, theres a great deal of uncertainty about what climate
change will mean for business over the coming years. Theres the
larger question of how the world might change because of changing
climates, but theres the more direct issue of how regulation might
change the rules of the game by which businesses play. We all know
something has to be done about carbon emissions, and most folks
are tired of waitingthey just want to know what will be done.
New regulations will require the stress of adaptation, but it would
be a welcome relief to simply know the new rulesto remove the
uncertainty so that firms can get busy implementing, rather than
guessing and hedging.
Managers would like to not only know whats ahead, but theyd
also like to control it. Its one thing to know where to set the mark
on the horizon to head toward; its a whole other thing to be able to
set the mark in a place that most benefits your firm. And so firms
do seek to control regulatory agendas. And its here that I urge
some restraint.
Firms have powerful voices in the regulatory processa good
chunk of the time, those who regulate have come from the firms
theyre regulating, and will probably go back into them. Its a system chock full of conflicts of interest. But theres one interest we all
sharethat of the planets continued vibrancy. If the planet
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goes out of business, we all go out of

business.
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The problem is, individual firms can gain much now by shaping
regulations in ways that lead to the most private profit, and not
necessarily the most public profit. We have a hard time grasping
how giving up a penny of private profit now might lead to a nickel,
dime, or arguably, an infinite amount of public good in the future.
We need long-sighted government to set these regulations in such
a way that we dont give in to the tendency to overdiscount future
public good relative to short-term private profits. So firms should
seek the certainty in having a clear standard for carbon reduction
established soon, and one that does so without unnecessary economic hardship, but I hope they avoid the temptation to control
the regulatory agenda in such a way that this standard is shortsighted. Firms have some power to control regulatory agendas, but
they have no power to control the weatherand thats the larger
problem here.
Mike Barnett, Research Fellow, Kiran C. Patel Center for
Global Solutions, University of South Florida
Climate change is a business issue, not an

ethical one
Do
It raises stakes and issues that are causing considerable problems

for incumbent environmentalists in the business arena in terms of
justifying their position in the climate change and business debate.
Responding to climate change is not a corporate social responsibility and I do not believe it is essentially an ethical obligation
eitherits about making sensible and pragmatic business choices.
All the studies of business reducing its carbon footprint mention
how much less energy they have used and how much those savings
Jeremy Blow, Publisher of Carbon Business
Response to Tom Stewart: Reducing the risk

is an important way to create opportunity
Late in January, for example, Staples severed its contracts with a

major paper supplier, Asia Pulp & Paper, because of its poor environmental performance. Other buyers have also cut APP loose. (Staples
VP of environmental issues, Mark Buckley, told the Wall Street Journal that to remain an APP customer would be at great peril to our
brand http://online.wsj.com/article/SB120240874246651263.
html). That move opened Staples doors to more environmentally
friendly suppliers who discovered competitive advantage in being
greener than APP. Similarly, as Wal-Mart turns its attention to
greening its supply chain, vendors who dont make the grade on its
environmental friendliness scorecards can expect to be summarily
let go. Likewise, companies that reduce their carbon footprint now
will find, as emissions are increasingly penalized, that they will be
able to do what they do at a lower cost (including, probably, access
capital) than less efficient competitors. That will create advantage.
While companies need to be thinking strategically about creating
opportunities in a carbon-constrained world, they should be mindful that a good offense is a good defense.
Should oil companies stick to their core

mission?
I certainly support what Andy and John have written, as well
as many of the points made in the follow-on discussion. I began
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discussing these topics in public 10 years ago when I was CEO of

both unfair and unwise. It is better to let them reinvest to keep the
BP America and BP had broken ranks with its industry colleagues
lights on and pass profits on to investors to channel those funds to
and declared that climate change was an issue worth addressing. It
those technologies and entrepreneurs with the right skills to create
is amazing to me how far things have come. Ten years ago my job
a new sustainable energy paradigm.
was about raising awareness, and today cliHaving said all that, my advice to the
mate change is a topic well known to just
oil industry is different. To quote Bob
about every one in this country.
Dylan, you better start swimming or you
I would like to argue two provocative
will sink like a stone, for the times they
Resources
points with respect to climate change and
are a changing. Most nations are acting
FORETHOUGHT SPECIAL
the oil companies. First, I would like to
on climate change through the auspices
REPORT: Climate Business/
take issue with those who say that the oil
of Kyoto. Even in the U.S., many states
Business Climate
companies should follow the lead of comand municipalities are acting, and climate
panies such as BP and Shell and do more
is clearly on the congressional and presiwith respect to climate change, i.e., indential candidate radar screens. Custom>> Grist: A Strategic Approach
vest more in alternative/renewable energy.
ers, and in particular business customers,
to Climate
However, having taken that tack, I would
are setting targets and making requests up
by Michael E. Porter and
recommend, they should in fact be doing
their supply chains. Investors/banks/insurForest L. Reinhardt
just that.
ers are asking about future risks and liabili>> Regulation: If Youre Not at
The typical oil CEO faces a daunting
ties. New employee recruits are weighing
the Table, Youre on the Menu
agenda, from employee safety to operathis issue in their decision making. And
by Andrew J. Hoffman
tional integrity and aging infrastructure to
probably most importantly, your competiexpropriation and rebel attacks on facilition is getting on board.
ties to changing fuel regulations/requireWith these shifting sands, isnt this
ments to extremely volatile markets and
the best time to figure out how to create
prices and rapidly escalating costs of rigs and steel. However, the
competitive advantage through new products and services, new
most pressing issue of all is the difficulty of adding to oil and gas
and more efficient processes, new partners, and energized employreserves and production in the face of fast-growing global demand,
ees. At the very least, shouldnt an oil company be minimizing risk
fueled in large part by the developing worlds much needed elevaand hedging bets to avoid getting stuck in an old energy paradigm
tion of living standards.
defined by a declining resource base with rapidly rising oil prices
Today the world runs on oil and gas. In order to generate the
which are thereby attracting either higher royalities, production
wealth needed to raise living standards AND invest in a more sustaxes, or expropriation. If I werent retired, I know what I would
tainable future, oil and gas will be needed in the short to intermedibe doing.
ate termjust to keep the trains on the track so to speak, and there
Steve Percy, CEO BP America (retired)
are many who believe that we are approaching a time when oil
production can no longer rise, i.e. peak oil. Suffice it to say the oil
Two possible futures
industry needs to run pretty fast in order to avoid severe economic
Andrew Hoffmans short list of climate strategy steps is a good
disruption in the short term.
starting point, but each of his items is a densely packed bag of quesWith this in mind, do we really want the oil
tions. An edition of HBRGreen could be dedicated to each. I would
like to unpack number 3: business positioning in the climate policy
industry to take its eye off the ball by
process. As Dan Esty says, the U.S. climate policy wild-card is a lot
diverting attention to new energy forms
clearer now that McCain is the Republican front-runner. The next
or do we want it to stick to its core mis
administration, Democrat or Republican, will implement climate
sion while others find new solutions? There is an issue of competence. Oil companies are good at bringing oil and gas to market.
regulations. The uncertainty now is what those regulations will
However, that doesnt mean they are good at perfecting alternative
look like. The outcome is vital because, as Hoffmans post title says,
energy! In fact, they have proved themselves highly deficient in this
it will determine the winners and losers in a carbon-constrained
regard in the past.
economy.
The oil industry does have skills/assets that will play in a future
One way to view it is in terms of continuity versus discontinuity
lower carbon energy paradigm. They have the resources and techsolutions, which comes from the economists idea of path depennologies to expand the use of natural gas, in transition. They know
dence. Our past choices have lead us down a path of fossil fuel
how to inject CO2 into underground geologic formations. They are
dependence. Going forward we can continue down this path and
excellent at exploiting energy efficiency, and they have the logistical
find a way to eliminate the climate problems of our existing energy
skills necessary to bring biofuels to market. They already produce
system. This has worked in the past for environmental issues like
and consume large quantities of hydrogen. Nevertheless, beatacid rain. This approach could be called the Sustainable Carbon
ing on the oil companies to plow profits into new energy forms is
Economy path. The other alternative is to throw out todays fossil
45
man systems such as agriculture, coastal zones, and transportation

will be profound. The levels of CO2 we have already achievedand
are likely to add substantially tomean that a great deal of climate
change is inevitable. This is in part because of the enormous momentum of our energy system. The real energy scenario for the future is more coal and oil with some uncertainty on how much more.
This includes doing all the efficiency, renewables, and nuclear we
can.
The growth in the world economy and the distribution of coal,
oil, and gas resources in the world mean that we will exploit them
extensively for decades to come, even as we are reducing our carbon
footprint by every means possible, including carbon sequestration.
This means that the level of CO2 will continue to rise rather than
fall and with it a greater climate impact. This perception of the inevitability of climate change, and of the growing need to adapt will
put even greater pressure on companies to take carbon reduction
strategies seriously and with greater urgency.
This sense of urgency is compounded by a positive surprise. William F. Ruddiman in his recent, brilliant, and readable book, Plows,
Plagues and Petroleum, documents how human beings have been
inadvertently changing the climate for thousands of years. Clearing forests, agricultural practicesespecially rice growinghuman
plagues, and finally the industrial revolution have all been part of
how human societies contributed to climate change for the last
10,000 years. We may even have prevented the onset of another
ice age a few thousand years ago by raising the levels of CO2 and
methane. But if Ruddimans analysis is right, then relatively small
changes by human beings can have meaningfully large impacts on
the climate. Perhaps taking large steps to reduce greenhouse gas
emissions rapidly might have a greater impact for the better sooner
than we think. Thus acting sooner makes a bigger difference, intensifying the need for urgency.
The uncertainty arises from the same turbulence that introduces
urgency. Over any brief period of a few years the track of the climate is quite unpredictable. It is a bounded, turbulent, chaotic
system. Not just anything can happen, but there can be a lot of
movement within the boundaries and it can be very difficult to
predict the next few moves. Because the level of CO2 is so high, any
sustained cooling is virtually impossible, but a brief period of two
or three years of slightly cooler weather at least in some places is not
impossible, even as the average is moving on an unbroken path upward. It could happen any time; therefore, the heat could literally
be taken out of the issue, making strong action today look foolish
and overanxious. Like Y2K before it, the concern
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fuel-based systems and develop a replacement. This could be called

the Non-Carbon Energy path. There are pros and cons, as well as
supporters and detractors, of both alternatives.
For many, the term Sustainable Carbon Economy is an oxymoron. Fortunately, there are technologies that promise to mitigate the climate damage from burning fossil fuels. Collectively
known as Carbon Capture and Storage (CCS), or sequestration,
they basically put the carbon released from combustion back into
geologic storage. Its already occurring to a limited extent in places
like Norway and Texas, but it would have to be dramatically expanded to stave off climate change. Vocal critics argue that CCS
just postpones an inevitable transition away from fossil fuels, and
thus avoids the problem.
The alternative is the development of non-carbon energy systems. Renewable energy technologies like wind and solar energy
are promising substitutes that can provide the worlds energy long
after fossil fuels are no longer economical. Renewable energy, however, has different characteristics than fossil fuel power systems.
Implementation will most likely be decentralized, with local energy
generation instead of large centralized power plants. Detractors
focus on the current high costs and the dramatic change it may
mean for society. But civilization has experienced major technological changes in the past, like moving from canals to trains to cars.
These transitions create dynamic economic growth, and a shift to
a renewable energy economy could conceivably create similar economic dynamism. However, they also create big losers, as the canal
and train manufacturers can tell the car makers.
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All the alternatives have large un

knowns around them. While it is too early to know
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which solutions will dominate in a post-climate-change world, it is

important for managers to evaluate which of the end games they
favor. Early coordinated support of a solution, perhaps through
demonstrated commitments in strategic investments and policy
outreach, can tip the playing field. But as the climate policy endgame begins, the time for proactive political strategies is quickly
coming to an end.
No
Response to Steve Percy:

Urgency and uncertainty
Do
I agree with him about the role of oil companies. (Full disclosure: Steve and I are old friends, college classmates and we served in
the oil industry at the same time, he in the leadership of BP and me
across the river as head of scenario planning for Shell.)
Let me add two elements to the conversation, urgency and uncertainty. We are likely to experience the very serious impacts of
climate change in some places in the world very soon if it is not
already underway. The image of a world gradually warming is inaccurate. When a turbulent fluid like the atmosphere changes state it
does so in jumps and startsnot a smooth and even transformation. The reality is, an increasing number of places in the world
will begin to experience increasingly extreme weather more often
with more frequent catastrophic effects. There will be more severe
storms, extended droughts, and flooding. The disruptions of hu-
over climate change could be seen as

excessive and misplaced. Business leaders need to
communicate that we are talking about climate changenot sustained and gradual warmingand that the disruptions for human
societies come from an unstable climate even more than from a
warmer world. We need to make clear that climate change will be
with us for a long time to comedecades at a minimum. And that
we will be thinking about how to adaptand how to change the
climatefor decades as well.
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So the business implications are that the impacts and uncertainties of climate change may be greater and worse than we think,
but that we may be able to do more about it than we think. That
re-perception puts a high premium on effective corporate responses
today rather than in the future. Action now has a very high value in
creating future maneuvering room.
common man the cost of energy will be a motivator to opt for

energy-efficient products.
If an organization does not have a green strategy already, it is
time now to think. It is never too late to start a good thing, including the journey toward greening the organization. It is obvious as
to who is the winner and who is the loser.
Peter Schwartz, Featured Contributor
L. Ramakrishnan
Climate change is in the wind
From my perspective, sitting in Washington and working on all

of the environmental issues (including climate change), every company has an opportunity with climate change. It comes down to
three critical, but simple, components of doing business: leadership,
innovation, and authenticity.
I have had the good fortune to work closely with Patagonia, and
from what Ive seen, its Chouinards unyielding ethics that separates Patagonia from the others. Sure, they are privately held, but
in the end, they are incredibly profitable as well. Its no coincidence
that Chouinard was on the cover of Forbes this past summer. Everyone is chasing him and his grand experiment. If you dont agree, ask
Lee Scott, who has had the greatest influence on the transformation
that Wal-Mart has undergone. I guarantee that Chouinard isnt sitting around waiting to see what regulations the government will
come up with to address climate change.
As for the comment about social responsibility being government responsibility; the same as it is for education, health care and
welfare, Id have to respectfully disagree.
Theres no question that government does have social responsibility, but so do other sectors. Ask consumers. Ask corporate board
members about shareholder resolutions and activism. Ask the winners and losers in education, health care and welfare (which have
been addressed by the public sector). Its no coincidence that Enron
and Worldcom had their ethical lapses around the same time the
private sector began its transformation. The global emer
Although Super Tuesday did not resolve who will be our 2008
Presidential nominees, it did make one thing almost certain: the
United States will embrace climate change legislation in the next
administration. All three leading candidatesSens. Clinton, McCain and Obamahave made it clear that this issue would be
high on their agenda after entering the White House. Congress
is also getting ready to act, with the introduction of no less than
seven congressional bills proposing greenhouse gas (GHG) controls in the past year. This leaves little doubt that the U.S.
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The government perspective
gence of CSR is a very real part of doing

business today, and to ignore it would be naive. CSR
No
needs to be part of the strategic discussion, because the social side

of climate change provides fertile ground that will help separate the
winners from the losers.
Joe Starinchak
Energy efficiency is key to long-term survival
Do
Carbon linked climate change (and the related carbon trade) is

no doubt a compelling addition to already existing business imperatives for energy and material efficiency in products and operations. I do not think that anyone will disagree about improving efficiency, including energy efficiency, to remain competitive. Energy
efficiency improvement projects in the past were not driven by
climate change considerations, but by cost considerations. I know
of examples of companies that have reduced their specific energy
consumption by over 70% in the last ten years; the driver, of course,
was cost reduction. I believe that there is a tremendous opportunity
for innovators to come out with energy-efficient productsfor the
is gearing up to follow Europealbeit

belatedlyin placing a price on carbon
emissions.
This change in political winds hasnt been lost on U.S. chief

executives, including the banking sector. A price on carbon will
inevitably alter costs of production, the pricing of securities, and
the assignment of credit and asset valuations. It will also bring
new opportunities for banks to engage in carbon trading, develop
new climate-focused products and invest in the burgeoning clean
technology sector. As Mindy Lubber, president of the investor and
environmental coalition Ceres, said at the RiskMetrics Governance
Conference held in New York City this week, It is unimaginable
that the banks will be anything other than one of the most important players in addressing climate change.
A month ago, RiskMetrics Group produced a report commissioned by Ceres that examined how 40 of the worlds largest financial institutions are preparing themselves for climate change. The
study found that while banks are not high emitters of greenhouse
gasses themselves, they are the primary financiers of the worlds
most-carbon-intensive industries. And while most banks are beginning to focus on their own emission footprintsand in many cases
pledging to go carbon neutralonly a handful are factoring a
price for carbon in their lending and investment decisions.
As a recommendation, the report, Corporate Governance and
Climate Change: The Banking Sector, (http://www.riskmetrics.
com/pdf/ceres_climate_change_banking_report2008.pdf ) called
on banks to explain how they are factoring carbon costs into financing and investment decisions, especially for energy-intensive
projects that pose financial risks as carbon-reducing regulations
take hold worldwide.
Carbon Principles Announced
Only a month later, three big banks on Wall Street have responded. On Monday, Feb. 11, Citigroup, JPMorgan Chase and Morgan
Stanley have adopted the Carbon Principles, a set of guidelines
for advisers and lenders to evaluate carbon risks associated with
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new investments in the U.S. electric-power sector. This framework

sion of warming or cooling climate change. To be clear, what is
comes after nine months of dialogue with leading environmental
being labeled green really means how individual companies will
organizations, including Environmental Defense and the Natuachieve more or less green in their pockets as a result of future
ral Resources Defense Council. Seven of the nations largest coalredistribution of wealth by regulations that enjoy too much celebburning utilities also were consulted and have written statements of
rity/popular support not to pass in some form. Like the Chinese
support for the guidelines.
symbol for the word crisis, the future business of being green
While banks have been stepping up their commitment to adpresents both danger and opportunity. The degree to which comdress climate change in recent years with a huge increase in suppanies think through this chess game will determine if they are to
port of renewable energy investments, they have largely shied away
be the participants or non-participants of available new opportufrom acknowledging any material risks associated with their connities, or, in a few instances, the sucker in the game. Some may
tinued financing of carbon-intensive enbe well-positioned to be either at the moergy sources like coal. In fact, some of the
ment, but a few have made brilliant plays
same companies that advocate policies to
that are likely to improve their future fate.
Resources
combat climate change are also the largest
For example, one company has gobbled
global financiers of the coal industry. Unup at low cost a lot of really nice sites for
What Every Executive Needs to
der the Enhanced Diligence framework
new lower-cost nuclear. Game changing
Know About Global Warming
called for by the Carbon Principles, it will
technology is occurring at a solar comHarvard Business Review
now be more difficult for U.S. electric
pany that will not be the answer, but
by Kimberly ONeill Packard and
Forest Reinhardt
utilities to build new, conventional coalwill certainly assure them as a player. On
fired power plants.
the other hand, ethanol from corn ignores
The evaluation process calls on utilities
calorie mass balance, and wind power has
to see if cost-effective demand reductions
other physics problemsthat means that
can limit the overall need for new generating capacity. Moreover,
such solutions will only be feasible if subsidized with a lot of hot
consideration should be given to renewable energy and low-carair by Washington. And in the long term we simply must find techbon distributed energy sources as alternatives to building new, large
nologies to use coal in a manner that nets less respiratory disease,
baseload power plants. Finally, any new coal-fired generation should
as America has a lot of both. But as Hoffman and Woody infer in
take into account whether carbon emissions can be economically
their third action item, the winners and losers will be picked in the
captured and stored, rather than released to the atmosphere. Only
short term not by physicists, but by politicians. Such regulations
after these other options have been ruled out should banks consider
are sure to further raise the price of energy for all, and by doing so
financing new, conventional coal-fired power plants.
stimulate (a) new technology, (b) conservation, and (c) production
The Carbon Principles leave some key questions unanswered,
by loosening the constraints on now-safe nuclear that have been in
however. One is whether they will extend beyond the United
place in this country for decades.
States eventually, to serve as a litmus test for new power generation
I would agree, as a previous VP Environmental for enterprises
around the globe. Another question is what price on carbon will be
comprising a range of greenness, that the three steps suggested
assumed for this Enhanced Diligence framework. If the assumed
by Hoffman and Woody are appropriate steps for all major point
carbon price is too low, it may not have much effect on final decisource emitters, but I would suggest that much opportunity for
sions regarding new power plants.
influencing the real rules of the game for this group has now passed.
Clearly, banks role as the primary financiers of the countrys
But for the software company discussed, as well as for a host of
most carbon-intensive industries is a place to start to make a differother companies, their link in the value chain is farther removed
ence. While the Carbon Principles will not preclude new coal-fired
from the issue of emissions, and how to play it is not therefore
power plants from bank-lending portfolios, they do ensure a more
obvious, and so there is still time to make an early chess move. For
rigorous evaluation process in evaluating the risks associated with
the non-smokestack crowd, rather than trying to focus on emisfinancing carbon-intensive projects. It will be interestingand tellsions, companies may get a better glimpse of their green future by
ingto see whether other banks and utilities follow suit and sign
considering the energy consumption not of their own companies
on to the Carbon Principles in the weeks and months ahead.
but of their customers, because its going to be all about the calories
The text above first appeared as a blog on our website (www.riskand not necessarily about emissions.
metrics.com), and seems appropriate for this forum.
Like any newly created market, be it
Doug Cogan and Emily McAteer
RiskMetrics Group
More or less green
The title of the Hoffman and Woody article says it all; it is the
shape of the regulatory constraining that will determine the winners and losers, and that is independent of any scientific discus-
tulip bulbs or the internet, lots of shortterm speculative money will be made
and lost on the margins. After all, someone has to
be the first to figure out that some consumers will use their debit
cards to buy Renewable Energy Credit cards at the checkout stands
of Whole Foods. But for companies with a longer view, it seems a
safe bet that in the future everyone that will be using less energy per
48
capita and paying more for it, and so it will be all about the consumption and production of calories and the technology that cuts
the cost of doing either. If you can change any of these parameters
for any point source emitter, that will be worth some bucks. It may
seem overly simple, but like the aforementioned software executive,
its way too easy to get caught up in the emissions discussion and
not be able to see its all about energy. Thats how you figure out
how you place your company in the winning camp in the future.
Kyle Dotson
www.dotsongroup.com
Whats special about this carbon game?
Reducing emissions means reducing cost
Many emissions reductions can be achieved simply by reducing

consumption and improving efficiency. There are many excellent
examples of how companies are doing this in The Climate Groups
publication Carbon Down, Profits Up. You can view the publication here: http://theclimategroup.org/assets/resources/cdpu_
newedition.pdf
Companies that ignore the rapidly shifting market and likely
changes in greenhouse-gas policy may be doing so at their own
peril. From a strategic, business perspective, companies should begin working now to address the carbon questionif not for the
short-term benefits gained from cost reductions, then for the longterm need to prepare for the eventuality of doing business in a
low-carbon economy.
Chris Walker, North American Director, The Climate Group
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Great posts here, very little disagreement. If climate regulation is

