A survey of more than 500 executives said sustainability can positively impact their business and help achieve strategic goals (Fox, 2008). For example, from 2005-2009, HSBC’s reduction in energy and water consumption has resulted in an average annual savings of more than $11 million across the group (Flinders, 2009) 64% of companies surveyed, claimed an improved company image was a strong force for going “green” (Watson, 2008). Ford Motor Co, was one of the failing three automakers in Detroit which built fuel inefficient and high carbon emission cars. Ford announced in July 2006, that it had sold 239,989 vehicles over the month, which was a 34% drop from the same month last year because of high fuel costs (Litterick, 2006). Ford then created the EcoBoost engine in 2007 which promised better mileage and a 15% decrease in carbon emissions. Since then Ford’s hybrid vehicle sales were up 67% in 2009 while the overall industry hit an 11% slump (Weinstein, 2009). Ford’s “green” car initiatives are winning them many accolades, i.e. Green Choice Award by Natural Health Magazine and Ford Europe was awarded the 2009 Green Supply Chain award for reducing carbon footprint of its vehicle transportation operations. In the SHRM Green Workplace survey, 61% of respondents whose employers participated in the “green” movement said they were “very likely” or “likely” to stay at the organization because of environmentally responsible programs McDonald’s Corp. saved 3,200 tons of paper and cardboard in 1999 eliminating clamshell sandwich containers and figuring out a way to replace them with single-layer flexible sandwich wraps. This move allowed them to take steps towards reducing ozone depletion
It is important a company recognizes what green means to their business. If you are a service company, being green might mean re-examining the way you do business rather than changing the service you provide. If a company decides to make a green product, they will need to address not only costs and marketing but also credibility.
Lean Green- Example, Coca-Cola Co. has invested heavily on recycling programs; however, they have chosen not to market its efforts to the overall brand because they have a wide target market and brand breadth Shaded Green- These companies see green as an opportunity to develop innovative needs-satisfying products and technologies that result in a competitive advantage. Environmental benefits are promoted as a secondary factor. Fed Ex for example is replacing existing aircrafts with more than 90 new planes that are 36% more fuel efficient than the old fleet requiring less fill-ups leading to quicker delivery times. Extreme Green- 3M has a 32 year history of building its green identity. 3M’s manufacturing plants have scaled down a wastewater treatment operation by half, simply by running cooling water through its factories repeatedly instead of discharging it after a single use. 3M has defined its vision as a commitment “ to actively contribute to sustainable development through environmental protection, social responsibility and economic progress” Being able to answer questions from the previous slide and be placed in one of the three categories, companies can begin approaching a “green” strategy from either an internal and/or external standpoint.
PROS: A 2005 U.S. Dept. of Energy study indicated A September research study by Enterprise Management Associates discovered desktop systems are left on when not in use during the evenings and weekends 43% of the time CONS:
Also known as the EPA “Superfund” holds companies accountable for solid and liquid waste disposal- sometimes decades after the disposal occurred. In the case of, Kalik vs Allis Chalmers Corp, the federal courts found the manufacturers could be held liable for the pollution their products emitted even after those products were scrapped. Ben Kalik sued the manufacturer under CERCLA because the manufacturer did not warn recyclers of the pollution problem. Ben Kalik operated a scrap metal yard and bought scrap electrical transformers that had been manufactured by Allis Chalmers and other firms. But deadly PCBs were found in the oil in these transformers, and when Kalik was required by his state to clean up the subsequent pollution, he sued the manufacturers under CERCLA. Because the manufacturers had not fulfilled their duty to warn recyclers of the pollution problem, they were held liable for part of the cleanup costs. The Executive Order of 12780, issued in 1991, used the buying power fo the U.S. gov. to coerce suppliers into “Greener” behavior. The order requires all federal agencies to “buy products made from recycled material and to encourage suppliers to participate in residue recovery programs”, thereby forcing gov suppliers to tend to the long-term environmental effects of both inputs and end-products (Sharfman, Ellington, Meo, 1997) Restriction of Hazardous Substances issued in March ’07. This regulation is designed to reduce the use of toxic and hazardous substances in electronic and electric products and eventually exporters will be prohibited from shipping any items that contain lead, mercury, cadmium, etc. That this means to companies that already export to China or have plans to, is they must re-engineer their whole supply chain to meet these regulations or they will face the financial burden of non-compliance.
Wal-Mart Stores Inc. requires its suppliers to respond to questions about their packaging, providing such details as the ratio of product to package and the amount of recycled content used in the packaging. Wal-Mart assigns the suppliers a score based on their answers. The company will use this data to reduce the amount of packaging it uses by 5% by 2013. As of February 1, 2008, Wal-mart will begin using the packaging scorecard to measure and recognize its entire supply chain based upon each company’s ability to use less packaging, utilize more effective materials in packaging, and source these materials more efficiently relative to other suppliers. Wal-Mart’s strategy of reducing packaging and conserve natural resources will save 667,000 metric tons of carbon dioxide from entering the atmosphere, which is equivalent to removing 213,00 trucks from the nation’s highways annually, saving 323,800 tons of coal and 66.7 million gallons of diesel fuel. About $10.98 billion is expected in savings from a 5% reduction in 10% of the global packaging industry (Terreri, 2008). Create innovative marketing to attract consumers’ attention. A 2008 survey, of 6,000 global consumers, conducted by public relations firm Edelman, found that 87% believed it was their “duty” to contribute to a better environment and even in a recession, 55% would pay more for a brand if it supported a cause in which they believed in. In turn, retailers and manufactures are demanding greener products and supply chains. Depending if a company is defined as, “lean green”, “shaded green,” or “extreme green” will also decide how they should approach a marketing strategy. Toyota, for example, created the Prius with the environment in mind but what they realized was their consumers were more concerned with rising fuel prices so Toyota marketed the Prius as a fuel-efficient vehicle. Marketing strategies should be structured and communicated in ways, which can bolster corporate “green” credibility. For example, a “Life Cycle Assessment” commissioned by Procter and Gamble found that 80%-85% of the energy used to wash clothes comes from heating the water. P&G calculated the U.S. consumers could therefore save $63 per year by washing in cold water rather than warm. So , they created a brand called Tide Coldwater, which they positioned the product as a way to save on energy bills. Marketing efforts first reassured consumers for the products efficacy. Then, on a special website designed to empower consumers, visitors could calculate the amount of energy they could save. Tide Coldwater generated $2 billion in sales in the first year.
