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Published: December 21, 2009

 
 

Green Is a Strategy

A Deeper Shade of Green

In companies adopting green strategies today, the state to aspire to might be called differentiated green. This phrase describes companies that have moved beyond complying with regulations, reducing their energy use, or marketing ecologically safe products. Such companies make pro-environment policies the cornerstone of their business and a defining corporate strength. Companies that have embraced this approach pursue green strategies throughout their operations and opportunistically use them to enhance performance. For example, Kaiser Permanente is building new hospitals with rubber flooring (instead of vinyl) and PVC-free carpeting, thus promoting health-care facilities that are actually healthy. The company expects to obtain long-term paybacks from a healthier patient population and increased market share.

The transition to differentiated green is gradual. Typically, companies begin by lowering their costs and reducing their negative environmental impact with nascent green programs, thus gaining internal and external credibility and beginning to build the capabilities required to drive green business at the highest level. To adopt a differentiated green approach, organizations must take five steps.

1. Elevate sustainability to a core business strategy. Green awareness must be a cultural trait throughout the organization, always on the agenda of the senior leadership team. To the highest degree possible, the company’s products or services should be marketed as environmentally friendly. Often this means making public statements that make the company accountable. For example, computer maker Dell Inc. has announced that it is committed to becoming “the greenest technology company on the planet.”

2. Embed green principles in innovation efforts. Green initiatives require fresh ways of looking at problems. For instance, when designers at Nike Inc. first tried to manufacture shoes in an environmentally safe way, they generally failed because they held on to traditional materials and specifications. Nike overcame this roadblock by developing a series of product engineering concepts it called “considered design” principles. These aim to reduce environmental impact by eliminating waste, using environmentally sustainable materials, and eliminating toxins in manufacturing processes and the shoes themselves. Nike plans to apply considered design standards to all its products by 2020 and estimates that doing so will reduce waste in its supply chain by 17 percent and increase its use of sustainable materials by 20 percent.

3. View the entire product life cycle through a green lens. In its ultimate form, differentiated green seeks a “cradle-to-cradle” life cycle, in which products or their components can be used again and again with zero waste. (The phrase comes from the book Cradle to Cradle: Remaking the Way We Make Things, by William McDonough and Michael Braungart, published in 2002 by North Point Press.) Dell has launched a program called Design for the Environment that seeks to minimize the company’s deleterious impact on the environment by controlling raw material acquisition, manufacturing processes, and distribution programs while linking green policies with consumer use and disposal. This framework encourages Dell’s product designers to consider the full product life cycle, and it provides them with a platform for collaborating with suppliers, supply chain experts, and external recycling experts and other downstream partners to help them fully understand the environmental implications of their design decisions.

4. Consider green principles in making major decisions. Business decisions have always involved trade-offs, but traditionally, green considerations, such as carbon emissions, the use of renewable energy sources and recycled materials, energy efficiency, and material yields, have not been given proper weight against risk, cost, growth, service, and quality. Differentiated green companies not only continually take these factors into account but are also willing to undertake green initiatives that may add incremental costs to the business and have long payback periods. PepsiCo Inc. has adopted sustainability as a criterion in determining capital expenditures and tracking expenses. All funding requests of more than $5 million must include a review of environmental concerns and green opportunities.

 
 
 
 
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