so imminent as to make carbon strategy inevitable, what is special
about it? If competitive environmental strategy in general and carbon strategy in particular are simply extensions of good corporate
strategy, what is the contribution here? What about this carbon
game makes it any different from business as usual? I suggest three
considerations:
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First, as Hoffman and Woody point out, nearly all sectors of the
economy will be affected.
By altering the cost of energy, climate regulation has the potential to impact nearly every industry. This kind of transformation is
not routine.
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Second, the window of opportunity to influence the policy

process is limited.
Climate regulation will evolve over multiple iterations, but precedents set in the first round will become more and more difficult
to alter in the future. If companies want a seat at the table with
credibility to leverage, they need to move fast.
Do
No
Third, the avenues by which these changes will impact corporations are numerous and not always obvious.
Climate regulation will impact some companies directly, others
indirectly, and not simply via cost increases among suppliers and
distributors. Swiss Re has taken a keen interest in the climate issue
for years, and changes to insurance costs are important regardless
of a companys direct exposure to a particular version of climate
legislation. Other avenues include investors, trade associations,
and NGOs, for example, Environmental Defenses influence over
utility development in Texas. And these avenues speak mostly to
the risk side of the equation. New opportunities for products and
services in a carbon-constrained economy provide the largest and
potentially the most lucrative unknown.
What is different about carbon strategy? It requires capacity for
public policy development, stakeholder management, and discontinuous innovation none of which are routine. To profit from
this market shift, managers need a mind shift that encompasses
these greater considerations. Hoffman and Woodys three steps are
a prudent start, but only a start.
Aaron James
Even in the wild frontier, do the right thing
It does look like a near-certainty that legislation will come, one

way or another, to put some type of price on carbon emissions. Its
about time, too. I think we will look back on the last two hundred
years as a crazy period of time when companies could completely
externalize the consequences of their emissionssomething like the
way we look today at the old-time chemical companies that would
simply dump their toxic waste into the creek down the road.
Dont expect this transformation to come in an orderly way. The
disruptions and battles we can expect as the new capping disciplines are haggled through their difficult birth will most likely rival
or perhaps exceed any of the ugliest transfers of wealth in history.
Entrenched interests will of course invest huge resources in protecting their domains. The big decisions will be set and made by
politicians. Means of measurement and verification and assigning
value and setting prices will be up for grabs. Entrepreneurs will
jump in to work their angles, and some of them will be fabulously
successful. Expect big winners and big losers. Think of the Wild
West, with all of the excitement and violence that comes to mind.
The paradoxical truth is this: every company should watch these
developments closely, but even with careful attention the likely outcomes will be very difficult to predict. So we know that significant
changes are most likely coming, but attempting to capitalize on
those changes will be an exercise in speculation. Where do we get
our bearings for business decisions?
The simplest answer just might be the best one: do the right
thing. A number of thoughtful contributors opine that this isnt an
ethical issue, and Andrew and John focus on the business impacts
in their introductory piece. And we do need to be sure that shareholders are taken care of. But is that the real issue here?
Very often, I sense that we mention

the business benefits of sustainability,
which are real, because were just plain
hesitant to call this out as an ethical is
sue. I propose that this absolutely is an
ethical issue.
Ive seen Chouinard in action, and Im convinced that he did
not drive Patagonia down the green path to make more profit.
49
The fact that he most likely has made much more profit doesnt
mean thats why he set the course. He chose the path that aligned
with his personal values. The fact that his sales, and his brand value,
skyrocketed was not the result of MBA-driven market analysis, but
showed a much deeper effect: the resonance of consumers with his
value-oriented direction.
We have executed a number of sustainability-oriented projects
with large organizations and I am constantly amazed by the energy
and innovation that is unleashed when people get a chance to do
the right thing.
In my opinion, the winners in this new age of carbon constraint
will not be the ones with the calculators and spreadsheets. They
will be the courageous thought leaders that drive their businesses
forward in line with their personal values.
Discussion leaders Andrew Hoffman and John Woody respond:
The time for action is now
certainty can either cause you to stall or cause you to aggressively

pursue innovations, policies, and organizational change that will
better equip your company for a carbon-constrained world. The
best time to start is now.
There were several posts that called for additional depth on the
three stages of developing a climate strategy. Those details and
much more are covered in Climate Change: Whats Your Business
Strategy (Harvard Business Press, May 2008). We close the book
with two provocations that wed like to introduce.
1. Adaptation is the next big thing.

Most of the discussion of climate strategy has focused on mitigation strategies. But as the impacts of climate change become real,
companies that have high dependence on water and regional climates will be forced to alter their operating practices. We can see
this already with companies that work north of the Arctic Circle
and can no longer rely on the same amount of ice bridges; or municipalities (such as Chicago) that are beginning to plan for more
severe rainstorm events. If you are in any one of a number of industries (soft drinks, agriculture, energy, forestry, etc.), you should be
planning for climate change to alter your operating parameters in
ways that can be both negative and positive.
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Michael Potts, Featured Contributor
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Thanks to all who have contributed

to this discussion. We see several
common themes, but all appear to
agree that we have reached a tipping
point due to a confluence of factors,
including rising energy prices, impending climate legislation, noticeable physical effects from climate change, and increased awareness on the issue from businesses, investors, the media, and the
general public. While there is still uncertainty,
that does not mean there is additional

time to delay to begin thinking about climate change as a
Andrew Hoffman and John Woody,

Discussion Leaders
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boardroom issue. As Jeremy Blow said, We should be concentrating on reducing the impact of climate change on business rather
than businesss impact on the environment.
While you, as a business executive, are running out of time to
get ahead of the curve on this issue, you still must realize that there
are numerous opportunities to create value and innovate to create
solutions to the problem. It is not a zero sum game, and the un-
2. Will climate change become an issue of fiduciary responsibility?

As we begin to develop a cost for carbon and real changes in the
climate, senior executives (and the companies that insure them),
must begin to consider climate change vulnerabilities as a material
issue under Sarbanes-Oxley. That will drive the issue deeper into
the corporate mind-set.
So, as we put it all together, we conclude where we started,
Whats your business strategy?
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Staying Green
in a Tough
Economic Climate
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Featured from March 518
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Leadership
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n January 9, 2008, the London stock market resaving us millions of pounds, reducing landfill waste, and decreasacted strongly to a 12-week Marks & Spencer trading electricity consumption.
ing statement: Same-store sales, excluding new space,
Progress against Plan A is closely monitored because we reguwere down by 2.2% compared with the previous year. Our
larly consult with a wide range of NGOs. The plan has also gained
share price fell 18%, taking 1.6 billion off the value of our
NGO recognition and was recently awarded the World Environbusiness.
ment Center gold medal for sustainable business practices. We have
In light of increased business uncertainty and fragile consumer
a series of key public reporting dates with NGOs so that we can
confidence, it might have been tempting to quietly shelve Plan A,
take their recommendations and ask for help. We have also delibour 100-point, five-year eco-plan. We could have heeded critics
erately tied Plan A reporting to our financial reporting schedule so
who said, Times are tough, best ditch the fluffy stuff. But we
that our stakeholders know when to expect to hear from us, and we
didnt.
expect to be held accountable to our commitments.
We started Plan A last year, to make M&S carbon neutral and
Cutting back would also be a commercial mistake. A 2007 M&S
send no waste to landfill from our operations by 2012. The plan
customer survey said that 75% of British consumers are interested
extends to sustainable raw materials sourcing, sets new standards in
in green issues. Last November, in a survey which scored M&S
ethical trading, and helps customers and colleagues lead healthier
with the best reputation in British business, the Confederation of
lives.
British Industry concluded that customers will pay a premium for
Despite the tough consumer climate and the reaction to our
a great reputation, and that, as far as M&S is concerned, Plan A is
sales results, we are sticking to Plan A. There are compelling
already contributing positively to our wider standing.
commercialas well as moralreasons to do so. Take the early
Weve also taken some tough decisions not to do certain things.
results its generating. Our Wash at 30 campaign, which encourWe decided not to put wind turbines on the roof of our first ecoages consumers to wash their clothing at a lower temperature than
store, a store designed entirely around green principles, because
used to be considered the norm, has saved an estimated 25,000
they wouldnt have been capable of generating sufficient power in
tons of carbon dioxide. We have reduced C02 emissions by an adthat location and it would have been too expensive to build and
ditional 55,000 tons by switching 23%
maintain them. Symbolic perhaps, but
of electricity to renewable resources.
not economic.
Toward our goal of zero waste to landSo, responsible business is good busiSir Stuart Rose is the chief
fill, 75% of the construction waste from
ness, provided we dont get too far ahead
executive of the London-based retailer
our store refurbishment program is now
of our customers. I think half a step is
Marks & Spencer. He is also a nonexecurecycled.
about right: Any more and you cant sell
tive director of the UK property developWhile weve estimated Plan A could
to them; any less and you lose the lead.
ment company Land Securities and the
cost around 200 million over five years,
Marks & Spencer is holding firm in its
chairman of the British Fashion Council.
we havent actually done a hard costcommitment, but will others be able to?
Previously, he
benefit analysis. What we know is that
Or will green agendas be relegated to nice
served as the
individual decisions within Plan A need
to have not need to have for companies
chief executive of
Arcadia, Booker,
to make financial sense. For example, varistruggling in tough economic times? What
and Argos, all of
ous initiativesrecycling clothes hangers,
specific green ideals are most important
which are based
reducing packaging, and encouraging refor a company to not abandon when times
in the UK.
usable carrier bags instead of plasticare
are tough?
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Is green a fad?
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Staying Green in a Tough Economic Climate | Leadership
research technology, we run a quasi-experimental simulation to

test the hypothesis: Those companies which consistently spend
X% of their PBIT for sustainability management, get more investments from markets than others over 10 years (including economic
ups and downs). Real people participate in this experimental research and play a role as (A) a company management, (B) a consumer, and (C) an investor. Every year, over 10 years, (A)s decide
the level of sustainability expense for their companies, which (B)s
and (C)s monitor through (A)s financial statements, which forms
the basis of consumer choices and investment decisions. The rule of
the game is simple and the same for everyoneto make the most
money for himself or herself. So, it is not really about altruism but
about money that the participants are concerned about.
The result? To make a long and complex story short, the hypothesis was positively confirmed, quite clearly. That said, with a simple
financial statement regulation, we can create a market in which
those who constantly care about sustainability can get more money,
and as a result of this, the general level of sustainability management can be improved in the market. This is so not only as a matter
of altruism but also as a matter of profit and market mechanism.
Moral versus money, or moral is money?
Quite exciting! This implication is so significant that one of the
It may appear quite naive, but is sustainability expense a
most powerful emerging countries is considering adopting this
matter of altruism, moral duty or a matter of investment for the
regulation for their fast-growing companies and the economy.
companys future cash-in-flow? Whether you like it or not, listed
But, for this, we need some investments to make our expericompanies activities, including sustainability management, are
mental research more sophisticated. My problem is that we have
constantly monitored by capital markets, and the stock price is
not managed to find investors who can donate some money for
usually a foremost concern for management. Given the power of
our research. I think, as a creative accountant, this investment can
the capital market, sustainability expense
be accounted for as sustainability expense
has to be framed as part of the investment
on your financial statements. So, would
for future growth, at least to some extent,
you consider this donation opportunity
or to large extent for many companies. In
for both sustainability and growth? Let us
the short term, however, sustainability
share our excitement for greener and susFeatured
expense certainly suppresses the level of
tainable growth.
Contributors
profit, and conventional theories imply
Tomo Suzuki, Featured Contributor
that investors do not like it.
John Elkington, founder &
Sir Stuarts article reflects on this aspect
Two more points
chief entrepreneur, SustainAbility, which
of the balance between costly sustainabilIn order to make the emergence of
advises clients on the risks and opportuniity management and the capital market
Sustainability Management more sustainties associated with corporate responsibility and sustainable development
expectation. Given that the general busiable than fashionable, overly critical cyniness is currently adverse for M&S, their
cism and pessimism should be avoided.
Joe Fuller, cofounder and CEO,
unchanged effort for sustainability (Plan
I appreciate Sir Stuarts and M&Ss efMonitor Group
A) is much appreciated at least from the
forts. The following is just for further
altruism point of view. Good news is that
consideration.
Gardiner Morse, senior
there is at least one good supporter of
1. Famous multinationals can benefit
editor, Harvard Business Review
M&S. Is it from today, in the UK, M&S
from being a market leader in sustaincharges 5p for a plastic bag? I certainly
ability management, which attracts the
Tomo Suzuki, Professor
keep shopping at M&S as a matter of my
attention of investors even if sustainability
of Sustainability Management and
moral attitude, which I sense is shared by
management is costly for the company. BP,
University Lecturer in Accounting, SAID
increasingly many customers and invesfor example, sees a strategic opportunity,
Business School, University
of Oxford
tors.
and they openly say so. However, what
I have even better news for them from
about the rest, the non-famous companies?
Jeffrey Swartz, president
a capital market theory point of view, and
Unless they, the majority of the business
and CEO, Timberland
it seems to be empirically supported as
world, change their management behavior,
well. In Oxford, drawing on an emerging
the impact of sustainability management
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Sir Stuart Roses post points to the first test of how durable the
current corporate green wave is. With an apparent global economic
downturn imminent or underway, we will soon find out if there
is a true business case for the sustainability craze, as many advocates claim, or if its just an added economic burden taken out of
shareholderswell, share of profits. Many of the sustainability initiatives in the post appear to create business value in terms of cost
savings or brand and reputation benefits regardless of their greenness. The decision to abandon a photogenic wind turbine on an
M&S store because it would produce more energy elsewhere also
seems to make economic and environmental sense. The big question is, would that 200 million slated for Plan A be better invested
elsewhere? M&S have made themselves publicly accountable for
implementing Plan A, but it would be interesting to hear from
others about what types of sustainability initiatives are most likely
to be sidelined in an economic downturn. Investments in carbon
offsets, for example?
52
is limited on our planet. I sense that we need an institutional design

to come up with the solution.
2. The same is true in fast-growing emerging economies. Efforts
in developed countries are of course welcome, but their impacts on
the planet are limited unless we take care of the developing countries. This may have been taken care of by methods such as the
international carbon trade market, but something more can and
should be done, I feel.
Tomo Suzuki, Featured Contributor
The history of supermarkets going green
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pact fluorescent bulbsso that consumers dont have a choice in

the matter, other than buying bulbs elsewhere.
Too often, major companies launch major initiatives with bold,
ambitious promises, and then quietly bury them under competing announcements over time. With Plan A, M&S has done us a
considerable service by setting both specific expenditure targets and
explicit time-scales. We, at least, will be watching this space.
John Elkington, Featured Contributor
Sustainability as a value-creating strategy
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Sir Stuarts discussion of M&Ss commitment to Plan A raises a

Lester Brown, whose work I hold in great respect, is now up to
number of issues of interest to any company considering the role of
Plan B 3.0 in his series of books on a planet in stress and a civilisustainability in strategy.
zation in trouble (http://www.earth-policy.org/Books/PB3/index.
Plan A incorporates a number of elements that my colleagues
htm), compared to which the Marks & Spencer Plan A may seem
and I believe are fundamental to any sophisticated sustainability
quite modest. But, as Sir Stuart Roses opening post underscores,
strategy. By actively engaging NGOs, M&S has done more than
this is a major initiative for the UK retailer.
educate itself as to the standards by which
100 target areas may seem a bit of a brainit will be assessed by an important confull, but so far I have been impressed by
stituency. It has gained access to a comResources
what I have seen Rose and his colleagues
munity that often possesses the deepest
doing to make good on their pledges.
knowledge of best practices globally. The
Strategy and Society: The
The potential impact may be smaller
spirit with which Sir Stuart states that they
Link Between Competitive
than that in prospect from Wal-Marts parfully intend to ask NGOs for help is to
Advantage and Corporate Social
allel initiatives, with the U.S. retail giants
be applauded, as is the insight that that
Responsibility
61,000 suppliers under intensifying presstance reflects. Moreover, by investing in
by Michael E. Porter and
sure to improve their performance in areas
this dialogue, M&S will have established
Mark R. Kramer
as diverse as energy efficiency, packaging,
a degree of credibility with a constituency
and sustainable fisheries, butto be honthat will prove critical if the company falls
est (and, interest declared, Wal-Mart has
short of the goals it has announced.
been a client)my sense is that the M&S
By making their targets public and linkventure is more deeply rooted in the companys traditional core
ing them to financial goals, M&S does more than demonstrate its
values than Wal-Marts.
commitment. It engages a constituency of growing importance in
That said, I find it interesting to think back to 1988, when I
sustainability the asset management community. The growth in
co-authored The Green Consumer Guide, which sold around one
the number of mutual funds focused on companies with environmillion copies in the space of eighteen monthsand (as it went
mentally sound strategies is impressive. Companies with explicit,
into some 20 foreign editions) helped bring growing consumer
longitudinal metrics will undoubtedly benefit from a more buoyant
pressure to bear on supermarkets, manufacturers, and growers. At
market for their shares as more capital flows into those funds.
the time, M&S was among the more recalcitrant supermarkets, we
Sir Stuarts commentary also raises some interesting questions.
found, insistent that its customers were mainly interested in price
He cites data that 75% of English consumers are interested in
and quality, not in green issues.
green issues. Does interest translate into greater customer loyalty
The following year, however, we followed up with a supermarket
or a higher propensity to purchase? That is, at best, a speculative
version of the book, based on a 99-page questionnaire. M&S was
proposition. Our work suggests that such interest seldom translates
already building momentum in the green space and a couple of
into greater market share or loyalty, unless the product or service
years later I recall visiting the company and having its manager
associated with the brand is highly competitive. While specific cusof sustainability issues pull open his top drawer and show us his
tomer segments find green offers appealing, they remain limited in
marked-up version of the questionnaire, which he was gradually
size. Some consumers may pay a premium for a great reputation,
working his way through in terms of targets.
but such reputations are usually built by providing those consumers with value along traditional measures of value, such as price
Supermarkets have a crucial role to
and product performance. M&Ss iconic status with many English
play in what some call choice editing,
not only informing consumers on the key issues but also moving
consumers may be sufficient to cause consumers to broaden their
beyond the simple option of offering customers a choice between
basis for evaluating value.
good and bad products, to actively weed out the poor performHow will challenging economic conditions affect the willingers. That is what Wal-Mart is doing by killing an entire product
ness of companies to follow in M&Ss footsteps? Unless companies
category, incandescent lightbulbs, and replacing them with comsee a clear path to gaining a competitive advantage by adopting a
53
to be a significant part of it. A supermarket chain is only the tip of

a very flat pyramid and I would guess M&S has well over 10,000
suppliers of every conceivable size from around the globe. I am
aware from other sources that they are co-funding sustainable facJoe Fuller, Featured Contributor
tories in emerging economies such as Sri Lanka and this is positive
Why isnt M&S tracking cost savings?
but appears to be isolated. The sustainability-related opportunities
Im a bit confused by this postingis the logic basically not
within its supply chain dwarf what is possible via Plan A and the
cutting Plan A because 75% of customers support green? I could
handful of new eco-stores it can build each year. Wal-Mart appears
be missing something, but that just seems
to be going further in this regard, as a
incredibly vague. I can think of an array of
previous posting indicates. One question
reasons not to cut it: staff retention, fosI have is, Does the sustainability agenda
Resources
tering innovation, risk management, PR/
imply we need to see a consolidation in
Marketing, etc., but none of these seem to
the supply base of retailers, similar to what
Marks & Spencers Plan A
be under consideration.
we have seen in other industries, such as
While Sir Stuart indicates, While
auto? Is it really possible for retailers to
weve estimated Plan A could cost around
have the control and transparency neces200 million over five years, we havent actually done a hard costsary to implement their own sustainability policies across such a
benefit analysis. What we know is that individual decisions within
broad supply base?
Plan A need to make financial sensebut this is really only the
Brendan Dunphy
cost-savings/eco-efficiency card. There is so much more to this initiative than just cost savings, and NONE of these aspects are beValues-driven commitment getting popular
ing consideredor perhaps more importantlytracked? While I
As Sir Stuart points out, there are definite commercial advantagstrongly applaud M&S, Im floored by the apparent lack of metrics
es to maintaining the sustainability focusas there are with pretty
to assess cost-benefits for a 200 million initiative!
much any values-driven commitment (as an example, signing the
Business Ethics Pledge, at http://www.business-ethics-pledge.org).
Alexis Morgan
But the advantage is only there if companies understand how to
Leadership matters
harness that advantage in their marketing and outreach. Showing
I wish to applaud Sir Stuart Rose for his strong leadership. An
how has been the focus of my speaking and writing the last few
increasing number of companies such as Marks and Spencer have
yearsand in that time, Ive seen a definite tilt toward mainstreamtaken bold action to pursue investment to make their enterprise
ing these once way out ideas.
and products more sustainable. Starting just three years ago, GEs
Shel Horowitz
bold commitment to ECOMAGINATION grew GEs bottom line
Principled Profit: Marketing That Puts People First
by $14B in green product sales in 2007. Green is truly green.
A decision to aggressively pursue sustainable business policies
Response to Alexis Morgan, Brendan
and investment strategies is as much a moral and ethical decision as
Dunphy, and Bill Olson:
a financial one. For exampleare there short-term costs to a comAlexis Morgan points out that green initiatives have value that
pany that decides not to do business with a corrupt government
transcend the traditional customers value this logic. Green inior a supplier that employs young children? Yes, there are. But over
tiatives can, when well crafted, motivate employees and potential
the long run, I believe that companies that rigorously pursue and
employees. If the corporate world is engaged in an epochal war
enforce strong ethical management policies reap significant operafor talent, an initiative such as Plan A promises to help M&S win
tional and market valuation benefits. Further, as an employee and
their skirmish in that war.
consumer, I would not want my name associated withnor would
Brendan Dunphys observation about suppliers also merits
I purchase the products ofa firm that did not rigorously pursue
consideration. Our work suggests that firms need to consider the
and enforce such management practices.
green impact of their strategies across their supply chains. I suspect
I predict that companies such as Marks and Spencer that make
that the M&S initiative has done much to educate their 10,000
thoughtful, hard economic investments to create a sustainable ensuppliers as the need to factor sustainability into their strategies.
terprise will reap operational, social, economic, and market valuaBill Olsons comment is also highly relevant. Companies that
tion benefits in the future. It truly is more than just a good thing for
persevere in pursuing such strategies will reap benefits with cuscompany management to do, it is absolutely the right thing to do.
tomers and other critical constituencies.
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green strategy a path Sir Stuart sees for M&S they are likely to
proceed cautiously and ditch the fluffy stuff, to quote Sir Stuart.
Many are likely to regret it.
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Bill Olson
Joe Fuller, Featured Contributor
What about M&Ss suppliers?
M&S is leaving the door open
Whilst applauding Marks & Spencers Plan A and its apparent

success to date, I have to question why its suppliers do not appear
While I appreciate the Plan A initiative and the resolve shown

by Sir Stuart Rose to implement it in spite of rough times, I am
54
Of course companies should reduce their carbon footprints,

both because it can make strategic sense and because its the right
thing to do. But reducing energy consumptionwhich most any
company can profitably dois only a piece of the carbon-neutrality equation. M&S, in addition to admirably cutting its energy use,
is using biodiesel in its trucks, powering its stores with renewable
energy, and buying carbon offsets in its multipronged strategy to
achieve net zero emissions.
As many companies that try these tactics will discover, renewable
energy is often more expensive than the dirty energy it replaces;
biofuels (depending on their source) may produce more carbon
in the course of their production and use than conventional fuels;
and purchasing carbon offsets may not actually reduce a companys
carbon footprint. The point is, it may be possible for a company
to make its operations look carbon neutral on paper, but, handled
poorly, such initiatives could eat into profits without substantially
reducing emissions.
Im all for businesses reducing their carbon footprints. The questions for any company considering a zero-emissions plan are a) is it
possible to achieve zero emissions? b) What will it cost to try? And
c) what will this expensive effort buy us? For many companies, setting a less aggressive target for emissions reduction might be more
strategic, cost effective, and achievable.
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disappointed at the last sentence: So, responsible business is good

business, provided we dont get too far ahead of our customers. I
think half a step is about right: Any more and you cant sell to them;
any less and you lose the lead.
The last sentence strengthens the view of Gregory C. Unruh; it
appears that Sir Rose has kept the door openin case some elements of Plan A need to be reviewed in the future! To me, it is an
indication of lack of commitment to sustainability. I hope I am
wrong!!!
The five pillars are good; a few more pillars would have made the
program solid. It appears that quite a few elements of Plan A are
there just to reach the magic figure of 100. I would have loved to
see commitments on bribery, corruption, diversity, inclusion, discrimination, employee Health & Safety, etc., at Marks & Spencer
and its supply chain. Or are they covered elsewhere?
By the way, sustainability as a stand-alone
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subject no doubt costs money. This was

the case with quality a couple of decades
ago. Now quality is integrated into various functions and does
not entail excessive cost, bringing benefits to organizations. Unless

sustainability principles are embedded in the organization, integrated into various functions, we will be talking about the cost
of sustainability for years to come. Unless sustainability is the way
of doing business (or responsible business), probably even the
200million in five years many not be enough to meet the targets
set out by Sir Rose.
L. Ramakrishnan
Think of our childrens children
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There are many ways to start saving resources today for a mere
fraction of the bonus dollars our high profile CEOs are saving for
themselves. While technology is fortunately coming at us we still
have to jump in at some point. A waterless urinal can save 40,000
gallons of fresh water annually in a commercial location; there are
light-harvesting dimmable light ballasts; there are motion sensors
and soon-affordable LED replacements for florescent lighting that
both cut electric consumption and disposal issues to the minimum.
This listas we all knowcan go on for some time, but when is
the decision made to do the right thing? Is it always about customers? Why do I not read is that we are thinking of our childrens
children.
Unfortunately our North American multilocation clientele looks
for an ROI of 16 months or less. Some of these small investments
may take 24 months, but they are small investments into doing the
right thing. I also applaud Marks & Spencers determination and
integrity in doing what is right. Its about time.
Michael Cocuzza
Is M&Ss carbon-neutral by 2012 goal

realistic?
I was struck by M&Ss commitment to become carbon neutral

by 2012. Thats a laudable goal. But is it doable, and what will it
cost to try?
M&S is putting their mouth where their

money is
They appear to be taking a pragmatic approach by shelving the

funds for rooftop turbines as this investment can be better used for
other initiatives. They are not working with a blueprint on how to
ensure their success, but a part of the M&S legacy will be a blueprint for others to follow and to avoid the inevitable errors M&S
will make.
They will likely reduce some of their suppliers as a result of the
philosophical commitment to their customers. Some of the M&S
suppliers will find easier business to go after, Im quite sure. There
is a lot of room for choices in the market.
Elkingtons comments about choice editing are going to continue to be applied more stringently. Brand survival should be influenced by the ability of the brand to meet the functional needs
of the consumer while ensuring it meets the test of no harmto
the best of the manufacturers ability. The long-term effects of using
responsible products can only benefit us all.
Larry Berglund
Plan A will struggle in the marketplace

before any conclusions can be reached
In order to succeed, Plan A has to move from the boardroom to
the shopfloor, where it will be challenged at every turn. In my mind,
the intellectual challenges are interesting, but the marketplace challenges are the true test. We know consumers respond, not simply
with words but in consumer deeds, when the food industry floods
the market with coupons. Demonstrating through time that great
brands can move consumers from lip service (sure, green is desir-
55
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able) to action (what a great company, what great products, what

Americans may find it hard to believe, but the Marks & Spencer
an irresistible blend of desirable and affordable and principled) is
piece upstaged even the news that Wall Street crusader Eliot Spitzer
a proof yet to be rendered at any meaningful scale. This to me is
was being pressured to resign in the wake of prostitution-related
the daring of Plan AMarks & Spencer bets that they can make
allegations.
consumers reach into their wallets and buy responsibly, in a way
And the reason for all this fuss? Sir Stuart, who kicked off this
that will create sustainable profits for M&S and its shareholders.
HBR debate with his essay on his companys Plan A, had cut
To me, the central question for Plan A is, can M&S make pracacrossintentionally or notthe UKs corporate governance code
tical virtue desirable? Can the merchants
by accepting the role of executive chairand the operators within the company
man. Although he had previously said
create products and shopping experiences
he wanted to remain as CEO through to
Resources
that compel consumers, on a platform of
2009, this new appointment means that
thoughtful environmental activism? How
he is now likely to stay on until 2011.
Big Foot
will Sir Stuart ensure that in the aisles, evAll of this may seem a storm in a distant
The New Yorker
eryday, average consumers hearts are sent
teacup to most American business people,
by Michael Specter
soaring with the irresistible goodness and
used to having the same individual serve
personal relevance of Plan A?
as chairman, CEO and even president of
For brand builders like me, the question
the same company. But in the UK this is
is not merely interesting. In our company, we have committed to
now a real issue. While some observers may see this development as
our equivalent of Plan A, with the same blend of intuition and conaffording a welcome opportunity for a thoughtful, future-oriented
sumer data that Sir Stuart references. Like Sir Stuart, we compete
business leader to ensure that, among other things, his Plan A is
principally in markets where our products are purchased not from
disseminated throughout the M&S value chain, this latest news
necessity, but as a result of desire. And like M&S, we are confronthas certainly upset some major M&S shareholders. It remains to be
ed with the seemingly dialecticthe imperative to deliver quarterly
seen what the impact of the controversy will be, both in terms of
profit, and the exigency to pursue a principled path in our daily
Sir Stuarts future prospectsand those of Plan A.
business. Building environmental thoughtfulness into our business
system is on the one hand easy enough to doother posters have
pointed out, from lightbulbs to transportation choices, there are a
Go green now
whole host of input choices any CEO can access to reduce his/her
Former American vice president Al Gore has been putting a
carbon footprint. But to make environmental thoughtfulness part
great spin on global warming with the Cannes Film Festival awardof a compelling offer to consumersthis remains our number one
winning, An Inconvenient Truth. He and loads of others have really
challenge with consumers.
missed the biggest of problems of the worldthe population douWhen we introduced EarthKeeper boots this past fall,
bling in ever decreasing time scales, but that is for another time.
with recycled content and thoughtful assembly, we were absolutely delighted to see the product leap off the shelf. But
Consumers Prefer Green Brands
the post-consumer data was clearconsumers reacted first
This groundswell of awareness has led consumers to favor brands
to the aesthetics (cool looking boots), next to the perforthat have a green element in their culture and products.
mance (I needed waterproof ) and only when we reminded
According to WPP, American and British consumers perceive
them, to the sustainability of the product (oh, yes, definitely,
the top green brands to be Toyota, Honda, Ikea, Body Shop, Aveda,
I appreciate that too). Hmm. For Plan A to go all the way to
Sub Zero, and now M&S.
sustainable, brand builders and product merchants at M&S are goHere in SouthEast Asia, Habitat5, PJC Wood and Nikolsons
ing to have to do better than that.
have taken the initiative. There is no real reason to suppose that
We are absolutely rooting for Sir Stuart to stay the course, and
these brands are seen any differently in other countries as the trends
see Plan A all the way to success with consumers. Plan A is printend to be similar.
ciple and commerce joined in one strategic thrust; our world will
So how are these brands seen as being green? Consumers associbe richer by far, when Sir Stuarts Plan succeeds.
ate green brands with environmental conservation and sustainable
business practices. They appeal to consumers who are more and
Jeffrey Swartz, Featured Contributor
more aware of the need to protect the environment.
Investor fury at M&S role for Rose

on front page of the 11 March edition
of the Financial Times
In one swift move, the Financial Times declared, the recently

knighted Sir Stuart Rose has swapped his front-row seat in good
corporate governance for one at the back of the class.
Green Brands Boost Sales and Corporate Image

They are a point of attraction to clients and prospects. You must,
however, act on the promise to be green. The increased awareness
of global warming means that prospects and clients are more likely
to support a green company.
56
Corporations can no longer just say they offer fuel efficiency, organic foods, or energy efficient productsit is now a cost of entry
in many industries, and corporations need to start thinking and
planning strategies ahead.
Marketers must consider the next level of greenness such as ensuring their overall business practices are sustainable or that the
products and services represent greenness in the bringing of items
to the marketplace.
GE is a singular company and clean technology is a narrow

product line. But Immelts broader point seems relevant to this discussion, and to a broad swath of companies. As the cost of energy
rises (how far off is a $120 barrel of oil? A week or two?) and carbon
emissions are increasingly priced (in the U.S. its just a matter of
time), companies that sell products that consume less energy and
emit less carbon either in their manufacture or use (ideally both)
will profit. Soon it may not be necessary or relevant to appeal to
consumers environmental consciousness; whether youre selling a
lightbulb or a jet engine, the products that are the most efficiently
manufactured, and most efficient to use, will win because, ultimately (and simply), theyll cost less. Judging from Immelts comments, and those of some other heavyweights at the conference
including Walmart CEO Lee Scott, companies that dont invest
now to get out ahead of this will be left in the dust.
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Develop a Strong Green Brand

Strangely enough, a study by the Hartman group indicates that
the average greenie has no brand awareness! So companies that
have spent years developing consumer confidence have the most to
gain from the trend away from the mass market. As a result many
companies not associated with the organic lifestyle have managed
to capitalize on this new consumer base through product development and the acquisition of small well-being companies and spas
appearing under company banners.
Consumers believe that these are the things required for them
to feel better. Its about choicea real culture shift. We marketers
need to be well aware of who makes the product, with what, and
how; these are all questions that compete for consumer attention.
So lets not knock M&Ss initiatives: Anything in the urgent race
against certain extinction is welcome.
Its time to go green now or risk your brand wilting in an arid
wilderness
rP
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Response to Gardiner Morse: The long

process of fundamental change
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I was at the Wall Street Journal ECO:nomics conference in Santa

Barbara he mentionsand it was indeed striking to hear not only
Jeff Immelt of GE on the green agenda but also Lee Scott of WalMart discussing how that huge retailing company sees the challenge.
There is a passion in the way such people now speak of this agenda
that would have been inconceivable a few short years ago.
But on the flight across to LA, I had read much of Thomas McCraws stunning biography of Joseph Schumpeter, Prophet of InnoThe Baldchemist
vation (Belknap Press, 2007), and it reminded me of just how long
Economics of green: Immelt on clean energy
processes of fundamental change take. Arriving in Santa Barbara,
Id like to circle the conversation back to the economics of beI was also reminded of the 1969 oil spill that helped catalyze the
ing green and come in from a different angle. Marks and Spencers
nascent environmental movement. A decade later, in 1980, I wrote
Plan A is about greening the companys
my first book on the greening of busioperations and the compelling commerness and my second, The Green Capitalists
cial reasons to do so. Greenness, of course,
(Gollancz, 1987), nearly 21 years ago. To
Resources
extends far beyond a companys walls,
be honest, market adaptation has taken
throughout its supply chains and products.
longer than I then imagined.
Back in Fashion: How Were
At the same time, companies like M&S are
For various reasons, including such
Reviving a British Icon
trying to calculate the benefit (or cost) of
time-scales and the political inclinations
greening their operations, theyre pulling
of its editorial team, I have long tended
by Sir Stuart Rose
their hair out trying to calculate the bento see the Journal as a lagging indicator of
efit (or cost) of serving the hard-to-gauge
change. In this context, the fact that it is
markets for green products.
now focusing on the greening of capital is
Speaking at the Wall Street Journal ECO:nomics conference
a very welcome development. But the historical record shows that,
in Santa Barbara yesterday, GE CEO Jeff Immelt put GEs green
to date at least, our periodic greenings have tended to coincide with
strategy plainly. I am not an environmentalist.
the late phases of economic booms, with consumer and business
enthusiasm waning fairly quickly once a recession arrives.
Im a capitalist and a businessman, he said.
Immelt sees a pot of money to be made in selling products that will
More positively, much of the really useful work tends to get done
satisfy a gargantuan global appetite for clean technologies. Global
in the downwave cycles (so, from 1973, 1991, and 2001 in terms of
demand for GEs gas and wind turbines and jet and locomotive
the three main societal pressure waves we have tracked since 1960).
engines outstrip supply, Immelt says, because theyre the cleanest
As economic pressures build, I have no reason to doubt that the
[and] most competitive in the world. He added, I think [clean
same will be true this time around. But it will be fascinating to see
technology] could be one of the great export industries of our lifehow Plan A and its retail sector counterparts survive what I expect
time (for more on Immelts take go to http://blogs.wsj.com/envito be a very much tougher trading environment in the next year
ronmentalcapital/).
or two.
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mance has improved markedly under Sir Stuart, it must continue

to excel along traditional dimensions of performance, using Plan
A as a gratifying accent mark to its core competitive strategy. That
may enhance M&Ss brand further. But if management believes
that Plan A will enhance its competitiveness purely as a function of
stapling a green claim to M&Ss brand, they will be disappointed.
The recent kafuffle about Sir Stuarts organizational role is unrelated to Plan A. It pivots on another critical obligation of a CEO
succession management. It appears he will be in place to see Plan
A through 2011, even at the expense of the affection of inflexible
adherence to the UKs corporate governance model of separating
the chairman and chief executives roles.
Joe Fuller, Featured Contributor
Response to Tomo Suzuki: Make it global
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According to Lee Scott, Wal-Mart sales have been picking up as

recessionary pressures force consumers to be more price-conscious.
Fine for Wal-Mart, for the moment, butas he also pointed
outtheir consumers seem to be running out of money earlier and
earlier in the month. Factor in oil prices and a major downturn,
and it is not at all clear that the typical Wal-Mart customer will be
prioritizing green products. Scott accepts this, which is why he sees
the central challenge as one of making green products available at
pretty much the same price points as competing optionsand, in
cases like incandescent lightbulbsremoving the most unsustainable choices altogether.
Retailers have a crucial role to play in what has been called
choice editing. But if I had to bet whether Wal-Mart or Marks &
Spencer is most likely to stay this particular course and still be pushing ahead with the current level of enthusiasm three to five years
from now, I dont know where Id place my money. True, these are
evolutionary pressures that markets and leading corporations will
find it very difficult to duck completely, but some will try. And, in
the process, I wonder whether they might not open up the way for
radically new retailing models, along the lines of a vigorous hybrid
between, say, Patagonia and Amazon?
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Response to Gardiner Morse and

Jeffrey Swartz: The twin themes of
sustainability strategy
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The strategy espoused by Immelta sensible one for a company

that focuses on business customersrelies on a traditional ROI
logic. Products with strong sustainability features will be in substantial demand in the future; GE will prosper if it offers differentiated products that meet that need. That logic treats sustainability
like any other investable proposition. Changes in regulation, marginal economics or demand open new investment opportunities
for companies.
The story of the EarthKeeper boot offered by Swartz is much
more relevant to Sir Stuarts Plan A strategy. Our experience
echoes that of Timberland. Consumers, beyond a narrow segment
of greenies who are not brand oriented (as the mysterious Bald
Chemist notes), in the dozens of markets we have studied demonstrate no willingness to pay a price premium or to shift share for
a product that has a superior green performance. Consumers are
happy to embrace a green product if it meets or exceeds their expectations on traditionally important buyer purchase criteria, such
as appearance and waterproofing in the case of EarthKeepers. Had
the boots been unattractive or failed to meet expectations along
important performance criteria, it would have failed despite its
green features. We have observed that story repeatedly in multiple
markets. That descant suggests that Plan A may ultimately face
some turbulence. While Sir Stuart asserts that M&Ss customers
find green products appealing, the success of Plan A hinges on generating superior returns from both models the traditional ROI
model and commanding the loyalty of customers because of the
value offered (including a green quotient). While M&Ss perfor-
No one is addressing Tomo Suzukis point, which is most important for the sake of our world. We have to make it global, taking
SMEs and developing countries seriously. We need an institutional
system to make it happen. Otherwise, green economics is just a
matter of normal advertising.
John Balliol
Response to John Balliol:

SMEs are greener than multinationals
Many discussions on environmental performance point to a

poor performance by SMEs. I am not sure if this is based on hard
data, especially indicators related to value addition and employment generated. The amount of waste in multinational companies
and in developed countries (per capita waste for example) is quite
high, compared to SMEs and developing countries. A blanket view
covering SMEs and developing countries needs to be avoided; facts
and data should speak.
L. Ramakrishnan
Reply to the previous comment

But, we cannot wait for the facts and data, right? We did it,
that is why we are too late. Environmental economics is a matter of
ethics, not hard science. Have you been to India and China? I have
seen the facts with my eyes, and if you want us to come up with
academic facts and data, it is your fault to be so slow.
Anti-Academic
Response to L. Ramakrishnan:
SMEs green performance
In the above, L. Ramakrishnan suggested that SMEs are actually
performing better than multinationals, and s/he has evidence. I am
interested in learning more about it. Could s/he help us more?
From my and my colleagues research experience in Japan, where
green activities have been strong, the hard data on SMEs green activities are difficult to get. But our sense is that SMEs are not particularly paying much attention to the green activities, partly because
there is no demand for info of their green activities (whereas multinationals and listed companies are watched via environmental/sustainability/CSR reports). Tomo Suzuki, Featured Contributor
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Corporate Governance
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Green Stakeholders:
Pesky Activists or
Productive Allies?
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Featured from March 19April 1
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xecutives who still think of environmental stakeholdconsulting with stakeholders is no longer about appeasing the eners as pesky activists that can easily be ignored are in for
emy. It is about making strategy decisions that stand the test of
a rude awakening. Today, its big investorspension funds,
time. Coca-Cola and the World Wildlife Fund tackling global
state controllers, institutional investors, and even their investment
water quality, McDonalds and Greenpeace hammering out initiabankersthat are putting pressure on companies to change their
tives to mitigate deforestation, Clorox and the Sierra Club worktune when it comes to the environment.
ing together on the rollout of a green product linethe litany of
As major shareholders scrutinize the short- and long-term risks
unlikely bedfellows grows as executives, board members, and inand opportunities of climate change, companies must be prepared
vestors watch corporate imperatives and environmental concerns
to justify their environmental actions, from their carbon-intensive
converge.
investments to plans for energy productivity to long-term strategies
It doesnt matter whether youre playing environmental offense
for operating in a carbon-constrained world. Those whose strateor defense. Ignoring outside groups can mean trouble for the top
gies dont measure up will see capital drain from their coffers into
lineas in a product launch (remember Monsantos tin ear when it
those of savvier competitors. So who are companies turning to for
came to GMOs)and the bottom line, as in better management of
help in mapping sustainable, profitable strategies? Yup, those pesky
resources (think Home Depot and its battles with environmentalactivists.
ists over its lumber-sourcing practices). And if you cant figure out
This is hard work, no question, and many businesses still resist
who your stakeholders are, its quite possible they will do it for you.
or dont pay attentionin many cases without consequence. But I
In an era of what Don Tapscott calls radical transparency, reputabelieve the TXU buyout will be remembered as the tipping point
tion-breaking news seems to travel faster than the speed of light.
in the stakeholder game. For years, the massive Texas utility had
Ask Wal-Mart about the impact of a well-supported network of enwaged war with environmentalists over carbon emissions; its plans
vironmental and labor activists or any of the bottled water brands
in 2005 to build 11 new coal-fired electricity plants were a red
how long it took consumersconnected by blogs and e-mail and
flag in front of a bull. When TXUs stock price plunged into takeinstant messagingto find their voice after last summers attacks
over territory and KKR and Texas Pacific Group began their bid
by environmental groups on the industry.
to buy the utility, we witnessed a revoluBottom line: The old days of black-andtionary approach: making environmental
white positions, of big business versus tree
reputation part of due diligence. The inhuggers, are long gone. Direct engagement
Judith Samuelson, the
vestors consulted with the Environmental
among business and those that invest in or
executive director of the Aspen Institutes
Defense Fund and the Natural Resources
capitalize the business and environmental
Business and Society Program, is a leading
Defense Council alongside standard deal
stakeholders is the critical path to a suspublic policy advocate with a background
drills like probing the integrity of TXUs
tainable future.
in business, public-private partnerships,
management team. The result? The buyers
How are green stakeholders influencand philanthropy.
dropped plans for eight of the plants and
ing your companys business agenda
Since the midagreed to cut global-warming pollution,
and stock price? Have the dynamics
1980s, her work
among other commitments.
between your industry and environhas focused on
the role and imWith every new headline, companies
mental NGOs shifted? What are the
pact of business
like Citigroup, the first of the big U.S.
hard trade-offs and challenges in forgin society.
banks to adopt the Equator Principles
ing partnerships between businesses and
on green investing, are learning that
NGOs?
59
Invest in green technology

Green has finally caught the attention of both the political and
financial ears in the U.S. We are now designing recyclables in our
material selections, EOls are ear marked with reusable in mind,
and we are realizing that less energy in means better margins out.
The need for greater application is at hand. America for the first
time in decades is in the competitive export posture (based on the
Euro and Europes loss of direct export to the U.S. for products
other that wine, cheese, and olive oil)
The technology vault is openrenewables, carbon fiber, waste
recycling systemsagain, the U.S. is postured for a blue ocean
flood. The only thing holding it back is the first round investor
pools; add that to the mix and the growth curve will head in the
right direction.
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Green Stakeholders: Pesky Activists or Productive Allies? | Corporate Governance
Any human organization will at some point make a mistake

somewhere in the world. This will be picked up on the internet as
it happens. At that point you need well-established global environmental and social reporting to put the failure in context, and you
need independent organizations with whom you have worked to
develop policies and who know and respect your values to help you
address the issue.
Sir Mark Moody-Stuart, Featured Contributor
GEs ecomagination decisions
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Judith Samuelson is right that contemporary corporations would

be wise to consider green initiatives and to engage stakeholdersincluding but hardly limited to environmentalists/NGOswhen doing so.
To deepen that thought, however, it is important to distinguish
Terry OMalley, CEO, PMI
three kinds of substantive decisions.
Watching the trends
The first kind of decision is whether a green initiative makes
In 1997, when Shell invited major shareholders to a meeting
sense from a traditional business point of view: Does an investment
to discuss nonfinancial issues covering industrial safety, human
produce appropriate returns and margins? Part of GEs Ecomagirights, the environment, and climate (yes, climate in 1997), one
nation effort was to introduce technologies into the marketplace
shareholder said to me, That was really interestingI wondered
that offered both operational and environmental advances. If costs
what we were going to talk about for three hours. Now in a similar
could be competitive, these green technologiese.g., better airannual meeting to discuss Anglo Americans Report to Society,
craft engines, hybrid locomotives, coal gasificationwould be in
around 40 major shareholders ask searching questions and make
great demand from customers (airlines, railroads, utilities) because
constructive suggestions. Why the change? As a mining compaof end-user and societal demand. GE explicitly said Eco was a businy, Anglo American, unlike Shell, does not have millions of diness initiative, summarized by the phrase: green is green. The aprect consumers making daily purchasing
peal was primarily to investors, but with
choices around the world. But our mastrong support from environmentalists.
jor shareholdersinsurance companies
A second substantive decision is how to
and pension fundsdo have millions of
adhere to the spirit and the letter the myrFeatured
consumers. And as an NGO activist once
iad environmental health and safety laws
Contributors
said to me, Insurance companies watch
and regulations across the globe. This intrends in consumer attitudes, and twenty
volves significant choices about resources,
Frances Beinecke, presiindividual letters or e-mails to them is a
inside expertise and systems and processes
dent, Natural Resources Defense Council
trend.
embedded in business operations. Such
So HSBC, which certainly listens to
adherence is a foundational corporate rePaul Dickinson, chief
consumers around the world, not only
sponsibility and is far from easy because
executive officer, Carbon Disclosure Project
subscribes to the Equator Principles, but
corporate efforts vary markedly in their
Ben W. Heineman, Jr.,
has lending guidelines for sensitive areas
depth and intensity. Decisions here informer general counsel of General Electric
such as forestry, energy, mining, chemicals,
volve regulators, workers, and communiand author of the book High Performance
and water infrastructure, which were deties, not only environmentalists.
with High Integrity (Harvard Business
veloped in consultation with outside notA third substantive decision is what volPress, June 2008).
for-profit groups. HSBC reports on transuntary global standards and actions coractions covered by the Equator Principles
porations should adoptbeyond formal
Mindy Lubber, president,
and has a sample externally appraised.
business metrics and rules. These decisions
CERES
Aspirations and verbal commitments to
involve a cost-benefit analysis about what
principles are not enough. Measurement
is in the long-term enlightened self-interSir Mark Moodyof results and transparent, verified reportest of the corporation. They often require
Stuart, chairman, Anglo American;
former chairman, Royal Dutch/Shell Group
ing against, for example, the Global Rejudgment because benefits like cost-avoidof companies
porting Initiative guidelinesdeveloped
ance or enhanced reputation or employee
by businesses, non-governmental organipride involve common sense, not just
Alyson Slater, director of
zations, labor organizations and agencies
financial analyses, and because the time
strategy and communications, Global
such as the UN Environmental Program
period for the benefit to occur is often
Reporting Initiative
working togetheris essential.
longer than the next quarter. Such choices,
60
Lynch, HSBC and Schroders have all recently launched funds and
products in this spaceNymex recently launched the Green Exchange, and NYSE-Euronext launched Bluenext, to trade carbon
credits and other climate change related products.
To find out more about how companies are developing strategies
on climate changevisit our website at www.cdproject.net to read
thousands of corporate responses on climate change strategy and
emissions data.
Paul Dickinson, Featured Contributor
Companies and activists collaborating

instead of bickering is 99% on the mark
The only point I disagree with is her contention that TXU

backed away from building 11 new coal-fired power plants in Texas
because its environmental reputation was at stake. The pullback was
driven not by reputation but by the realization that building new
coal-fired power plants is a huge financial risk. National carbon
limits are inevitable and high-emitting coal plants will be hugely
expensive when plant owners have to pay for their carbon emissions. According to our estimates, if TXU had built all 11 plants,
the companys costs to pay for the additional CO2 emissions would
have been in the range of $900 million to $2 billion a year. No
wonder TXU dropped the project.
Still, Samuelsons overall thesis is dead on.
For years, Ceres has used stakeholder teams, comprised of investors, environmentalists, and other outside experts, to engage with
companies on the environmental and social challenges they face.
Through regular conference calls and face-to-face meetings, these
teams advise companies on sustainability reporting, emerging issues, and specific performance improvements. The relationships
between these teams and the companies are steady and long lasting.
They are not one-night stands focused on one problem and one
project only. Thats an important distinction. Constructive longterm stakeholder engagement is the best way to drill sustainability
deeply and broadly throughout a company.
An example of what I am talking about is our relationship with
apparel company Timberland. Ceres has a long track record of
working with apparel companies on workplace conditions at their
overseas factories. Timberland is among the companies that have
been responsive to our concerns on this issue. In just the past few
years, the New Hampshire company has disclosed the names and
locations of its 300 contract facilities and boosted its assessments at
those sites, which has led to improvements in workplace conditions.
But, with help from our stakeholder team, Timberland is
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which involve some cost, must balance or optimize concerns of all

stakeholders.
For example, GE chose to build new plants to world standards,
not local standards, whether in Mexico or China for a number
of reasons: more efficient, better health and safety for employees,
avoidance of future remedial costs, better for the environment.
Similarly, in Ecomagination, GE committed to absolute reductions in greenhouse gases and an increase in energy efficiency in
its own operationsas a proof statement to customers that green
efforts could work, to be credible in its broader Eco initiative and
to achieve important environmental goals.
Moreover, corporations may conclude that the cost of such voluntary actions is too great because competitors wont take them
and wont incur that cost. But corporations may also conclude that
new public policy mandates, not voluntary action, is needed to
attain necessary social goods and to ensure fair cost-spreading.
National and international policies to restrain carbonthrough a
variety of alternative mechanismsare a good example of the need.
But, once again, many stakeholders and elements of society will be
instrumental in forging the political consensus so necessary for effective governmental action on this multifaceted issue which affects
so many elements of society.
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Ben W. Heineman, Jr., Featured Contributor
An Activist Perspective: Climate actually

matters to corporations
The work we do at the Carbon Disclosure Project (CDP)

shows just how important climate change issues have become to
the corporate world. We work with over 385 in
tC
stitutional investors, holding $57 trillion

in assets under management, including
Merrill Lynch, Axa, AIG Investments, For
tis, Morgan Stanley, HSBC and Barclays.
Do
No
On behalf of these investors CDP writes to over 3,000 companies

globally to request greenhouse gas emissions and climate change
relevant data. The data help investors pick out the winners and
avoid the losers as we move towards a carbon-constrained world.
The level of engagement from the investor community shows the
growth in understanding of risks and opportunities associated with
climate change and the importance of information and data to inform on these issues.
Equally, many of the companies who respond to CDP recognize
how important climate change is in business strategy and planning. Eighty percent of the Global 500 companies that respond to
CDP recognise climate change as both an opportunity and a risk
and many companies are implementing emissions reductions programsCadbury Schweppes, for example, aims to achieve a 50%
cut in carbon emissions by 2020, and other companies are taking
on equally ambitious reduction targets. There are also many large
companies that have spotted the huge raft of opportunities associated with producing low-carbon productsthe Toyota Prius, Ciscos TelePresence systems, GEs low energy lightbulbs, double glazing for improved insulation, components for renewablesthe list
goes on. And investors too are spotting the opportunitiesMerrill
now taking sustainability in exciting new

directions. The company recently launched first-of-its-kind
packaging with nutritional labels, detailing how and where each

Timberland product was made and its impact on the environment.
The company is also participating in our new Facility Reporting
Project, a valuable way for companies to evaluate and address how
individual facilities are impacting their local communities.
Still, stakeholder engagement is hard, hard work with numerous challenges. The three keys to success are goal setting, continual
performance improvement, and accountability.
61
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In the case of climate change, our stakeholder teams will never

not only are climate change and all of its consequences real, but
be satisfied with companies making simple pledges toward carbon
that they are in fact human induced. The issue of climate change
neutrality. Its relatively easy to buy carbon credits and renewable
alone has made it increasingly important to understand the risks
energy certificates (RECs) and then claim youre 100% powered by
that civilization as we know it is facing, and to find new ways to
wind energy. But, as we all know, theres
engage with and listen to each otherso
a vast gap between credits and RECs that
that together we can find solutions to the
are purchased and new wind farms that
many problems facing the world.
Resources
are actually built.
Todays reality is that some 300 signaBusinesses that are really serious about
tories, financial institutions of all stripes,
Turning Gadflies into Allies
reducing their carbon footprintand
with assets totaling over $10 trillion (yes,
the worlds carbon footprintneed to go
thats trillion) have now signed the UNs
by Michael Yaziji
much further. Energy efficiency and other
Principles for Responsible Investment,
measures that directly reduce greenhouse
and that there are now nearly 5,000 siggas emissions in their operations and supnatories to the UN Global Compact, of
ply chains should come first. If carbon offsets are being utilized, the
which about 3,700 are companies. Who could have imagined this
companies should also support tough accountability standards to
type of activism on behalf of the planet on the part of compaensure that offsetswhether for a forest project in the Amazon or a
nies even ten years ago, yet today progressive companies from all
clean-energy project in Russiaare real and legitimate. And, lastly,
industries are recognizing the need for change, and are acting on
companies should support state and federal policies that will enable
that recognition.
more wind farms and other renewable energy projects to be built.
In the new world of connectivity and sometimes unwitting
Otherwise, those renewable energy certificates companies are
transparency that Samuelson identifies, previously adversarial rebragging about to the public and their stakeholder teams may be
lationships are becoming not only less effective, but even distinctly
little more than pieces of paper.
unhelpful in pointing businesses, NGOs, and other social institutions, including governments, toward the types of solutions that
Mindy Lubber, Featured Contributor
are really needed. We need to find ways to open up the common
Its not that easy
ground that we all sharea better world for our childrens children,
Many companies are trying to adhere to becoming a sustainable
a world in which there is equity and sustainability, perhaps, a world
company but many of them dont really know what it means, as it is
where there are natural spots all can visit, a world where there is
not clearly defined. That is the reason there are claims of companies
health and well being. Ultimately, we are all on the same team if we
being sustainble, but surveys show that a small percentage are actucan find the strength and courage to make the kinds of changes that
ally achieving their goals.
are called for today to build a better world tomorrow.
On the other hand, some companies, like Mc
Sandra Waddock, Professor of Management, Boston College
Donalds, are doing more in being social

ly responsible than they are disclosing
publicly. If McDonalds publicizes some of its environmental
No
initiatives, it runs the risk of being criticized for what it is not doing,
and the latter seems to get more print space.
I also agree that companies should make a concerted effort to reduce their carbon emissionsthe usual way of accomplishing this
is through energy efficiency, but isnt that something that all companies should be doing as a matter of operations management? In the
book Cradle to Cradle, the authors make a clear distinction between
eco-efficient (reducing the impact on the environment) and ecoeffective (restore the environment), but the former should just be
labeled efficient. Whether you are benefiting the environment or
not, a company should strive to be more efficient.
Do
George P. Nassos, Director, Center for Sustainable

Enterprise, IITStuart School of Business
Recognizing the need for change
Judith Samuelson has hit on a core element of the new world of

realities facing companies and other institutions in society today:
the need for collaborative relationships across sectors. Underlying
Samuelsons argument is a key issue, the growing consensus that
Companies need to be serious

to work with us
Theres absolutely no question the TXU deal had huge implications far beyond the acquisition itself. Yes, the environmental terms
of the dealeight proposed coal plants off the table, major efficiency investments, and support for national climate legislationwere
a real accomplishment in themselves. But the bigger story was the
signal that it sent to both Washington and Wall Street that global
warming had officially arrived as a core competitive business consideration, one where there are opportunities to make money by
building better mousetraps.
No more are we talking just about economic doom-and-gloom.
Theres good business to be had selling cleaner, safer, more-energy
efficient goods and services. In fact, it has the potential to be the
next industrial revolution in this country.
Thats the main reason Ive been spending so much more of my
time over the past year or so working with CEOs and other business leaders. They want to get this right, and they are looking for an
active and open dialogue to help them do it. That is a huge change
from how things worked when I first started out in this field.
62
Whatever the starting point for the carbon price, it would need
to rise over time, because the impacts of our emissions will be greater as we get closer to the time that really catastrophic changes might
occur. The model results show that the price should rise at about
3% per year in real terms.
If a carbon tax or fully auctioned permits are used, the revenue
raised would be substantial. A small amount should be set aside to
deal with any hardship caused to those on low incomes. The bulk
of the revenue would allow welcome cuts to other taxes, such as
income and sales taxes. This is a blueprint for saving the planet and
boosting the economy at the same time.
Chris Hope, Reader in Policy Modelling,
Judge Business School, University of Cambridge
Response to George Nassos:

Sustainability is a process
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That doesnt mean that were going to cozy up with any old corporation that comes along. Whether its a mom-and-pop or WalMart, the criteria for companies that want to engage with NRDC
on their greening efforts have to clear the same three filters: First,
are they serious about it? Second, are they going to dedicate the
resources and commitment to make it work? And third, is the result
going to have benefits beyond just that companyare we really
transforming the broader marketplace. If the answer is yes to all
three questions, then we can start a real conversation.
Many factors are driving these changesand they arent going
away. Policy is one. Rising resource prices is another, and not just
oil. The price of coal has doubled in the last year, and some analysts think it may double again in the next 12 months. Consumers
also have higher expectations today, and they are better informed
than ever about corporate responsibility. The biggest reason may
be simple competitive pressure: If you dont deliver, the guy across
the street will.
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Frances Beinecke, Featured Contributor
Environmental pressures will exacerbate

existing social tensions
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As authors such as Thomas Homer-Dixon have shown, environmental degradation tends to fall on the oppressed around the world,
and as Michael Klare has shown, competition for oil, water, and
other resources may not (or may) cause war themselves, but they
will certainly add a volatile dimension to already existing ethnic,
religious, political, and other tensions. Companies and government
leaders will have to listen to these voices or risk adding violence to
the mix of environmental issues...and war isnt exactly beneficial to
the environment either.
Tim Fort, Executive Director,
Institute for Corporate Responsibility
George Washington University School of Business
The carbon tax
Do
No
As Mindy Lubber noted, the prospect of having to pay for carbon dioxide emissions concentrates the mind of senior management wonderfully.
But what sort of carbon price should we expect?
The central estimate from the Stern report of the damage caused
by a ton of carbon dioxide emitted today is $85. So this could be
a sensible starting point for a carbon price. But much of the controversy about Sterns figures stems from his use of a 0.1% per year
pure rate of time preference to discount impacts in the future back
to the present day. Despite Sterns persuasive arguments, this rate
is lower than many are willing to accept. But what would a higher
discount rate do to the figures?
Fortunately, we can calculate this, using the same model as Stern,
which was developed at Judge Business School. Using a pure rate
of time preference that ranges all the way from 0% to 2% per year
brings the central $85 damage valuation down to about $40 per
ton of carbon dioxide. That the starting point for a carbon price
should be somewhere within the range of $40 to $85 per ton of
carbon dioxide would seem to be a fairly robust conclusion.
George Nassos says: Many companies are trying to adhere to

becoming a sustainable company but many of them dont really
know what it means, as it is not clearly defined. That is the reason
there are claims of companies being sustainable, but surveys show
that a small percentage are actually achieving their goals.
Maybe here is the key point. What does sustainable development
mean? For one thing, sustainable development is not a business
project but a social project. Not surprising then that companies
dont deliver! And the fact that managers do not seem to recognize
this distinction is a basic problem.
So business is not a suitable unit of analysis for sustainable development because business is mainly concerned with the production
sideand consumption in society is that are currently unsustainable.
Seen in this way, business can only contribute to sustainable development by working with others in society. In Europe we
would argue that business contributes

through practices that we would call cor
porate responsibility. But a word of warningthe notion of corporate responsibility that has dominated management
scholarship and business practice in the U.S. is not the same in
Europe. European CSR is much more open to the notion of business working with others in a process of organizational and social
learning, innovation and change toward sustainable development.
No! American citizens do not worry! This is not a recipe for
socialism. This is merely acceptance of the fact that in a rapidly
changing world shaped by international business, and significant
resource scarcity, the companies that succeed will be the ones best
able to keep apace with change. The ones that survive will be able
on the one hand to protect the value of some of their current assets,
and, on the other, to develop and have accepted new assets based
on innovation.
Given that the first principle in generating ideas for innovation
is to talk and listen to others not like yourself, and, that the first
principle of innovation is that this occurs when others come to
adopt those new ideas, it seems obvious that companies should engage with external actorsas a source of ideas and as partners in
changethe cornerstones of innovation.
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The question then is not whether to engage with stakeholders

you do. And they winkle out your commercial risks for free. Probut who to engage with and how? Indeed, the act of engagement,
ductive allies indeed!
the choice of external actors, the facilitation of the exchange of
Peter T. Knight, President, Context America
views and insights, the generation of ideas, the accomplishment of
Judith Samuelson, discussion leader, responds:
complex integrated evaluations of those ideas, and, then, the rapid
deployment of the resulting innovations might well define the proManaging by the quarter is unsustainable
cess of sustainable development. Sorry, George Nassos, sustainable
It was good to see Peters comments here, as I was
development is a process, not a goal.
beginning to think I was operating in Wonderland.
This becomes even more imperative in a world characterized by
My day job, in a nutshell, consists of corralling exever more rapid change and ever more tight connections. A world
ecutives to take time out of their pressure-cooker
where open innovation becomes critical and where innovation is
jobs to think about two things: One, how do the
no longer about technology or products and services, but about
decisions I make affect wider society? And two, how do I align the
business models, management, organizations and institutions.
metrics and incentive systems in my company (bank, consulting
What is currently advocated as open innovation is in fact better
firm) to long-term value that more naturally incorporates the nonseen as slightly less than usually closed innovation. We have a very
market and community impacts? Do I think this conversation is
long way to go in opening up innovation!
getting easier? You bet. Is the evidence strong enough to influence
Indeed a prerequisite of sustainable development is the ability
the market? Only on the margins. Yes, the biggest brands in indusof companies to gain from society the license to operate together
tries that touch people are vulnerable and are making strides. And
with the license to innovate. That itself can only be done through
we have seen some remarkable changes in the last couple
innovative forms of governanceto set what we might call the
yearsamong them, success in moving up the food chain to the
framework conditions for enterprise determined by companies in
service and capital providers like investment banks; however, we are
concert with other actors in society.
not out of the woods yet.
In this sense we should not even think about business and its
Our mantra at the Business and Society Program at Aspen is
stakeholders but about business as a (powerful) actor among many
borrowed from the work of Adam Kahane, who used to say someother actors.
thing like this: The system is perfectly designed for the results we
What gets in the way of this process? Managers. I could sughave now, to which we add, so lets get cracking and redesign the
gest an over-reliance on control, fear of change, inability to work
system. The gamesmanship involved in quarter-to-quarter managewith others who are different, an absence
ment, including the ridiculous system of
of creative and courageous leadership, arforecasting down to a penny per share the
rogance and, of course, a distance from
entire results of a multinational operation
Resources
others caused by their professional lanof extraordinary complexityand then
guage and self-assumed status. Finally, the
working to beat that forecastis the real
Using the Balanced Scorecard
pursuit of knowledge accumulation rather
mantra in public companies. Sure there
as a Strategic Management
than a commitment to learning! These do
are exceptions, but there is also plenty of
System (HBR Classic)
not readily contribute to sustainable develevidence that this mentality dominates.
by Robert S. Kaplan and
opment as a project for humanity, within
The CEO of one of the largest banks in
David P. Norton
which great economic opportunities are
the world once told me that he has a 90there to be found.
day calendar on his wall. The big issues:
To point a little to my own institutions,
climate, poverty, even domestic issues like
this is of course fueled by a failure in busiinvesting in keeping the U.S. workforce
ness schools to furnish the skills and competencies on which manequipped, dont get addressedcannot get addressedin a world
agers can draw to participate effectively in the type of social and
that manages by the quarter.
organizational learning, innovation, and change for the future that
Judy Samuelson, Discussion Leader
I seek to describe above.
Do
Nigel Roome, Daniel Janssen Chair of Corporate Responsibility,

Solvay Business School, Bruxelles, Belgium and Professor of
Corporate Global Responsibility and Governance, TiasNimbas
Business School, Tilburg, The Netherlands
Investigative environmentalists should be

celebrated
What is so surprising is the continuing denial of so many managers to the huge business benefits that campaigners deliver free of
charge. They probably know more about your supply chain than
Not enough focus on stakeholder responsibility
Judith Samuelsons article underscores the importance of what

my colleague Andrew C. Wicks and I have called stakeholder responsibility. While much attention has been directed to the responsibilities of corporations for addressing an array of social and
environmental concerns, there has been less of a focus on the responsibilities of stakeholders (e.g., investors, employees, customers,
suppliers, government, NGOs) who play critical roles. The examples Ms. Samuelson writes about in this inspiring article highlight
the promise of corporations and their stakeholders recognizing
64
their mutual responsibilities and working together to address social

and environmental issues.
Jerry Goodstein
Companies need to improve, whether or not an

NGO is watching
In my research I am in relatively constant contact with advocacy

NGOs. Over the last couple of years I have begun to see a substantive shift that will become increasingly apparent in the years
to come.
Fifteen years ago it was mostly about conflict and confrontation.
In the last ten to fifteen years there has been a shift to more collaboration with individual firms and, to some extent, with industry
groups in setting voluntary standards.
From the big brand NGOs in particular I am hearing a high
level of frustration concerning the bang-for-buck returns of working with what are already relatively clean firms and in struggling
to reach agreement on voluntary standards that lack enforcement
mechanism and are ignored by the dirtiest players.
More and more they are turning toward regulation as the most
effective way of making substantive change. And today, the most
forward-thinking firms are beginning to work with these NGOs
in shaping the regulatory environment, to the benefit of themselvesthrough various forms of competitive advantageas well
as for society as a whole.
Want to know more? Watch HBR for a possible article! :)
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The old days of black-and-white positions, of big business versus

tree huggers, are long gone. Is it really so? Ms. Samuelson herself gives a few examples (Wal-Mart, bottled water manufacturers) where this is not true. There are NGOs everywhere...if you
are good with one NGO, there is a possibility that you invite the
wrath of another. These days, you still get called an environmental
terrorist or your program a greenwash it depends on the agenda
of the NGO, not necessarily on the corporations environmental
performance. I am doubtful if an organization can foresee such an
unpredictable chaos.
The focus, therefore, has to be on improving the environmental
performance of the organizations activities, products, and services,
irrespective of whether the organization is on the watchlist of NGOs
or not. If an organization has to be told
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by an NGO of its environmental impact,

there is something wrong and the orga
nization deserves to be condemned. Thinking ahead and avoiding adverse reactions is a better strategy than to
forge a strategic alliance with an NGO. One has control over the
former, no control over the latter. Which one would you choose?
L. Ramakrishnan
tC
Stakeholders are an untapped resource for

innovation
No
Companies realizing the potential of engaging stakeholders, particularly NGOs? Absolutely!

A successful engagement process includes, in part, the leveraging of tools such as Voice of the Customer and similar research
methods that get company representatives out of their offices and
into the end-use environment. By observing and interpreting the
work of stakeholders (in this case NGOs) first-hand, it can expose
the company to a rich and largely untapped resource for innovation
(not to mention risk mitigation). Its an excellent potential source
for discovering lead users and early adopters, as NGOs make it
their business to discover issues and identify solutions much earlier
than the general marketplace.
David Bennell, Executive Director, FSC Global Fund
Formerly L.L. Bean Manager of Product Research,
Testing and Environmental Affairs
Michael Yaziji, Professor, IMD
Response to Nigel Roome and Ben Heineman:

Engage with many stakeholders
The comments on Judith Samuelsons article already speak to the

main issues. However, there are two points that should be made
more explicit. Nigel Roome correctly points out that stakeholder
engagement is a process. And as Ben Heineman suggests, corporations will need to work with other stakeholders such as governments. These two comments allude to an important point that
stakeholder engagement is not a dyadic process. Quite the contrary,
finding truly successful solutions to complex social problems will
require engaging a range of stakeholders, not just developing partnerships with one or two NGOs.
Secondly, stakeholder engagement is more than stakeholder
management. Meaningful stakeholder engagement means following the principles of distributive, procedural, and interactional justice. If corporations fail to follow these principles they unlikely to
achieve their desired goals, and may actually make the situation
worse.
See Cropanzano, R., D.E. Bowen, et al. (2007). The Management of Organizational Justice, Academy of Management Perspectives 21(4): 34-48 for a good summary of the principles of organizational justice.
Joseph Cote
Beware the radical NGO
Nice discussion. As Samuelson and others have made clear,

dealing with environmental issues and advocacy NGOs is, by
now, a no-brainer. It has become something of a hygiene factor.
And writing up CSR reports and signing up for various voluntary initiatives like the GRI or the Global Compact do not provide much in the way of differentiation or competitive position
anymore.
Most NGOs are doing an effective job, but there are responsible NGOs and radical NGOsthe latter often co-opt a businesss
goals.
For example, fish farms, whether you endorse them or not, are
licensed to operate in Canada and elsewhere. If an investor puts
money into such an endeavor and receives a conditional license to
operate, it is difficult to reconcile the actions of NGOs aimed at
Do
Today, NGOs and businesses shape regulations
65
destroying such a practice. If there should not be a salmon farm for

example, then the government agency needs to determine that it is
not going to allow such practices and cease these operations. The
governments feet should be held to the fire. Salmon farms have
been operating for decades in many parts of the world, albeit with
mixed results.
In British Columbia in 2007, a judge ruled that a member of
a local NGO was guilty of making malicious comments against
a specific BC-based fish farm. Further, the NGO was
found motivated by malice to misrepre

sent the operations of this fish farm by
using deceitful practices and issuing dis
honest press releases that misinformed the public.
Second, early warning systems are a complementary process.

Such systems look out into the future by evaluating stakeholder
concerns, legislative proposals, media coverage, commentary from
experts in NGOs, think tanks, and academia. The issues generated
by this process are also assessed on a regular basis by top business
leaderswith initial decisions about which issues are so important
that investments should be made todayin developing technology or public policy or voluntary corporate commitmentsfor a
solid position in the future that positions the company ahead of
the curve. Again, choices on what to prioritize for the future are
not easy.
Third, corporations must report on their initiatives with the same
kind of detail and accuracy they seek in the managements discussion and analysis (MD&A) in their annual reports. We have seen a
surge in Citizenship or CSR reports. But these must be much more
than glossy pictures of children playing by fields of flowers. As others have noted, the Global Reporting Initiative provides a good
framework for such corporate efforts, and meaningful detail, with
an explanation of how it was derived and verified, is essential.
Wise corporations will seek stakeholder advice and counsel in
all three processes. For example, GE issued its first annual Citizenship Report in 2005, and has sought comments and critiques from
a stakeholder advisory group and in global stakeholder meetings
ever since.
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Before the individual from the NGO could be held accountable,

he fled to the UK to take up the case there. Fish farms may simply
be cattle farms in the ocean. If their practices are found to be wanting, then shared responsibility requires governmental intervention, ownership, and input from NGOs, shareholders, and other
stakeholders.
Working with NGOs to resolve issues and to ensure sustainable
practices is the goal. But the means of doing so can be as important
as the end. NGOs aimed at destroying businesses through illegal
activities cause other business owners or CEOs to rightfully be nervous when they hear that an NGO wants to have a meeting with
them.
NGOs are also businesses. They too should be issuing triple
bottom line reports and providing evidence of their credibility.
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Larry Berglund
Stakeholder engagement is the ethical

thing to do
Wow, talk about a series of topics near and dear to my

heartthese are it. Also, from my perspective, the very public ethiMany contributors to this discussion have rightly expressed concal lapses of Enron, WorldCom, and Tyco are closely aligned with
cern about whether corporate efforts on green issues are for show
these issues along with climate change and globalization as busior for real.
ness drivers. Each of the scandals has helped usher in a new form
How do corporations embed in their business operations deof stakeholder engagement (not just green stakeholders), which is
cision-making and evaluation processes on environmental, health,
now a real part of doing business.
and safety initiatives relating to: (a) traditional for-profit activities;
Increased consumer demands and shareholder activism are now
(b) the level of effort in adhering to the spirit and letter of formal
demanding attention from todays businesses, but globalization
rules across the world; and (c) voluntary
and climate change are the real drivers that
adoption of global standards beyond tradiare catalyzing innovation and are facilitattional business metrics and formal rules?
ing energy conservation and waste reducResources
This is an important, if complex, subtion. And while some of the leaders are
ject. Here are three important processes
using this to show a new form of responCocreating Businesss New
that corporate leaders should make part of
sibility, it would be naive to discount the
Social Compact
regular business rhythms.
cost-savings benefit, and chalk all these
First, they should have a systematic
innovations up to converting to the green
by Jeb Brugmann and C.K. Prahalad
process for identifying, prioritizing, decidreligion. Just look at the recent Wall Street
ing, and implementing global actions and
Journal ECO:nomics event in California.
standards in the present. As many here
Regardless, when combined, each of
have noted, defining which sustainability issues deserve committhese issues have contributed to a significantly changed dynamic
ment of time, effort, and resources is not automatic. It requires
for all the players, including environmental NGOs, other stakecareful analysis and hard choices. A CEO must make this process
holders, industry sectors, and government. And this has created a
high levelwith top business and staff leaders involved in the dislot of trade-offs and challenges in forging partnerships. However,
cussion so that decisions become business priorities.
embedded within these trade-offs and challenges are significant opportunities.
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Process, prioritization, principles
66
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Problem Behavior: Naively releasing potentially harmful nonnative species into the environment.
Desired Behavior: Choosing environmentally friendly alternatives to surrender pets.
Private Sector Partner: Pet and aquarium industry
Campaign website: www.habitattitude.net
3. SMARXT Disposal
Environmental Issue: Pharmaceuticals in the environment, an
emerging contaminant.
Audience: Medication consumers
Problem Behavior: Flushing expired and unused medications to
dispose of them.
Desired Behavior: Embracing responsible disposal methods for
unwanted medications.
Private Sector Partners: Pharmacists and pharmaceutical manufacturers
Campaign website: www.smarxtdisposal.net
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Helping Citizens Go Green

In working for the government, I choose to focus on fully maximizing the opportunities. As part of my work, Im responsible for
elevating the work of my agency and engaging people to mitigate
environmental harm. Because the sad reality is that virtually everything we do in our society creates environmental impact. Climate
change has created a necessary catalyst; however, Ive combined it
with the other changes in our society and business community to
facilitate a much different way of doing business in the government.
Essentially, Ive leveraged these changes to facilitate collaborative
relationships between specific industry sectors, government, and
various stakeholders to help consumers (or as I see them, citizens)
to live more sustainably.
While more companies are embracing their values and are more
overtly incorporating them into how they do business, others still
struggle. And this is where the opportunities lie. My agency is the
lead federal agency for conserving fish and wildlife. We share this
responsibility with the States. While we have used the North American wildlife management model to produce some amazing results
(bringing back deer and turkey from near extinction in the 1930s),
we need to evolve with all the changes that are occurring, and this is
where my work comes into to play. Because of its role, government
has had a traditionally adversarial relationship with the private sector. However, because of the changes that are happening now and
that are continuing to occur, this is where Ive found some leverage.
Ive spearheaded three national behavioral change campaigns in
conjunction with multiple partners to address some very complex
environmental issues, invasive species, and pharmaceuticals in the
environment. Below is some background information about each
of these campaigns.
America is one of the leaders of our global consumer society.
And while this position has provided our citizenry with a very high
quality of life, it has also created many complex environmental
impacts. Unfortunately, for a variety of reasons, our citizenry is
far removed from this reality. My agency has focused on addressing specific issues and elevating them by creating innovative, public-private partnerships with the relevant sectors to target specific
behaviors of specific audiences related to these issues. Below is a
description of our campaigns:
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1. Stop Aquatic Hitchhikers!

Environmental Issue: Invasive species, a major threat to biological diversity.
Audience: Aquatic recreational users
Problem Behavior: Unknowingly transporting invasive species
with recreational equipment.
Desired Behavior: Cleaning equipment to prevent invasive species introduction/spread.
Private Sector Partner: Recreational equipment industry
Campaign website: www.protectyourwaters.net
2. Habitattitude
Environmental Issue: Invasive species, a major threat to biological diversity.
Audience: Pet owners
So, my long-winded response to the hard trade-offs question is

that the mind-set of government needs to change from being exclusively regulatory to being more holistic in order to keep pace with
the times. And the challenges come in the form of leadership (who,
what, and when will they be willing to demonstrate it, not just talk
about it), just everything else.
Joe Starinchak, Outreach Coordinator,
U.S. Fish & Wildlife Service
Three limitations to stakeholder engagement

While I agree that the current trends point to richer corporatestakeholder engagement, we risk focusing on the wrong trends if we
do not consider a given companys definition of stakeholder. One
can cast the net narrowly or widely by using criteria such as level
of expertise, ability to impact our business, orientation toward our
proposed activities, etc. But I would argue that, for the majority of
companies, the popularity of stakeholder engagement as a process
may lead to a myopia about the actual impacts to be addressed.
1. Incentives for Short-Term Selection Bias

As Judy Samuelson points out, if a CEO is still penalized or
rewarded based upon his/her performance over 90 days, and it
is his in-house team that prioritizes when and which stakeholders to consult, the organizational incentives likely support a heavy
sample selection bias toward those stakeholders who can impact a
companys short-term goals. At BSR, we receive many requests for
facilitating stakeholder engagements once the protesters are on the
street or the threatening policy proposal is on the table.
2. No Proxy for Future Generations
The issue becomes more complex when one asks Which stakeholders can suitably represent future generations? Given the popularity of the Brundtland definition of sustainable development,
this becomes a critical question. Environmental and development
advocacy groups may be the best proxy, but it is questionable to
67
assume that they can predict the desired option sets for future generations (see Allen Whites 2007 paper on the subject).
family level through such means as rain-water harvesting, recycling

water for gardening and washing, switching off lights and appliances when not required, carpooling, conscious avoidance of nonbiodegradable packagingthe list can go on. A conservative estimate
has quantified the savings from these simple measures at 25%.
2. At the business level, in todays world, is it not necessary to
consider the concerns of all stakeholders and not just shareholders?
If this premise is accepted, we would probably not witness large
corporations using fresh water for gardening in cities where hundreds of thousands of people do not have access to potable water;
we would probably not witness retail chains making indiscriminate use of non-recycled plastics for packaging; we would
probably be spared the horror of watch

ing large quantities of food being wasted
at conferences even as millions across the world wonder whether

they would get the next meal at all; we would probably not have to
work in or visit giant offices that, to use the words of a well-known
architect, are virtual gas chambers.
3. As for NGOs, it may be worth remembering that our worst
critics are probably our best friends. It may be tempting for CXOs
to go along with groupthink and sycophancy, but someone has to
point out their dark spots too.
4. At the end of the day, it is time we gave up the we vs. they
syndrome; government vs. business; business vs. NGOs; ordinary
people vs. big business. We all share the most precious resource we
haveour planet. Either we work together or sink together. The
choice is entirely ours.
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3. The Blind Spot of Policy Advocacy

The traditional view of stakeholder engagement entails a company inviting input from a select set of internal and external constituencies regarding a given decision or activity. Typically, the criteria
for selecting those stakeholders include the directness of the impact
under examination. This tends to inherently exclude one area of
huge potential impact for corporate sustainability strategists: policy
advocacy. Those affected by new public policies are generally not
considered stakeholders of any one company. Also, the opacity of
lobbying efforts makes it hard for any stakeholders, including a
companys Community Affairs or Sustainability departments, to
highlight inconsistencies between lobbying stances and sustainability policies (see Robert Repettos 2006 paper on the subject).
Together, these three limitations highlight why companies
should not rely too heavily on stakeholder engagement as a cure-all
or a crystal ball.
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Emma Stewart, Ph.D., Director of Environmental R&D, BSR
Devils advocate here: do you trust NGOs?
No
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A dominant theme in the posts so far is that everyone wins when

businesses partner with NGOs on improving environmental impact. Businesses get good free advice (witness TXUs buyers, advised by Environmental Defense and others, scrapping all those
coal plants and, therefore, heading off crushing penalties for future
carbon emissions), they avert challenges about their environmental
performance, and they become greener, which is good for everyone.
But as Larry Berglund noted a few posts back, There are responsible NGOs and radical NGOs that can co-opt businesses goals.
NGOs are also businesses. They too should be issuing triple bottom line reports and provide evidence of their credibility.
Wouldnt businesses be wiser in the long run to paymaybe a
lotfor environmental advice from consultants whose interests are
contractually aligned with their clients, and who can demonstrate
a track-record of linking improved environmental performance
with organizational performance?
On its website, Environmental Defense

states We accept no payments from our
corporate partners. The environment is
our only client What company would in, say, reconfiguring its supply chain or overhauling its product strategy, bring
in a free consultant group that came right out and said Dont pay
us a penny; our real client is someone other than you
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Individual responsibility
Once we agree that sustainable development is an imperative

and no longer a matter of choice, the necessary conditions and
courses of action become apparent.
1. At a very basic level, why should we limit the discussion to
businesses and NGOs alone? Dont each one of us have a responsibility too? Is it not possible to make a beginning at the individual/
B V Krishnamurthy
First movers and laggards: make a plan
In a recent global survey conducted by BearingPoint regarding

green/sustainable supply chains, 83% of respondents indicated
that they have adopted environmental strategies in order to protect
brand image and to address environmental regulations. To borrow
terminology from the technology adoption life cycle, early adopters in green/sustainability are proactive, agile, and seek first-mover
competitive advantage and embrace working with NGOs, industry
consortiums and consumer peer groups to map out and identify
stakeholders and their green requirements within the company operations. Laggards are reactive and tend to not know where to start
with respect to how to identify a green strategy and define tactical
operational/supply chain responses.
In the meantime, you will continue to see companies impacted
by their ability to adopt and disclose green/sustainable performance from multiple stakeholders (both financial and insurance
institutions, NGOs, and consumer groups). It will be critical to
align green and operational performance through effective management dashboards in order to manage ongoing green performance
and mitigate risks associated with the negative financial results of
tarnished corporate image through poor environmental performance. With increasing costs of raw materials and energy, it will
drive companies to examine green initiatives, not from a marketing
standpoint, but as a business necessity. The initial steps companies
68
Brent Proud, M.Sc., Manager, BearingPoint

Discussion leader Judith Samuelson responds:
Where is the government?
edge that this ski company, known for its green-leaning policies,
has still failed to reduce carbon usage overall. He claims their most
important work falls in the realm of influencing policylike the
amicus brief they filed in the Massachusetts case (won) that will
force the EPA to regulate carbon. Not many compa
nies have weighed in on the big policy

issueslike on the need for a carbon tax vs. cap-and-trade
system, for example. (Although some of the most courageous, like

JP Morgan, have made it clear that cap-and-trade alone is insuffcient.) Will businesses gain sufficient experience through their
joint ventures with NGOs to see that the next frontier has to be
policy? To date, most action in Washington is limited to industry
and firm-specific protections. I think there is little doubt that the
big environmental issues require policy directiveswhether we are
talking about soil, air, water, fish, or biodiversity. Who will step in
to influence the playing field in a big way? What is businesss role?
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can take to develop green operational strategies will require them

to consider:
Define a green strategy
Determine if competitive differentiation can drive higher margins that are sustainable
If not sustainable, work with industry peers to define industry
standards relevant to suppliers who contribute components to
your product
Baseline where you are from a component environmental compliance perspective
Determine where you want to be
Define a plan to get there
Set up a management dashboard to continual monitor compliance
Publish your results to your stakeholders
During this journey, involving key stakeholders, consultancies,
and NGOs is a necessity that will help frame what the cost/benefit
equation is for your company. Sierra Club, World Wildlife Fund,
Greenpeace and others are actively involved in this process. One
element to consider is how companies factor in the goodwill costs
they will gain from marketing opportunities around their green
initiatives.
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Greetings from high atop Aspen, Colorado, where

the sun is shinning, the snow is piled high (most
snowfall in an eon) and where 300 environmentalists, business, and policy wonks are gathered for the
first ever Aspen Environment Fest. I just had lunch
with a charming, but depressing, forest specialist and researcher in
ecosystems, who worries aboutamong other thingsthe rapid
decline of the Aspen stands (trees, not tacos) in Colorado and elsewhere in the West. This lunch conversation and the recent posts
above have me thinking about government. Where is the government?
As B V Krishnamurthy posted, At the end of the day, it is time
we gave up the we vs. they syndrome; government vs. business;
business vs. NGOs; ordinary people vs. big business. We all share
the most precious resource we haveour planet. Either we work
together or sink together. The choice is entirely ours.
We focus on the role of business because industry is the source
of many environmental problems, and because it is business that
seems today to have the talent, resources, and increasingly, the motivation to act, but business vs. NGO (or even business + NGO)
without the moderating voice, and ear, of government may miss
the most important strategies: the best mix of technology and conservation, the right balance of consumer demands vs. public needs,
and the big picture strategy. Or is government as short-sighted as
business, with investments today that fall off the radar after the
next election?
One of the most provocative speakers here is the environment
advocate for the Aspen Ski Company, who is quick to acknowl-
judith samuelson, Discussion Leader
Check your guns at the door
As recent posts have noted, fundamental energy-environmental initiatives will require changes in public policychanges that
go beyond decisions by single corporations, in consultation with
stakeholders, to make green products, implement the spirit not just
the letter of existing formal rules, or take voluntary ethical actions
to protect the environment.
If we are in a new era of constructive discussions about such single company actions between corporations and their many stakeholders, we are just at the dawn of constructive processes between
business and advocacy groups on fundamental public policy. As I
mentioned in an earlier comment, when important social goods
are at issue, companies may choose to focus on legislation or regulation because it may be too expensive to go it alone (costs must be
fairly spread across industries or society) and because sporadic, voluntary action may not, ultimately, address the fundamental issue.
One part of a new, constructive process will involve companies
and advocacy groups finding ways to reach consensus on the basic
science and the basic assumptions that underlie so much public
policy in the energy/environment area. Second, each will have to
check their guns at the door if they wish to find a consensusto
discuss their real substantive policy positions rather repeating the
traditional practice of arguing about their political going-in positions so as to leave room to maneuver in the legislative or regulatory
process.
One example worth examining for future lessons is the United
States Climate Action Partnership, an alliance of manufacturers,
utilities, and environmental organizations (like the World Resources Institute and the Environmetnal Defense Fund) formed to
seek mandatory reductions in GHG emissions from major sectors
through a legislatively created cap-and-trade system.
But is all of this harmony a good thing?

By comfortably playing by the rules of the game, activists and
businesses alike may be overlooking the fact that the rules of the
69
game themselves need to be rewritten if we are to change the course

of the social and environmental crises that face us today and in the
future.
Several posts refer to the emergence of communicating and reportingopenly and honestlyabout social and environmental issues. Most economists would say that markets work best when full
information is available. Would businesses and their stakeholders
make different decisions if full information could be had? Would
this change the accepted roles and responsibilities of stakeholders
and lead to the dawn of a new era of stakeholdership?
Alyson Slater, Featured Contributor
Future leaders
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to consider another way of doing something or to try a new approach is like asking a horse to stop running on the track, where it
will most definitely get trampled by the rest.
What can emerging leaders do? They first need to understand
the terms manager and leader, and be able to clearly distinguish
each from the other. They then need to build a model that will enable the organization to have a leadership/management ratio that
maximizes opportunity while minimizing risk. Finally, they need
to build an organization that has a leadership component and to
reward it accordingly.
No one in corporate America ever says, Well, you took a risk
and failed, and were willing to let you take more. Beyond that,
and this is the scary part, they will likely point out areas where
people didnt succeed as well as expected, and will point to all those
missed opportunities that got them where they are. Damned if you
do, and damned if you dont.
So we continue running on the track, beating ourselves up for
not doing anything to move the company up a level, and wasting
time and resources on minimal achievements of the better-fastercheaper type, while ignoring those leadership opportunities that
are screaming in our face.
How do we fix this problem? Why not treat it the same way we
treat the countrys debt? Lets keep running, avoid
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The emerging leaders in corporate America are part of the slacker

generation. As such, they tend to devote more time to family and
personal needs, and are less likely to work the 70+ hours per week
that todays leaders put in.
On the plus side, these future leaders are both green- and technology-savvy, ready to embrace and fully exploit the greenology
being generated today. Theyre comfortable using technology and
have had environmental concerns drilled into their heads as far
back as they can remember.
On the negative side, if we assume theyll only put in 40 hours
during most weeks, these leaders will not put in the effort necesrisk, and leave it to the next generation
sary for driving a company to a new level. Theyll continue makto get the country out of this mess.
ing progress by figuring out ways to do things better, faster, and
Carolyn McKillop-Troiano
cheaper. To move to a whole new plane requires leadership and
dedication.
Response to Alyson Slater:
Will innovation die? Not likely. Ive been talking about the U.S.
Voluntary disclosure
market only. Move out of the U.S. and its a whole new ball game.
Alyson Slater asks a series of highly relevant questions about the
Will we be able to compete with countries like India and China? No.
changing stakeholder environment and shifting power play. No
In fact, we will likely swap positions and roles with them. Theyll be
one would disagree with her comment about the need for marthe ones inventing, and well be using the good old American knowkets to have full disclosure. Her organization, the Global Reporthow to make the inventions better, faster, and cheaper.
ing Initiative (GRI), has done valuable work in encouraging such
How did we get to the point where were actually trading places
transparency.
with these countries? We committed one
We at Context have been working with
of the biggest bungles of corporate Amercompanies (including Shell) for over a deica. Namely, we blurred the line between
cade, helping them in the reporting that
Resources
management and leadership.
Alyson promotes. The success of Shells
Today, many companies engage in
early reporting was largely driven by the
Capitalism at the Crossroads,
management activities, but proclaim these
reputation crisis that afflicted Shell in the
Second Edition
to be examples of leadership. They hold
90s.
Wharton School Publishing
the false assumption that everyone in the
While most of the largest companies
by Stuart L. Hart
organization can, and should be, a leader.
in Europe now accept the principle of
The definitions of leader and manager are
Alysons message, those in the U.S. (with
used interchangeably, posing enormous
some exceptions) do not see the need for
confusion for those coming up the ranks.
GRI-type disclosure.
The bottom line is that people are rewarded for the better, faster,
Two things might change this. First, a sense of business crisis
cheaper improvements. These efforts are typically based on some
brought on by climate change, which makes disclosure a competicalculated risks, which are very low. To move the organization to
tive issue and a must-do. Second, a greater sense of reality from
a new level requires much more risk, and theres no guarantee the
Alyson and her colleagues that business needs to be
payoff will be worth it. Managers are stuck, much
led gently into what it sees as the terrify
like horses with blinders on, running

around the company track. Asking them to pause
ing, tangled weeds of social and environ

mental disclosure.
70
No matter what Al Gore says, the first seems unlikely. The second will demand a much greater understanding by the good people
at the GRI about just how averse business is to voluntary disclosure,
and to tailor their diktats accordingly.
Peter T. Knight
A few ideas
Pay attention to consumers
It is a difficult question. Green stakeholders and NGOs have

been becoming more important. However, when it comes to carbon emissions, you can see that the old approach of ignoring the
green agenda is still followed by large corporations.
It is true that companies are paying more and more attention
to these issues. But it is also true that in developing countries the
approach is still very slow, whereas in developed ones the approach
seems not to have an impact on strategic business decisions.
There is, however, something new happening: Consumers are
interacting via the internet and blogs, spotting companies latest
green sins.
Few corporations pay attention, but they should: In the future, it
will be vital for the success of the launch of a product or a brand.
In other words, in the global world everybody has a say, and if he
is able to prove what he says, then he could really change the minds
of millions of consumers. And then the company that does not pay
attention could really have serious problems for the launch of its
products or even for its survival.
And the green issue is the issue for consumers nowadays.
Therefore companies will be better off paying attention to what
the civil society (not only the NGOs) say if they want to survive.
Do
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I have been interested in this topic for quite a whilelikely

initiated by the book Natural Capitalism (over 10 years ago) as it
forecast the greening of America as a major economic boon. Who
knew it would take this long? Funny, five years ago I had HP (my
former employer) ready to consider funding a rather unique idea
(not mine).
The idea was to use a tall ship (think Masters & Commanders)
as the icon for a traveling telecommunications center that sailed
port to port, and open discussions were initiated on topics that affect our planet. The first was global warming. HP was interested in
being the sole sponsor, to the tune of $29 million. I pulled the plug
on it as there were some issues that seemed to be unresolvable at
that time. Shame, the guy who thought of it was ahead of his time.
As a marketing consultant, I naturally follow trends and have translated several into reshaping global markets. This trend toward increased green stewardship is approaching a mainstream cusp (grass
roots and high level support), but it still needs help. I read an article
a couple of years agoThe 10 New Laws of Brandingthat I
strongly agree with. It speaks to Millennials and Boomers driving a
shift from homogenized statements that offend no one to companies everywhere standing for something of substance. Kind of like
the approach Newmans Own took many years ago. I kind of see a
spin-off of Consumer Reports where companies that do step up are
promoted as worthy. It should also offer help and options on how,
as I think many companies struggle with that.
I think when people surrender power to economic-minded pursuits (look at uranium mining as one example), we fail to realize
our own power. I am heavily vested in creating empowered online
communities and see that as one key enabling factor. Look at the
progress MoveOn.org has made, for example; of course, they too
have an agenda some agree with and some do not. So I realize these
are some seemingly random thoughts that I see as all connected.
A good friend of mine, Dr. Alex Pattakos (author of Prisoners of
Our Thoughts), talks of a major trend, whereas most people are
searching for meaning. I can relate to that on both a personal and
a professional level as so many companies have controlled dialogs,
have gone unaccountable and thus created a lack of trust between
themselves and consumers (heralding the death of intrusion marketing at long last). As a society we come dangerously close to being
superficial (if not already entrenched). I think that a backlash is
being formed, and a counterculture that I am proud to feel a part
of. Groups like this (you folks) are on the leading edge of positive
change. Keep the faith.
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Bill Van Eron, Chief Innovation Officer, Headwaters Marketing

www.hw2o.com
max buonomo
Im worried
RE:
the litany of unlikely bedfellows grows
And if you cant figure out who your stakeholders are
RE:
No! American citizens do not worry! This is not a recipe for
socialism. This is merely acceptance of the fact that in a rapidly
changing world
Dont worry?
Socialism corrects the basic flaw of capitalism. It sets human
society on a new path. The means of production, factories, mines,
and mills become the property of the people. They operate and produce only to fulfill human needs. They are not motivated by profit.
This is the foundation for the new set of priorities for new values...
What is innovated is a conflict of values.
Read Ecology: Can We Survive Under Capitalism? by Gus Hall,
1972
We must change all our valuesWhat we are talking about is
creating new forms of life on the basis of new valuesMikhail
Gorbachev
You bet Im worried!
nicker
How the necessary becomes the possible

It is terrific to see such a robust discussion of stakeholder engagement. Its been my world for a quarter-century, so I frankly relate to
almost all the comments.
But as a contrarian, let me challenge a bit.
Is industry the source of many environmental problems, as Judith states?
71
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This is a common misconception, in my view, and one that

proaches and partners. Informal processes are generally the most
blocks resolution of issues. I know that Judith did not mean it quite
effective way to start.
as it came out. But here are a few points Id like to make.
Overstate the caseas either sweetness-and-light or a capitula1. When you say industry is the source of the problem, you
tion. Engagement is not magicits simply a signal that people
pit industry against the rest of us, who are implicitly innocent.
want to understand one another, and the system that links them, so
In fact, there is no one institution or individual to fundamentally
that they can find any unseen opportunities to advance everyones
blameto say, They started itthey are the primary cause. The
goals at once.
economy is a systemall agents interact to create the demand and
See the case study at http://www.future500.org/documents/
supply of problems.
StanfordCaseStudyFuture5002006.pdf.
2. Thats more than a truismits a key insight. And it doesnt
Bill Shireman, President, Future 500
mean we all have to do our partthats not the point. The point
is that we, collectively, need to rise above our individual situations,
What is the definition of CSR?
and examine the system we are all a part of. What are its incentives
If we discuss a companys social responsibility reporting, we will
and disincentives? How do these affect our behavior? How can we
agree that a companys disclosure must be expressed in relation to
tweak these, so that our interests are better aligned?
accountability, not only its in finance performance but also its so3. By looking at the systemnot to find blame, but to learn
cial performance.
its trigger pointsa world of potential common ground opens up
The World Business Council for Sustainable Development in its
between industry, government, and consumersi.e., between all
publication, Making Good Business Sense (2002), defined soof us.
cial responsibility as the continuing commitment by business to
4. Example: We deplete oil because we dont charge its cost of
behave ethically and contribute to economic development while
creation, but only its cost of extraction. Thats like valuing your
improving the quality of life of the workforce and their families
life savings based on the cost of driving to the ATM to withdraw
as well as of the local community and society at large. (www.malthem. Of course, in this context, were golenbaker.net)
ing to waste petroleum. It would be insane,
The definition of Corporate Social
at the individual level, not to. Thats why
Responsibility has varied in different
Resources
even the most radical environmentalists
countries, for example, the association of
fly to conferences to espouse their views.
Corporate Social Responsibility in Ghana
The Executives Daily
It would be counterproductive not to. But,
mentions, CSR is about capacity buildGreen Briefing
its also insane, at the societal level, to do
ing for sustainable livelihoods. It respects
EnvironmentalLeader.com
this. The trick is: bringing these interests
cultural differences and finds the business
into alignment.
opportunities in building the skills of em5. So, why are environmentalists and
ployees, the community, and the governcorporations abandoning the idea of shifting taxes from jobs and
ment (www.mallenbaker.net).
income to carbonan economic trigger that could begin to shift
Whereas the association of Corporate Social Responsibility in
the whole economy away from petroleum addiction? I overstate
Filipina has a notion that CSR is about business giving back to
thisof course, many are advocating carbon taxes. But many are
society (www.mallenbaker.net).
too politically sophisticated to do so. They know its a politiAnd then CSR Europe (www.csreurope.com) has a notion that
cal impossibility, so they advance other good but insufficient subcompanies have two responsibility types, that is, first a commercial
stitutes such as cap-and-trade. Thats necessary, but not sufficient.
responsibility to run the business successfully, and second a social
Even if the political support is not there, we need to be very explicit
responsibility, that is the companys role in society. For example,
about what is neededand persistent, if gentle, in repeating it unCSR for a European company might mean participating in activitil it is a commonly understood mantra. That is how, eventually, the
ties for environmental continuity, paying attention to employees
necessary becomes the possible.
prosperity, running the business pursuant to existing ethics, and
6. The stakeholder engagement process is all the rage nowand
actively participating in the society where the company operates.
I know from experience, its impacts can be extraordinary. But there
A lot of irresponsible companies enthu
is great fear and misunderstanding of it, and that leads many to:
siastically gratify the investor at the ex
Avoid it, because even though it generally reduces conflict, the
pense of CSR and ethics in general.
blame for not engaging is not as easy to assign as the blame for
From the various definitions above, I conclude that the socially
engaging. Safe executives often leave their companies exposed, to
responsible company is a company who continuously tries to fulfill
avoid being the one blamed if they drive an engagement process
its obligations to all stakeholders fairly and proportionally.
that is later seen to backfire.
Edwin Mirfazli, Accounting Department,
Overengineer it, by creating formal bodies well before we unUniversity of Lampung, Indonesia
derstand what we are trying to achieve, who is going to help us
do so. That ties us into multiyear commitments to the wrong ap-
72
Should Managers
Have a Green
Hippocratic Oath?
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Featured from April 216
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Ethics
Do
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he once unassailable notion that corporations exist

sions of medicine and law. Professions such as these are, at least
solely to maximize their shareholders returns is crumbling.
in theory, characterized by an orientation to serving societyand
Without a doubt, the dramatic scale and scope of the chalthey have something the profession of management does not
lenges presented by climate change will require the next generation
havea normative code or oath that encourages leaders to consider
of business leaders to adopt a more socially oriented professional
the broader implications of their actions. Most professional codes,
identity. Recently, Bill Gates has called for a new creative capitalincluding the modern version of the ancient Hippocratic oath for
ism. Where once it was enough to simply deliver results to the
doctors, clearly articulate the higher aims and social purposes of
bottom line, Gates noted, the next generathe profession and the norms of conduct
tion of managers will be held responsible
that should govern members behavior in
for decisions that have effects far beyond
pursuing these purposes.
their corporations and the markets they
A management oath should be created
Rakesh
serve.
to encourage business leaders to be aware
Khurana
To prepare new managers for the chalof the broader implications of their actions,
is an associate
lenges that await them, dramatic changes
including those related to the environment.
professor of
in their education and training will be
Simply survey the history of management
business administration in the
necessary. Business school courses will
or business schools curricula, and you will
organizational
need to incorporate facts and decisionsee that the notion that corporations have
behavior area at Harvard Business School.
making frameworks that go beyond the
a responsibility to society is not a new idea,
conventional market logic that now domisimply a forgotten one.
Nitin
nates the MBA curriculum. Students will
Perhaps the frightening and complex
Nohria
need to learn how to incorporate environissue of climate change will serve as a wake
is the Richard P.
mental and social goals in decision makup call for managers and business educaChapman Profesing. They will also need to break away
tors, spurring them to create their own
sor of Business
from misleading and simplistic ideas that
code of conduct.
Administration
caricature managers as the hired hands of
Should managers be forced to adopt a
and senior
shareholders.
code to consider the effects of their actions
associate dean and director of faculty
development at Harvard Business School.
Management, in other words, will have
on the environment? What would such an
to become more like the learned profesoath look like?
73
YESMBAs should
take an oath
The Oath at Thunderbird

As a case in point, our experience at Thunderbird provides a
practical illustration of how such a
code can help drive change in attitudes and behaviors. In May 2006,
the Thunderbird board of trustees
formally endorsed the following
Professional Oath of Honor, which
has since become part of our academic rituals and curriculum:
As a Thunderbird and a global citizen, I promise:
I will strive to act with honesty
and integrity;
Thunderbird School of Global Management
Giuseppe Carella, MBA
candidate, Thunderbird School of Global

Management
Valerie Casey, global practice head,

IDEO; founder, The Designers Accord
Erez Eizenman, MBA candidate,

University of Torontos Rotman School of
Business
Rita M. Hudetz, student, Yale

School of Management
Cynthia Hung, MBA candidate,

Insead
Margaret Hurst, student,
University of Navarras IESE Business School
John Landry, Business
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I will respect the rights and dignity of all people;
ngel Cabrera, president,
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Rakesh Khurana and Nitin Nohria are right to call for a re-orientation of the management profession
rooted on the notion of service to
society. And their insight about the
value in establishing a professional
code of conduct to articulate the
higher aims of our profession is
right on target.
Featured
Contributors
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Should Managers Have a Green Hippocratic Oath? | Ethics
I will strive to create sustainable

prosperity worldwide;
I will oppose all forms of corruption and exploitation; and
No
I will take responsibility for my

actions.
As I hold true to these principles,

it is my hope that I may enjoy an
honorable reputation and peace
of conscience. This pledge I make
freely and upon my honor.
Do
The board resolution was the

culmination of a multistakeholder
collaborative process dating to
2004 that included faculty, alumni,
and students. A student-led team
started off working on a text developed by a group of young leaders
at the World Economic Forum and
gradually incorporated concepts
Development Editor, Harvard Business

Review
Rebekah P. Massengill, PhD

candidate, Princeton University
Gautam Narasimhan, MBA

candidate, Insead
Elizabeth Ortenburger,
student, University of Navarras IESE
Business School
Sandra Schmidt, MBA

candidate, Insead
Gabriel Shapiro, MBA candidate,

MIT Sloan School of Management
Rashmi Vittal, student, Insead

Elise West, MBA candidate,
University of Virginias Darden School of
Business
from universal codes and ideas from other

alumni and faculty.
A Hippocratic oath is not the only way
to articulate a professional service ideology, but our experience has proven that it
can be a powerful instrument. By publicly
declaring our commitment to a set of universal, core professional principles, and by
reiterating that commitment regularly in
our academic ceremonies, it has become
difficult for us to ignore our responsibility
as educators. The oath has shaped conversations inside and outside the classroom,
and it has molded the educational values
of our school in a profound way.
The underlying idea behind this project
is, as Khurana and Nohria point out, not
new. As early as 1959, an influential report
by Gordon and Howell argued that management should accept the responsibilities that accompany any true professional
disciplineto develop a scientific base of
knowledge through academic scholarship,
and to prepare individuals to serve society. Business schools have been effective
in their scientific endeavor, but unfortunately, they have for the most part ignored
the other requirement.
As educators, we can no longer pretend
to be exempt from conveying values to our
students. As Sumantra Ghoshal so powerfully argued, the theories that dominate
the business curriculum are imbued with
valuesonly, quite often, the wrong ones.
It is time to accept that businesses exist
to serve societyto bring about lasting
prosperityand that it is our shared responsibility to treat management as a true
and critical profession of our times.
The oath proposed by Global Leaders

for Tomorrow
This version of the Hippocratic oath
was proposed by a group of young
leadersthe Global Leaders for Tomorrowwho were gathered by the World
Economic Forum in 2003. This text is
longerbut also more explicit about the
commitments of the manager with respect
to different stakeholdersthan the Thunderbird oath.
A critique by Ron Alsop of the Wall
Street Journal at the time can be found
74
in the following link: http://www.collegejournal.com/mbacenter/

mbatrack/20030428-alsop.html.
Ron described this text as long and a bit flowery. As I re-read it,
I think we may have indeed overdone the closing statement when
we wrote it, but I still believe some poetry may help underscore the
higher aims of the management profession. Judge for yourself:
As a manager of a corporation, an adviser or an entrepreneur, I
pledge to fulfill, to the best of my ability and judgment, the following covenant:
I will safeguard the interests of the enterprises financial claimants and will strive to create endurable shareholder value.
need to be made, and shareholders need returns. Its not just an issue with environmental codes, its an issue with codes in general.
Take Google, for example: Here is a company that prides itself
on diversity, on people, on creativity, on nurtur[ing] an invigorating, positive environment by hiring talented, local people who share
our commitment to creating search perfection and want to have a
great time doing it, but we would hardly consider their agreements
with the Chinese government to follow these tenets. And in many
instances, the rebuttal becomes, Someones going to go into China
and make a fortune on this, why not us? And indeed, that is the
question. Its the Why not? If companies are not
going to be held accountable, how much

importance can the public actually be ex
pected to place on such proclamations?
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I will utilize natural resources in an efficient, sustainable way,

thus ensuring the rights of future generations to enjoy a clean
and resourceful planet.
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I will respect the rights and dignity of the individuals working

for the enterprise, as well as the people that may be affected by
its activities.
In meeting my commitments with my clients, suppliers, and allies, I will engage in honest and transparent transactions, respecting their rights and standing up to my promises.
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I will remember that I remain a member of society, and that, as

a manager, an adviser, or an entrepreneur, my actions may have
great impact on the well-being of others. I will ensure that the
operation of the enterprise contributes to the creation of wealth
and progress for society at large. I will assume the responsibility
for my acts in the execution of my duties and will respond to
society for them.
No
If I do not violate this oath, may I enjoy life and art and personal
success. May I be respected while I live and remembered with
affection thereafter. May I always act so as to preserve the finest
traditions of business and may I long experience the joy of helping improve the lives of my fellow human beings. This pledge I
make freely and upon my honor.
ngel Cabrera, Featured Contributor
NOThe problem is codes vs. reality
Do
The difficulty in answering a question like this is not so much

whether or not a code should be adopted but how managers would
actually be held accountable for adhering to the code. Today, were
already seeing a spread of environmental codes and promises, in addition to the promises of antidiscrimination and financial transparency and efficient corporate governance. But at the end of the day,
the issue of accountability and regulation come to the fore. Most
bulge-bracket firms have already launched green initiatives, started
carbon or climate indices and proclaimed their dedication to the
reduction of global emissions and environmental impact. But if we
look at their list of clients, if we look at their portfolio and their
investments, we find conflicts of interest. This is an eternal issue
of business because no matter how ideal and righteous our codes
sound, at the end of the day, the business needs to operate, sales
Cynthia Hung, Featured Contributor
NODont bankrupt yourself
Control Data Corporation launched a series of very expensive

public relations projects in the 1980s and 1990s to improve the
environment, employ the unemployable, provide automobiles for
ex-convicts and a handful of other do-gooder enterprises.
Control Data Corporation is no more. It bankrupted itself and
returned zero value to its shareholders and, most tragic of all, thousands of workers.
In retrospect, none of the projects CDC management launched
was based on much evidence other than goodwill and social engineering rules of thumb. A great deal of green rhetoric and almost
all of the global warming puffery are on shaky grounds to say the
least.
Wise corporations would invest in solid, scientific research before joining the green lemmings.
Bill
YES, BUTThe oath should be voluntary

Consideration of the notion that managers should be forced to
adopt a code to consider the effects of their actions on the environment is misleading. Also, calling for a green Hippocratic oath
based on environmental concerns alone is not sufficient to justify
the need to force managers to consider the impact of their actions
on the environment.
True, the environment is a very sensitive subject and that is why
we should consider it as a whole in order to get logical as well as
practical solutions. For example, for an important medical treatment, if you were asked to choose between two doctors, one who
willingly took the Hippocratic oath and another who was forced
to take it, who would you choose? I am sure you would choose
the former.
There is therefore a need to inculcate environmental concerns
and values through well-thought-out and planned change management strategies that will encourage managers to freely take up such
a code of conduct and therefore act genuinely.
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In substance, this is not a dog-eat-dog world (as some fund managers and investment bankers would like us to believe), but rather
a place where rules are needed to guarantee orderly access to these
resources by humanity today and, crucially, by those who will come
after us. Its in this sense that business does not act in a vacuum, and
in a world where resources are more and more scarce, its important
that business stays within the rules of the game. This will inevitably
mean that the rules of the game are not just coherent with the need
for a profit, but also with the need for a safer and cleaner world.
Increasingly so, stakeholders (if not the environment) expect this
from their managers.
Is an oath needed? Just as much as increasing profit is.
Giuseppe Carella, Featured Contributor
NOAn oath is like a dare
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Reality
Practically, let us agree that the environment is yet to become
one of the key drivers of an organizations existence. In most cases,
managers find themselves taking up positions in various types of
organizations aiming to either maximize profit or maximize share
value. All other goals, though important, are secondary; therefore,
we need to critically strategize how managers can increase consideration of more critical factors such as the environment.
Managers certainly do not take an oath to ensure profitability or
high value of shares, yet these are the main reason of the existence
of the organization. Furthermore, without profit or share value organizations cannot exist; therefore, we can not consider environmental issues. Managers should first take an oath to ensure they
maintain profitability of the organization they are managing before
taking the green Hippocratic oath.
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Strategy and Conclusion

Organizations are run by managers. The managers run the organizations to provide goods and services for customers. In the
process of providing the goods and services, the environment is
affected in more negative ways than positive. Organizations are increasingly being driven by customer need. If a customer does not
demand a commodity, supply of the commodity eventually secedes,
resulting in reduced environmental impact. The higher the customer demand, the higher the suppliers. This also translates into higher
environmental damage.
tC
The burden considering the environ

ment should therefore be shared be
tween us, the consumers, as well as the
managers. I propose that the oath be voluntary, but emphasis should be on the education of new managers, re-education of
the existing managers, and public sensitization.
Anthony Katusiime
YESBusiness is not in a vacuum
Do
No
The biggest issue here seems to be the inevitable conflict between

business practices centered on profitability (the name of the game)
and social responsibility (the rules of the game). In an article to
the New York Times Magazine of the 13th September 1970, Milton Friedman wrote that business had only one social responsibility
and that was to use its resources and engage in activities designed
to increase its profits so long as it stays within the rules of the
game.
Whilst at first read what seems striking is the emphasis on increasing profits, a second reading might set ones mind on a different course. And that is when the phrase so long as it stays within
the rules of the game is linked to the point about increasing profits.
April 1970 saw the birth of the modern environmental movement, but I doubt that Prof. Friedman was thinking of the environment when he wrote this article. I think, though, that it was clear
in his mind that business changes with its surroundings, with the
available resources, and ultimately with humanity and its ethical
dilemmas.
To draw parallels between the medical, law, and business professions, and thereby the applicability of a similar oath, is a difficult
task. First, there is no set standard for an MBA: medicine has the
boards, law school has the bar. What qualifies an MBA to practice
is their employability in the market, not some standard measure of
intellectual rigor. Second, in business, it is much easier to manipulate the environment in which we work. MDs and JDs have little
choice but to play by the rulesmedical discoveries take years
and a lawyer cannot fabricate a new lawand thus their time in
school is dedicated to learning protocol and procedure. Business
practitioners, on the other hand, are taught the virtue of disruptive innovation while case studies create legends out of companies
that changed the way the game was played through out-of-the-box
thinking.
Keeping in mind these cultural differences, it is necessary to understand how this oath would be applied: Would it be voluntary
or would it be legally binding? If it were a voluntary or non-legally
binding oath, I would argue it would actually go against the culture of business: If your competitor can undercut you legally in
some way, they will. A voluntary oath for MBAs could put those
who abided by it at a competitive disadvantage, and therefore, few
would abide by it.
A legally binding oath, that is, one that legally penalizes people
for disobeying, is also problematic. Casting aside the necessity for
more stringent regulations, problems arise due to the lack of environmental definitions. Drawing on language from the Geneva
Convention, what is respectful of the environment is highly dependent on science. In working on chemical policy issues, I have
witnessed that because the U.S. takes a weight-of-evidence approach to chemical issues, what is harmful to the environment
is highly debatable. Layer on top of that the investment made into
discrediting science when its economically inconvenient, and suddenly we are back to an issue of culture: Business virtue is embedded in finding ways to break out of or circumvent the status quo
rules for financial benefit.
In my opinion, fighting the competitive and innovative nature
of MBA culture is futile. Therefore, an oath is not feasible. The
original prompt on the oath topic suggests that business school
courses should teach frameworks that go beyond conventional
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the rate at which the icebergs on the poles are melting and know
that taking life on earth for granted would be mankinds costliest
mistake.
With every right comes a responsibility. The opportunity to
make money for an organization comes with the responsibility that
I would suggest that environmental and
society and environment remain untainted.
social concerns should not just be a goal,
Gut instinct decisions set apart the great managers from the
but a part of market logic. Incorporating these
things into market logic is something that most business schools are
ordinary ones. But no matter how well financially evaluated and
failing to teach properly. Again and again we see examples of poor
intentioned a decision or action is, it has to be evaluated for effects
business decisions made due to not takon two basic aspects:
ing into account the social and environ1. Is it enhancing shareholder value, afmental envelope in which the transaction
fecting society at large in a positive way?
was taking placethe Bechtel debacle in
2. Is it leaving the environment as is, if
Should Managers Have a
Bolivia comes to mind. Rather than just
not
better than before?
Green Hippocratic Oath?
talk about the environment and society as
For the answer to the second question
The Audience Answers
abstract goals, lets begin looking at how
to be a strong affirmative, it is very imthe business community can determine an
portant that it be a conscious decision that
agreeable metric to quantify environmenhas been ingrained into managers purtal damages and risks.
pose and conduct just like the shareholder
In sum, giving MBAs an oath is almost
value mantra.
like giving them a daremost will find a
A manager needs to abide by an oath
way to work around the oath if it means
No
Yes
that says:
they can gain an advantage by doing so.
16
17
I work with the best of intentions to inWhats more important is to change the
crease share holder value but not at the
business education so that it incorporates
cost of overall societal good and the enenvironmental and social risk factors into
vironment.
everyday quantitative analysis. To do so,
the business community must determine
I shall refrain from any harm to the enan acceptable metric for quantifying environment in both professional and pervironmental and social risk for these pursonal life. Under my purview, I shall not
poses. By giving everyone this tool for better environmental acencourage any action that shall has a negative consequence on
tion, you can change how the game is scored, rather than fight how
the environment.
the game is played.
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market logic that now dominates the MBA curriculum, so that

students incorporate the environment and society in their decision
making. I agree that changing business curriculum to incorporate evaluation of environmental and social goals is key. However,
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Rita M. Hudetz, Featured Contributor
YESSurvival trumps profit
Do
No
Managers need to increase shareholder value is the mantra that

you learn in business school and the entire curriculum revolves in
some form or the other around it in terms of strategy, marketing,
leadership, and so on and so forth.
Take a minute and question, Why exactly should managers strive
to increase shareholder value? And how does it affect society at large
and you in particular? Ponder It is obvious that society needs
moneymoney to have quality of lifein simple terms, to participate in the world just beyond satisfying core human needs of food,
clothing, shelter, and the other levels of Maslows heirarchy.
If a person has all the money he needed but cannot buy a cure
to save a loved one from skin cancer caused by the damage to
the ozone layer, how valuable is money? Of course society needs
money, but what we often forget is that society (mankind and the
plant and animal kingdom) needs a planet that is safe to live on.
Maslow, like the rest of us, took it for granted that life on Earth
would not be disruptedever (though it is addressed in the safety layer of the Maslow pyramid in an indirect way). We look at
In addition to not being involved in environmentally unhealthy

activities, I shall also not tolerate any environmentally unhealthy
actions by others. I shall try my level best to educate them about
the adverse effects so that the harm can be stopped in the bud.
It is very important that every manager not only understands

but also undertakes all duties with the quote, Once the last tree
is cut and the last river is poisoned, you will find that you cannot
eat your money.
Rashmi Vittal, Featured Contributor
YES, ANDAll employees should take the oath

Prof. Khurana and Prof. Nohria have indeed come out with an
excellent proposal; I believe that it is not enough for managers alone
take such an oath; every employee has to take the oath instead. I
cannot imagine a company being sustainable in the long run if high
ethical ideals are confined to the top alone; these ideals need to
percolate down to the last employee. Deviations to the code of conduct can take place at the operational level, too. Of course a deviation at the management level can cause the immediate death of the
organization (e.g. Enron); deviations at the operating level lead to
slow death or deterioration of the organization. I believe that in or-
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der to be sustainable in the long term, the whole organi

zation has to follow the code of conduct,
embracing ethical, social, and environmental imperatives.
L. Ramakrishnan
NOToo many codes already
Bruce Klafter
NOAre you joking?
I had to check my calendar. We have indeed passed April 1 and

tomfoolery cannot be the object of the good professors contribution.
Those who promote sustainability pro

duce many silly ideas. This one is worthy
of a Monty Python sketch.
tC
Business can only operate within the rules of the game. The rules
are set by politicians and supported by the prevailing social value
systems. The rules are complicated by globalization.
Getting your middle managers to take a green oath could be fun.
But the impossibility of compliance would only lead to the equivalent of a starving vegetarian locked in a meat factory.
It would be far more productive if managers were helped to understand the world better. This would lead to sensible decisions.
One of which would be to lobby politicians for frameworks that
are sustainable.
No
The only way an oath could have any meaning is if we were to

legally license and empower certain individuals in a legal structure
as business executives and use that structure to enforce ethics
and behavior based on the terms of the license as in attorneys and
doctorswhich then allows the prerogatives of authoritative decision-making.
By the way, who is writing this oath?
Will it be individuals with a vested interest in assigning blame to

any problem that may arise in the future, regardless of what was
known or possible in the present? The learned professions need
to be able to act in their authorized prerogatives without respect to
political pressures or temporal themes. The concept of professional
oaths seems to me to transcend popular pressures implied by this
article.
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I think the discussion overlooks the fact that most major corporations already have a surfeit of codes, credos, policies, trainings,
etc. While one could argue about how extensive or how explicit
those documents are in terms of addressing sustainability, they assuredly address ethics, compliance, fairness, and many other elements of a green oath. In our case we have a set of Standards of
Business Conduct, a sustainability policy, guiding principles, and
other relevant materials. The key as always is implementation, and
that is a function of individual motivation, corporate culture, and
many other factors. A green oath may lay more emphasis on the
subject, but it will likely be no more successful than any of the
other tools that are already being employed.
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Peter T. Knight
NOManagers obligation is to the law
Do
The issue is not whether or not to be green. Professionals who

take an oath are those with not only public responsibility, but also
those with public authority through a legally recognized structure.
Military officers, doctors, and public servants have oaths that bind
these individuals not only to their civic duty but also to justify
their reciprocal public prerogatives. A private corporation hires its
management to perform specified duties, but no matter how farreaching the impact of those duties, a manager is only the agent
of the business and is not empowered with public authority. This
reduces the managers obligation to that of obeying the law and
operating under ethical conditions that justify his/her job to
the operations stakeholders. The idea of a green oath is nothing
more than a feel-good proposition that has no basis in law or
authority.
Todd Furniss
YESLook at the Global Sourcing Council

This is a critical issue in todays marketplace and I applaud the
efforts of HBR Green and the Thunderbird program for making it
visibile. I believe the concept of an oath of honor should be promoted among all business programs and that it should be a comprehensive onei.e., going further than the environment alone.
The more detailed oath that resulted from the World Economic
Forum (2003) is very interesting as it extends social responsibilities
beyond the firms corporate perimeter to the people that may be
affected by its activities. This notion is one that is being pursued
by a nonprofit organization, the Global Sourcing Council, that is
focusing on the social and economic impacts of global outsourcing
(see the website at http://www.gscouncil.org).
An organization that is actively pursuing a policy of social responsibility toward its own employees and the environment should
also be extending that responsibility to any service providers with
which it works. It would appear hypocritical for an organization
to proclaim itself socially responsible and then not investigate the
practices of its own service providers, supply chain contributors,
etc.
The ultimate issue in this discussion is one of sustainability. How
can an organization conduct itself so that it is economically viable
without destroying the resources that it uses in pursuit of its economic success? Bringing together economic success with social responsibility toward human and environmental resources is the key.
It is important that we recognize the primary function of corporate management to safeguard the enterprises financial assets
and create shareholder value. However, there is no reason why that
function cannot be carried out in a socially responsible manner.
Christine Bullen
YES, BUTThe market will encourage

green initiatives
The fact that we are even discussing the notion of a management
oath that holds business leaders accountable for their companies
influence on the environment demonstrates how far weve come in
recent years. As Professors Khurana and Nohria point out, the notion that corporations should consider their obligations to society is
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No
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not a new idea; however, the recent media attention paid to issues
been evaluated on financial goals. To address success in terms of
of climate change and related environmental problems does present
social, equitable, environmental benefits would essentially mean
an auspicious opportunity to consider how future business leaders
imposition of an entirely new regulatory and evaluative framework.
are prepared to respond to these critical challenges.
Both cannot coexist currently, because old biases and familiarity
Perhaps managers should be forced to adopt a code of conduct
with working in profit-maximizing pathways will dominate.
along the lines discussed here, but at the same time we shouldnt be
To what extent are nonfinancial goals achieved in the nonprofit
too quick to dismiss the way that the market itself may work to enand NGO communities? I dont know the exact answer, but these
courage such actions on its own. Take Wal-Mart, for example. The
sectors benefit from distinct regulationnot unlike that of other
retail giant that formerly topped everyones list of environmental
professional fields. Governments endorsement of a new social busioffenders has recently launched an impressive array of green initianess framework might similarly have interesting consequences. For
tives designed to use its market power to
example, if a manager were to work within
encourage energy conservation at its stores
a company that demanded (and evaluated)
and environmentally friendly practices
maximum social and environmental benResources
among its suppliers. Even small efforts
efits and required no additional profit be(such as promoting the sale of compact
yond recouping spent investments (in this
From Higher Aims to
fluorescent lightbulbs) allow Wal-Mart to
case endowment-like donations), such
Hired Hands: The Social
promote green business by doing what it
goals might be readily achievable. ManagTransformation of American
does best: muscling suppliers to meet its
ers could either choose to work in such a
Business Schools and
the Unfulfilled Promise of
demands and using its massive market
company, or for a profit-maximizing one.
Management as a Profession
power to shape consumer behavior.
Ultimately measuring success in this
Princeton University Press
Of course, this is hardly an example of
way will inevitably lead to uncertainties.
by Rakesh Khurana
purely social-minded benevolence. WalEven though physicians are directed to
Mart stands to gain a great deal through
strive to help the patient, we cant often
such effortsnot only by reducing its
know if it was the lifestyle of high-cholesown bottom line (by using solar power at
terol foods, the fast-food industry for marselect stores or creating a more fuel-efficient trucking fleet, for exketing and distributing the food, or the patients genetic disposition
ample), but also by improving its tarnished public image through
to produce clogged arteries that is at fault and should be prevented.
these highly publicized initiatives. In cases such as these, shareholdSuch distinctions between proximate and ultimate causes to society
er interests and social responsibility need not be at oddsin fact,
will always cloud debate, but action to designate a framework in
the market may actually encourage green initiatives in the name
which a manager is explicitly told to maximize social/environmenof thrift itself. Rising energy costs may prompt grocers to take a
tal welfare could arguably leave society better off than before. After
closer look at food miles, for example, not for moral reasons but
all, even with the shortcomings in medicine, not the least of the
for economic ones.
benefits to humanity have been drastically increased life-spans and
Given their pervasive influence, we shouldnt let managers off
reduction in outbreaks of many complex diseases.
the hook for considering their corporations impact on society in
Leif Linden
all situations. But neither should we assume that environmental
well-being and economic profitability are always at odds. A fruitful
YES, BUTIt should be optional
conversation about a Hippocratic oath for managers should pay
While I strongly believe in sustainable business and disagree
particular attention to this common ground.
with some others that committing to sustainability would put
some MBAs at a competitive disadvantage to their peers, I think a
Rebekah P. Massengill, Featured Contributor
voluntary pledge is more effective. A self-selecting group of pledge
YES, BUTPeople will take a while to
takers builds a community of committed MBAs that can share readopt to new standards
sources and support each other, while a required pledge could creI agree that there is a cultural difference between the medical, leate resentment from those who do not believe in the sustainability
gal, and managerial professions. What is interesting is that in some
movement.
versions of the Hippocratic oath, there is effectively a call to help
I also see no reason that MBAs should have a pledge that only
the patient as well as respect the morals of the community. This
applies to them. MBAs take positions in many different functional
effective duality, I think, brings into question the relationship beareas in many different industries. Since there is little consistency
tween two managerial goalsthe client (investor) and the greater
across MBA graduate jobs, I think that a pledge is more effectively
social/environmental community.
offered on a university scale rather than just to an MBA program
I fully support the adoption of such an oath. However, protecwithin that university. An optional pledge that spans a university
tion of one goal (i.e. ensuring the financial interest of the investor/
creates a community of like-minded graduates from all disciplines.
shareholder) might necessarily exclude other, broader, aims. Added
What I have just described is what the Graduation Pledge Allion top of that is simply the length of time businesspeople have
ance has been disseminating to universities for years.
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The MIT effort is strong and growing and you might be interested to learn that the Harvard undergraduate classes of 2000 and
2001 took part in the pledge. The Graduation Pledge of Social and
Environmental Responsibility simply states:
I pledge to explore and take into account the social and environmental consequences of any job I consider and will try to
improve these aspects of any organizations for which I work.
less without the academic and personal framework. Conversely, if awareness and training are in place, an oath is likely to be
unnecessary.
This is not a process that happens overnight. The process is also
predicated on a hope that the changes necessary will happen before
environmental degradation reaches a point of no return. It would
be ideal if there was a magic bullet such as an oath that shortcuts
the process. Unfortunately, an oath for corporate managers is not
such a panacea.
Gautam Narasimhan, Featured Contributor
YESPowerful people must take the oath
Whosoever is empowered or required to take decisions that influence actions of consequential outcomes to society, or sections of
it, must take the suggested oath. Managers are certainly part of this
category of people.
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I think the pledge is simple and to the point. Students commit

to think hard about the company that they choose to join upon
graduation and vow to work to improve the social and environmental performance of that company. What is more valuable is that
the Pledge Alliance keeps in touch with members and creates a
network and community of all who have taken the pledge. Check
out their Facebook page.
What is most important are the other things mentioned in the
article. All students need to be provided with tools, resources, and
training on what sustainability is and what it means for a company
and an individual to operate in a sustainable manner. These items
must be incorporated in the curricula of all courses of study. Taking
a pledge without the tools or knowledge to live up to it is putting
the cart before the horse.
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Gabriel Shapiro, Featured Contributor
NOSuch an oath would be meaningless
No
tC
Compliance is likely to be at the same level as commitment to

Enrons company values, which stressed integrity and respect.
Instead, there has to be continuing pressure to develop an atmosphere where such an oath is unnecessary. Business practices will be
constrained by law, which is optimally a reflection of the prevailing
will of society. Laws that address the most pressing environmental problems are increasingly becoming promulgated. Compliance
with laws requires no oath and is part of the rules of the game.
This is not to say that business schools dont have a place in the
process. Corporate decisions have a large and growing influence
on the environment. As the training ground for corporate leaders,
business schools have a responsibility to equip students with the
mind-set and tools to make these decisions in a responsible manner.
Some graduates will make their mark not only in business, but also
in government.
Change starts with awareness, and MBA programs
must make a greater effort to integrate

environmental consciousness as part of
the B-school experience. These efforts should be
Do
both integrated into the academic curriculum and stress behavior

during school. Academically, the core curriculum should include
courses on natural resource conservation and market-based mechanisms to promote sustainability. There should also be an emphasis
on minimizing resource consumption during B-school.
The goal should be to graduate students who are both aware
of macro-environmental problems and also responsible environmental citizens in their private lives. One of the central tenets
of leadership is leading by example. The capstone could be an
oath during graduation, but such an oath would be meaning-
M.J. Arul
YESLook at the Designers Accord
Interesting and valuable discussion. Several points have come

up in the threadif they remain unresolved, it seems it would be
impossible to bring about meaningful and positive change in this
area (which, of course, is the primary driver for creating a code of
conduct).
Definition of Terms
At a basic level, there is confusion around terms. And for good
reasonthe fast uptake in interest around green issues has led to a
sort of semantic fugue.
I have seen some great progress made in this area by the creative
community, who has been proactively resetting the boundaries
around the term sustainability so that we can move the discussion
away from solely considering environmental issues to encompassing social justice too.
In addition to creating positive social and environmental impact,
sustainability is about driving valuethis is the triple bottom line:
measuring success by economic, environmental, and social effect.
Follow the truism: If you want to solve the big problems, then
make them business problems. Were trying to take sustainability
out of the media ghetto, to actually be a productive and important
vector in business decision making. The first step is creating a baseline around terms.
Code of Conduct and Guidelines
I founded a global grassroots movement called the Designers Accord. It is a coalition of designers, educators, researchers, engineers,
business consultants, and corporations, who are working together
to create positive environmental and social impact. There have
been a few significant design activism movements before, but nothing quite like this has ever taken placein the last three months,
we grew from 3,500 members in 21 countries to about 91,000 in
over 100 countries.
I attribute this to the fact that we have a code of conduct (modeled conceptually on the Hippocratic oath), and a set of guidelines,
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NOSustainability is just good business
Lawyers and doctors serve society through upholding the law

and healing people, but businesses serve society by producing
goods and services and ultimately creating shareholder value. The
oaths that lawyers and doctors take are central to the work that they
do every day; creating an environmental oath for businesspeople is
not only outside their core purpose, but is unnecessary. There is no
reason that a separate oath should be needed to invoke the kind
of strategic and long-term thinking that is required for business
leaders to make decisions that benefit society and the environment;
good decisions in this realm serve customers well and create true
value for shareholders.
Take climate change, for example. If a manager is
currently ignoring the issue and not ad

dressing how future legislation and/or
changing climate is going to impact his
or her business, it isnt an ethical ques
tion, its just bad business. Wasting water, energy,
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which give adopters a specific set of activities to fulfill the spirit of

the code of conduct. Weve had a new wave of corporate and educational adopters recently because they say the Designers Accord
provides tangibility to their current corporate social responsibility
documents. Everyone seems to be looking for some handle to access this seemingly intractable issue.
While our code of conduct will persist, we plan to adapt the
guidelines as our collective sophistication around the issues evolves.
For instance, we ask adopters to measure their carbon footprint.
The reason we started with that is because it would have been too
abstract and dense to have people measure their ethical footprint
(although that is where were going). Carbon measurement is inherently limitedyou could have a very low carbon footprint, but be
making very toxic products. What we are trying to do with this
guideline in particular is to start the conversation and bring forward a certain level of self-awareness. When you start to measure,
you see the complexities around the issue, and you become sensitized to possible creative solutions.
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Accountability and the Motivation to Self-Police

If youre saying something externallylike adopting a code of
conductthen you need to have an authentic internal story. There
is an inherent motivation for people to self-police, and a community to help support that (as evidenced in the post about the community on Facebook). However, while the barrier to entry for adopting a code of conduct should be low, accountability needs to be a
critical part of the equation. For the Designers Accord, we require
periodic submissions of evidence of adherence to the guidelines.
tC
Open the Dialogue

For this issue specifically, Im interested in the show your math
aspect. Companieseven those who feel they are too known to
have questionsshould be given permission to have a conversation
about their struggles with some of this. Sharing knowledge, methods, and practice for fulfilling the code is the way you can extend
your zone of influence beyond your traditional zone of control.
No
Valerie Casey, Featured Contributor
NOLet the market work
Do
The question is not whether managers should consider the effects

of their actions on the environment and society but rather, as others have alluded to in this discussion, how will this be enforced?
I believe that the market will be much more effective in regulating environmental considerations than a Hippocratic oath could
be. If the market believes that environmental considerations are an
essential input into the valuation of a corporation, organizations
would have to report on any activities that had an impact on the
environment and these reports would be audited no less closely
than financial statements. If our society truly believes that managers should be held accountable for the impact of their actions on
the environment, this will be reflected in market valuations and all
managers will surely take notice.
Erez Eizenman, Featured Contributor
or materials in a manufacturing process doesnt just cause environmental harm, it costs the company money. Taking full responsibility for the lifecycle of products, whether it is the bottles that
Coca-Cola puts its beverages in or the carpets that Interface sells,
it is not just closing the environmental loop, it is providing good
customer service. And what about cutting costs by buying from
suppliers with bad social or environmental practices? Just ask executives at Nestl or ADM how much value they lost after getting
dragged through the mud over child labor issues on their African
cocoa farms, or ask a Mattel executive just whos feeling the brunt
of the lead paint debacle with their made-in-China toys.
The business case is there. Making sustainable, socially responsible products is not only the right thing to do, it is the only way
to operate to create long-lasting value for shareholders. The authors
are correct in saying that the education of managers needs to shift;
the Sustainability Manager can no longer sit in a siphoned corner of
the company; environmental thinking and management will have
to reverberate throughout every department and each employee.
But the oath would make it seem that this shift is something other
than what it really is, and what it really isis good business.
Annie Barton
MBA/MS 2010, Erb Institute for Global Sustainable Enterprise,
University of Michigan
NOEducation of future leaders is how to

encourage change
There are two connected, but separate issues that have so far
been discussed in trying to answer the question of whether managers should have a green Hippocratic oath:
1) Should we encourage business leaders to be aware of the
broader implications of their actions, including those related to the
environment?
2) And, if the answer is yes, is a management oath the right
tool to do so?
I will address the second point first, as I personally think this
is an easier one to tackle. Lets assume that yes, we indeed need to
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encourage managers to think on a broader scale, is an oath the

member of BGI, a relatively new and innovative sustainable MBA
right tool? I almost wish I could answer the question with a yes. It
program, the issues around making business decisions that incorseems like a neat, easy, and convenient solution. But unfortunately,
porate social, environmental, and economic factors are integrated
the realist in me doubts its effectiveness. My doubts mirror those
in our courses. We do not take electives on social justice or envimentioned in several of the other threads: I fear that an oath will
ronmental business; we cover these topics as part of the core. As I
turn into a promise with merely symbolic meaning, accompanied
see it, instead of an oath, these topics must be integrated into the
neither by action nor by honest intention to act.
courses of the mainstream business schools. If they are topics that
What then, is the alternative to this admittedly nice gesture?
will be graded and deemed desirable by employers, students will
How can we create a global incentive system such that shareholderpay attention.
value maximization is not possible without the consideration of
Why do businesses exist? To provide goods and services to peostakeholder interests in generalranging from the employee to the
ple for the benefit of society. If the activities of business systematienvironment?
cally pollute our environment, subvert the democratic process, and
Which brings me to the firstand much more essentialissue:
create social unrest, how are they benefiting society?
Should we even bother to encourage business leaders to be aware of
I am certain that most businesspeople are interested in doing
the broader implications of their actions? Is it not the sole purpose
business responsibly, bringing their core values to what they do.
of a CEO (and of a companys management) to ensure the long-run
The next wave of managers will be charged with creating these busisustainable profitability of his or her company? I have read threads
nesses.
in this discussion arguing both sides.
Wayne Maceyka
I would like to propose an answer that does not treat the two isMBA Candidate2009, Bainbridge Graduate Institute
sues as mutually exclusive. Ultimately, ifas is my firm belieflonghttp://www.bgiedu.org
run profitability is not possible without broad stakeholder managehttp://www.renewacycle.com
ment (including consideration of environmental concerns), then it
is not an either/or question. (The examples provided by some of the
YESAn oath will make people think twice
other featured writers provide great examples to this point.) If this
I hope that most if not all MBA students can agree that someis in fact the case, then the answer to issue one becomes an easy yes
thing needs to happen in the area of environmental sustainability.
and the second issue becomes irrelevant. It becomes not a question
And as we live in a business world that is measured by the daily
of whether to consider broad implications, but rather the extent
stock price and three-month earning reports, it is very difficult to
to which the business incorporates sustainability into its business
take into account the long-term needs of the environment.
model. Sure, it will always be a question of trade-offs; however, an
The power of an oath can at least get people thinking. In conimaginary graph of sustainable actions (x
junction it can give NGO watch groups
axis) plotted against profits (y axis) will not
and others a leg to stand on when they
be a downward sloping line, but rather a
question the actions of businesses and
Resources
parabola (with vertex pointing upwards).
managers. I dont think there is a problem
Managers will thus, by definition, be
with that. While it is not enforced now,
Hill & Knowltons Corporate
forced to consider the implications of their
maybe we should move in that direction.
Reputation Watch
actions. Hence, what remains to be done,
It could become a unifying line in which
Do corporate social responsibility
is the (admittedly complex and challenga finger can be pointed, bad press or good
and green efforts influence MBA job
choice?
ing) task of educating managersand
press can be generated, and change can
future managersof the necessity of the
begin to happen.
triple bottom line for true long-run susWhile I do not see it as an all-encomtainability. Which brings us back to Propassing fix to our environmental problems,
fessors Khurana and Nohrias point of embedding these topics in
I see it as the beginning of change. And at least it does something:
the MBA curriculum: Being sustainable needs to become the norm.
It gets every new MBA, manager, and executive to at least stop and
And, while a case discussing the pros and cons of taking a green
repeat some words that they say they will follow, and at the very
Hippocratic oath might well make entertaining teaching material,
minimum they think about the environment and their impact for
in the world after the business school, hard facts, laws, public per20 seconds. Again, at the very least it is better than nothing, and at
ception, and an increased awareness of all involved decision makers
the most it is the beginning of change and hopefully a sustainable
will have more impact than an oath.
future.
Sandra Schmidt, Featured Contributor
Elizabeth Ortenburger, Featured Contributor
NOBusinesspeople bring their

core values to their jobs
NOProfessionalism promotes
conservativeness
As some of the other respondents have already commented, an

oath may easily become a symbolic gesture and nothing else. As a
Whether even a voluntary oath makes sense is one thing. What

about whether we even want executives to become more pro-
82
fessional? Professors Nohria and Khurana say we need professional management because business has become too complex
and interdependent, with society and the planet, to be managed without sophisticated analytical tools and a perspective oriented to serving the greater good. What about the downside to
professionalism?
It will likely promote conservatism, if not complacency, among
executives at a time when we need innovation as much as ever. Entrepreneurship is the buzzword of the day even in big companies,
yet professionals are rarely known as creative and daring.
Also, it may well reinforce faith in top-down leadership at a time
when we need more empowerment, not less. We should do more to
connect executives with knowledge workers, not drive them further
apart. Meanwhile we have tried-and-true
are spending a lot of money, time, and effort to comply with the
Sarbanes-Oxley Act.
When Microsoft, General Motors, Toyota, or IBM, to name
some of the big companies, decide to open a branch or plant in
some country like Mexico, Panama, China, or India, they are going to help thousands of families, giving them an opportunity to
live better than in the past. But when they decide to close a plant
or branch in these countries, they are hitting the body of a lot of
families.
The managers, directors, or leaders of the government or private
companies must remember that they are examples for their employees and also for students and families. They have a lot of influence with their actions, so a lot of people will do the things they
are doing. When my child asks me, How is
the future going to be?, I always answer

him, The world must be better today
than yesterday, my son, but at the end of
the day, it will be exactly as the leaders
of the world are drawing in their hands.
op
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methods of promoting corporate social

responsibility. Government regulation, nonprofit moni-
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tors, and the demands of enlightened and affluent consumers, have

enabled the United States and many other countries to effectively
address almost every serious environmental and social problem.
Wouldnt we be better off lobbying governments for carbon limits
than putting our energies into making management more professional?
John Landry, Featured Contributor
YESShareholders are only one stakeholder
No
tC
Isnt the fundamental assumption, upon which the need for a

Hippocratic oath is based, that the primary purpose of business is
no longer to just deliver shareholder value but, in fact, to do more?
If that is our primary question, lets address that.
Is there another purpose for business other than to deliver shareholder value?
I say yes.
Shareholders are simply one stakeholder whose need for an investment return is neither greater nor lessor than another engaged
stakeholder. Those engaged with business include employees, customers, suppliers, partners, management, local communities, the
larger world, etc. Why should investor needs be placed at the top
of some arbitrary hierarchy of needs?
Astute and responsible managers understand and are deeply
challenged by the need to weigh and balance the multiple and conflicting requirements of all these stakeholders in the performance
of providing a service or good to the marketplace. Lets stop assuming that profit and shareholder return trump everything. They are
simply one part of the equation.
Sandy Skees
Do
Managers are models to the people
All managers should help employees understand that any action

the business takes will have an impact on society.
For example, we can talk about the wrong steps Enron and
WorldCom took. When they did the things everybody knows
about today, the business world changed dramatically; a lot of companies not only in the United States but in a lot of countries, now
Finally I want to say that every manager has to apply these management principles:
1. Plan for the growth of your company and of the region where
you are doing business.
2. Hire, educate, and retain the people that have commitment,
skills, values, and social responsibility in order to make the environment one of the top priorities.
3. Support your employees in any topic that can take them to
the next level so they can realize the best of the human values they
have inside.
4. Listen to outsiders comments and suggestions; maybe there
are things you lack when your planning is not getting to the goal
zone.
Enrique Hernandez
NOGreen is a fad
I agree with Bill that the global warming fad has created a bunch
of green lemmings, as he calls them. These alarmists, like the authors of this article, assume that global warming is fact, and that the
Earth and its inhabitants are headed for extinction unless some sort
of governing body steps in to save the planet. The notion that managers should take a green Hippocratic oath is preposterous. Have
we forgotten the benefits we have reaped from capitalism? Why
socialize the marketplace by requiring managers to swear an oath
to be faithful to this flavor of the day. (Lets not forget that not so
many years ago, scientists were concerned that we were entering
another ice age.)
One thing seems to be missing in this discussion: personal responsibility.
It is the responsibility of each investor to ensure that his portfolio meets his personal values. If the investor values a companys
greenness over its ability to generate greenbacks, then his portfolio
should reflect that value. If it becomes apparent that the individual
investors who make up the market favor one value over another,
then our capitalist system will reward the companies with that
83
value and will punish those companies whose values are not in line
with the market, which, then, should cause the value systems of
businesses to migrate toward the values of the market.
We managers have much to worry about with the government
regulating our businesses, it should be the furthest thing from our
minds to muck up our already full and complex lives with self-imposed regulations like this ridiculous oath.
It should be incumbent upon each one of us to live with such
integrity that we can look ourselves in the mirror each and every
morning and know that the person staring back at us did everything yesterday in his/her power to do no unnecessary harm while
prospering as many of those within his/her sphere of influence as
possible, and will act in such a manner today that tomorrow mornings face-off will be as pleasant.
If we extend this principle of justice and equity, America should

have taken care of people affected in Hiroshima & Nagasaki. Did
it happen? No.
Bottom line: You cannot fight human greed and immorality
with oaths, policies, and procedures alone. You fight them at the
root by instilling the right value system. Make the human misery
thrust on societies the world overdue to human greed and corporate negligencea moral lesson.
Srinivas vedula
YESThe green oath could be a guideline
When I first read about the requirement of a green Hippocratic

oath, I must admit I thought it was going nowhere. Upon reflection, it has merit.
If an organization felt that an oath was important, then it could
use key performance indicators or other performance assessments
to monitor peoples commitment to it.
The oath in its simplicity is a framework or guideline. When
I worked in the forest industry a few decades ago, mill managers were rewarded by their ability to drive profits. This resulted in
safety problems going on unattendedone example of a myopic
approach to profitability. When the company introduced a balanced scorecard, operations changed. The scorecard required an improvement to safety, among other issues, but more importantly it
said that safety was mission critical. This also translated into lower
workers compensation rates, and reduced lost time due to injuries
and so on. And this did not detract from profitability.
Following this was the green movement from NGOs, so the
company added green performance assessments. That led to using
fewer toxic chemicals and did not affect profitability.
If leading organizations required an oath to be green, and linked
them to the individuals performance and bonus, based on merit
and results, then an oath would be the means and not the end.
Enron treated codes of ethics as the end and not the means. They
rewarded one factor of business onlythe profitability box on their
scorecard. Their business model was unsustainable.
op
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Clay
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NOAn oath wont matter; we need values
The authors have posed a question for which the answers lie in
human history, religion, politics, economics, philosophy, and professional ethics.
Oath or no oathit does not make a difference. The fundamental issues that need to be addressed arehuman greed and the lack
of a values-based education system.
As long as ethical issues are not addressed by the education systems from a very early age, commitment and responsibility will
never be seen in the educated class.
tC
I have seen illiterate individuals in trib

al communities in central India protect
ing their environment and promoting
sustainable living.
Do
No
The corporate social responsibility programs are at best small initiatives to enhance brand image. If they actually walk the talk and
not harm the environment and ecosystem where they operate, they
obviously enjoy an even better brand image.
The main purpose of any business venture is wealth creation. It
has its roots in leveraging available resources to create wealth. The
word resources refers both to living and to nonliving things. As
long as resources are carried out by a method wherein the same
resources are regenerated, it is termed sustainable development.
When leveraging is replaced by exploitation in order to satisfy
the selfish interests of a few individuals, the activity becomes immoral and unethical.
What we need are strong deterrents in international law that
ensure exploitation is stopped and corporations survive to serve the
exploited.
Let me substantiate my arguments with a case of corporate
negligencethe Bhopal Gas tragedy. If Union Carbide was made
to pay on an ongoing basis regular payments to families and survivors of the Bhopal Gas tragedy to meet their basic needs for a
certain period of timeuntil they become empowered to take care
of themselves economicallywe would have set a great precedent.
Instead, what we did was allow lawyers, governments run by greedy
politicians, and greedy business managers to take kickbacks and
ensure no social justice for the victims.
An oath could reiterate that business

is also responsible for changing behavior.
This could lead to behavior across an executives work/life which

affects far more people. An oath is evidence of a commitment.
Compliance is meeting minimal expectationsthere are no points
awarded for that. Commitment to an oath is similar to a commitment to other corporate philosophies such as hiring the best talent.
It can lead to a higher return to shareholders and better value for
stakeholders.
Larry Berglund, MBA
NOAll of society is responsible

I offer another question in response: Are managers not already
required to consider the effects of their actions on the environment
through the financial results of their companies? And if the financial results of the company do not also accurately represent the
cost of that companys operations on the worlds scarce resources,
then: Does the fault not lie with the prices that society assigns to
84
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public goods like air, water, and land rather than the managers
For example, imagine if two electric utility companies of equal
themselves?
value in terms of future profits are compared. One is constructIn her post, Rita Hudetz promotes the notion that the business
ing new (highly polluting) coal power plants whereas the other is
community must determine an acceptable metric for quantifying
investing in (cleaner) nuclear power. Savvy investors should anticienvironmental and social risk. I agree with Ms. Hudetz, but I also
pate that the cost of dirty coal-fired electricity plants will be much
believe that this metric already exists and it is prices. For centuries,
higher in the future than it is today. When the present value of
economists have understood that all resources are scarce and have
each of the two companies is calculated, the company investing
believed that prices are the best way to allocate scarce resources.
in coal power plants should be worth less to investors. Punishing
So why have prices suddenly fallen out of
managers with a lower stock price is surely
fashion in favor of measuring managers
more effective than having them sign an
by much less qualitative means like adherunenforceable oath.
Resources
ence to management oaths?
In summary, it is up to all of society,
The failure of prices, of course, comes
not just company managers, to protect
How Business Schools Lost
with public goods. When property
the worlds scarce resources. The best way
Their Way
rights for something are shared among
to protect our scarce resources is to assign
everyone, it becomes difficult to assign a
prices to consumption of public goods (air,
by Warren G. Bennis and
James OToole
price to consumption of the good. But the
water, land) by using taxes and regulation.
failure of prices has also been surmounted
When a companys consumption will ocin modern economies through the applicur in the future, or future prices are not
cation of taxes (for example, petrol taxes
well known, it is up to society to assign a
that increase prices in order to reduce consumption and therefore
higher discount rate to the companys future earnings in order to
carbon emissions) and outright prohibition (for example, outlawlower its present value. In this way, managers are held financially
ing disposal of dangerous chemicals into public water sources). So
accountable for decisions made today that will effect the future suswhy are taxes and laws now suddenly not enough to protect the
tainability of their own enterprises and the natural environment.
environment from the heavy hand of the modern, malevolent manMargaret Hurst, Featured Contributor
ager?
tC
In my opinion, the reason prices, taxes,

and prohibitions are no longer enough to
satiate environmentalists is because
there is so much uncertainty about the
true price of current consumption of re
sources in terms of tomorrows prices. The
Do
No
effects of actions like water pollution are immediate, but will releasing excess carbon into the air today really make life more difficult
and costly tomorrow? Even those who are certain climate change
exists are uncertain about when the most serious problems will
manifest themselves or whether new technologies that eliminate
the effects of climate change will be developed first. Should managers of companies be expected to have a better crystal ball than
everyone else?
Of course, managers are always expected to have a view into
the future, constantly providing company stakeholders with future
projections of profits. But these forecasts are always uncertain. So
to mitigate this uncertainty, company shareholders discount these
future earnings in order to determine the companys value today.
The riskier the stream of future earnings, the higher the discount
rate applied, thus lowering the companys current value.
My view is that if society wants to provide incentives for managers to make sustainable decisions for their own companies and
for society, the best way to do it is through the discount rate. If
a company engages in activities that degrade its own future competitiveness and the quality of the environment, then the discount
rate applied to its future earnings should be higher, thus making its
current value lower.
YESGood idea, needs more thought on

implementation
This is certainly a good way to enforce business ethics. However,

we should also talk about creating Business Councils like Medical
Councils to ensure oaths are taken not only as obligations but to
abide by their meaning as well.
The idea is definitely is great but it would need a wider acceptance as businesses may not follow any new world methodology or
process.
Also, enforcing it to the new bunch of managers will create a
difference of opinion with the experienced ones. This needs a little
more thought for implementation and real-time feasibility.
Looking forward to a revolution of some kind.
Gaurav Sharma
YESCommitment to green ethics is overdue

Voluntary programs such as ISO 14001 really havent done
much to curtail our collective environmental footprint, and initiatives such as the CDP, GRI and other next-generation voluntary
reporting programs really havent gotten a firm foothold on the
corporate psyche yeteven as more and more conferences extolling the virtues of green openness, such as ECO:nomics, become
the norm.
Having the environmental equivalent of doctors Hippocratic
oath is probably a good way to hold managers accountable, especially those who proclaim their organizations are certified to ISO
14001, and yet problems exist just below the surface. This is a global issue, and not just the U.S.s, but if we lead by example, perhaps
85
we could learn a lesson from how the 50 states look at e-waste. Not
all states view electroncs as hazardous, and in those states where
e-waste can be casually disposed, were setting up those who come
after us. There are other examples, but lets just mull over this one
first.
Gabe Crognale
YES, BUTAre oaths keeping doctors and

lawyers from acting immorally?
As the head of the organization that shared the 2007 Nobel

Peace Prize, Dr R K Pachauri observed recently: I switch off the
lights even if I have to go out for two minutes. It is this kind of
personal commitment and passion, rather than any oath or platitudes that can ensure a safe and sustainable development of this
fragile planet.
B V Krishnamurthy
NOWe need to show, not tell
Part of Khurana and Nohrias argument for a green Hippocratic

oath is that students are asking for it. If the majority of students
wanted an oath like this then I would expect the percentage of
Let us first consider the Hippocratic oath.
students involved in Net Impact and other social enterprise clubs
Recently, a doctor was arrested for allegedly removing the kidat the top programs to be high. In my program, only 20% of the
neys of over 300 poor and gullible people, to be used for trans650 or so students are in Net Impact at Darden. At HBS, the Social
plantation among rich recipients. This is said to be the tip of an
Enterprise Club boasts 300+ members but thats just 17% of the
iceberg. Cases of unnecessary surgeries being performed by highly
total enrollment. One of the reasons why these percentages are low
qualified surgeons have been well documented. In a country where
might be that the normative message of business school, which the
the female child is still looked down upon, any number of hospiprofessors mention, is that students couldnt really achieve societal
tals routinely scan women to determine the sex of the fetus and if
benefit through business. Khurana and Nohria say that many of
found to be a female, facilitate abortion. Both the sex determinathe students at the top business schools are getting an MBA so
tion and subsequent action are illegal but
that they can make a lot of money first
are still carried out. To be sure, for every
and then give back. They call this learn,
such unscrupulous doctor, there are scores
earn, give. If business schools are interResources
of dedicated professionals saving lives and/
ested in making sustainability a key part
or improving quality of life. The point to
of their programs, then working to change
The Designers Accord
be noted, however, is that the mere takthis norm will be an important part of the
A coalition of designers, educators,
ing of an oath by itself does not ensure
equation.
researchers, engineers, business
compliance. There have hardly been any
In my second year at Darden, I have
consultants, and corporations
working together to create positive
instances of physicians being brought to
seen sustainability come to the forefront
environmental and social impact.
book for acts of omission or commission.
on our grounds and that of other top programs. Recruiters are sharing their compaNow for the legal profession.
nies sustainability practices in briefings.
The 1984 riots following the assassinaSpeakers from companies are touting their
tion of the then Prime Minister of India claimed over 3,000 lives.
sustainability and corporate social responsibility efforts in hopes
Ample evidence is available that, in many cases, people were instithat they will convince the best and the brightest to come to their
gated by prominent political leaders to kill those belonging to a
organizations. Business schools are creating sustainability programs,
certain community. Twenty-four years later, no one has been conwhich include platforms like HBR Green and Dardens actions
victed. Who is to speak for the families of the victims? Similarly, the
toward sending zero waste to landfill and being carbon neutral,
1993 bomb blasts perpetrated by terrorist groups claimed hundreds
because the market forces have said, Right now, this is good busiof innocent lives. The judgment of the trial court was pronounced
ness.
only in 2007. The matter is now before the highest court of the
Sustainability is hot right now, but how
land. One can rest assured that many more years will pass by before
long will its popularity last? As a classmate of
anyone is judged. Who is to speak for the families of the innocent
mine said just the other day, The problem with sustainability is
victims? Such delays are now taken for granted. At least a significant
that it is not sustainable.
part of the delay can be attributed to the dilatory tactics employed
Therefore, I think the better question for all of us is: How can
by the legal profession. Given this track record, how relevant is the
business schools help to make sustainability more sustainable? How
oath taken by lawyers?
can we make sure this is not just a fad? As has already been menThis is not to imply that there is anything wrong with the oath
tioned many times in this thread, the best way for business schools
itself. And yet, one cannot help observing that living up to the ideto instill sustainability values in their students is through education.
als of any profession is largely a matter of personal choice. If one
Discussions of stakeholders, social responsibility, and sustainability
chooses to cross the border, who is to judge and what should be
should be integrated throughout all required curriculum and electhe punishment?
tives. Programs should practice what they preach and work toward
creating sustainable schools. And, even when sustainability is no
Do
No
tC
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While the idea of an oath or code for managers is commendable,

the implementation of the idea is open to question.
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86
longer being talked about in the Wall Street Journal and on CNN,
the business programs should continue with these sustainability actions.
When I was in high school, my English teachers always used to
tell me to show, not tell, because showing is much more powerful.
An oath is just telling, but actions show students that sustainability
is important.
Elise West, Featured Contributor
Managers only interest is money
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YesIts about time
I wish we lived in a world where an oath wasnt necessary, but

leaders have an obligation to us all. My goal with ReaLeadership
Alliance is to confront the problems we face today at the core with
socially-strategic leadership. I believe the way up is the only way
out. By up, I mean socially-strategic leadershipa bigger way of
thinking than our current thought-systems. Its not harder to think
this way; its actually more fun, more rewarding, and far more interesting. The time is now to save our future.
Will Marre
ReaLeadership Alliance
http://www.realeadership.com
op
yo
At this time when we have oil at $130 and the petroleum corporations presidents and managers want to invest in biofuels burning wheat, corn, and vegetables, creating a space where breathing
becomes awful. The statements they give of supply and demand do
not match the ethical oaths Khurana and Nohria propose. I think
they are only interested in money, like the lawyers.
Do
No
tC
Firozali A. Mulla, MBA, PhD

Dar-Es-Salaam, Tanzania
HBR Green: Six Critical Conversations about Business and the Environment
http://GreenConversation.hbr.org
Product number 12156
Copyright 2008 by Harvard Business School Publishing Corporation. All rights reserved. Unauthorized reproduction or transmission of any part
of this publication in any form or by any means, mechanical or electronic, is prohibited. The analyses and opinions presented in this report are
solely those of the authors.
87

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Dont Bother

with the Green

Featured from January 23February 5

In the spirit of going

Six Critical Conversations

nvironmental issues arent a fad, and

3 | Dont Bother with the

Discussion Leader: Steve Bishop

24 | You Are Only As Green

We launched HBR Green for two reasons. The first is

Discussion Leaders: Andrew J. Hoffman

Discussion Leader: Sir Stuart Rose

41 | Winners and Losers in

51 | Staying Green in a Tough

Weve presented the six discussions as a white paper

73 | Should Managers Have

Dont Bother with the Green Consumer

Staying Green in a Tough Economic Climate

You Are Only As Green As Your Supply Chain

Since green products dont magically appear on the shelves of a welcoming

Green Stakeholders: Pesky Activists or

Should Managers Have a Green

In the final conversation, Harvard Business School professors Rakesh Khurana

Featured from January 23February 5

on the face of it. A company wishing

holds several patents.

Harvard Business Review | The Green Conversation | Spring 2008

Dont Bother with the Green Consumer | marketing

The challenge of true sustainability

place. This approach is destined to fail, even with the greenest of

The challenge of true sustainability

Dont Bother with the Green Consumer | marketing

Gregory C. Unruh brings up a great point about

PJ Stafford, Green Irene LLC

Steve Bishop, Discussion Leader

To create successful green offerings means creating something

supply chain, yet fail to create offerings

There is no one green consumer

Target the heart of green consumer

Harvard Business Review | The Green Conversation | Spring 2008

fore it moved from fringe to mainstream. Not only is it the right

Steve Bishop puts itstrikes me as, at best, an inefficient way for

Gardiner Morse, Featured Contributor

Steve Bishop is right, but companies should

I dont think we can adequately discuss whether companies

Greenness is not important to consumers

Dont Bother with the Green Consumer | marketing

Is there evidence that, all things being equal (price, performance,

Steve Bishop says Dont Bother. Do You Agree or Disagree?

Some companies tout the

Its a waste of time

Green is context. Disregard

Companies that authentically

The core issue is

Companies need to focus

Harvard Business Review | The Green Conversation | Spring 2008

The corollary is that greener products need to be, quite simply,

I dont buy green paper products

Not to diminish the marketing spin on going green, but that

I would rather buy cheap and dirty coal power,

Dont Bother with the Green Consumer | marketing

Evidence backs up Steve Bishops idea

There is one very good reason for companies