PROS: A study done on the performance of 243 firms over two year period (1991-1992) found a strong link between high levels of environmental performance and organizational profitability, as measured by return on assets. In the study, firms with the highest levels of environmental performance demonstrated strong support for environmental protection and undertook first class initiatives in environmental matters; these firms had built a reputation of going above and beyond their competitors in pollution control and/or hazardous waste reduction. In return, these corporations were rewarded for their environmental performance with bottom-line profitability gains. For example, the hybrid gas electric Prius ha been a blockbuster seller for Toyota. With a waiting list of six months, this new kind of car has helped the company “own” the brand image of innovation and environmental sensitivity, helping Toyota in 2008 take the crown as the world’s biggest car manufacturer.
It is important for companies to set “green” goals for their organization and make sure they hit those targets so that they stay focused on their strategy as well as build their credibility as a “green” company. For example, Cadbury Schweppes launched its “Purple goes Green” initiative where they have specifically laid out their “green” targets on their website. Cadbury Schweppes has set targets such as, a 50% reduction of net absolute carbon emissions by 2020 with a minimum of 30% from in-company actions, 10% reduction in packaging used per ton of product and 25% in the more highly packaged seasonal and gifting items. Cadbury has already started making headway with the goals, for example their new Eco Easter Eggs use 75% less plastic and 65% less cardboard. Overall they saved 202 tons of plastic.
Creating A Green Company’S Strategy(2)
Creating a Green Company’s Strategy Jerry John MBA 8900
What does “Green” mean? <ul><li>Adopting practices that reduce your overall impact on the environment. These may include reducing your energy usage, recycling, and/or designing, remodeling infrastructure and processes that are more energy efficient. (Hall, 2009) </li></ul>
Why go “Green”? <ul><li>Improve company’s brand image </li></ul><ul><li>Positive effect on employee hire/retention rates </li></ul><ul><li>Devise more effective production processes/products that can reduce waste or the need for more raw materials </li></ul>
How to choose the right “Green” strategy <ul><li>To determine the right strategy, companies need to answer these questions: </li></ul><ul><ul><li>In regards to consumers, </li></ul></ul><ul><ul><ul><li>How substantial is the green consumer segment for the company? Can the company increase revenues by improving on perceived greenness? </li></ul></ul></ul><ul><ul><li>In regards to processes, </li></ul></ul><ul><ul><ul><li>Can the brand or company be differentiated on the green dimension? Does the company have the resources, an understanding of what it means to be green in its industry and the internal commitment at the highest management levels to be green? </li></ul></ul></ul>
How to choose the right “Green” strategy <ul><li>A classification system can aid companies to choose a green strategy (Ginsberg, Bloom, 2004): </li></ul><ul><ul><li>Lean Green- Have a green strategy but not focused on publicizing/marketing their green initiatives </li></ul></ul><ul><ul><li>Shaded Green- Invest in long-term, system wide, green processes which require substantial financial and non-financial commitment </li></ul></ul><ul><ul><li>Extreme Green- Environmental issues are fully integrated into the business and product life-cycles </li></ul></ul>
Internal “Green” Strategy <ul><li>Companies that want to go “green” but can’t endure the costs of changing their products and whole supply chain </li></ul><ul><li>Top internal “green” practices (Watson, 2008): </li></ul><ul><ul><li>Paper recycling (79%) </li></ul></ul><ul><ul><li>Refurbish and recycle old equipment (66%) </li></ul></ul><ul><ul><li>Consolidate servers (62%) </li></ul></ul><ul><ul><li>Server Virtualization (56%) </li></ul></ul><ul><ul><li>Light-out policies (52%) </li></ul></ul><ul><ul><li>Replacing old equipment with more energy efficient equipment (50%) </li></ul></ul>
Internal “Green” Strategy <ul><li>Pros </li></ul><ul><ul><li>Switching office light bulbs to LED lighting could cut electricity costs by $100 billion over the next 20 years (Pierce, 2006) </li></ul></ul><ul><ul><li>UPS re-routed trucks to avoid left turns (which keep trucks idle, and waste fuel) which reduced routes by 28 million miles (Winston, 2008) </li></ul></ul><ul><ul><li>By turning off computers, companies could save about $150 per system per year (Sturdevant, 2008) </li></ul></ul><ul><ul><li>USEC, reduced power consumption by 40% running their servers on an energy-efficient virtualized environment (Greengard, 2009) </li></ul></ul><ul><li>Cons </li></ul><ul><ul><li>Not a differentiation strategy since a lot of companies are implementing an internal “green” strategy </li></ul></ul><ul><ul><li>Regulations in place are “forcing” companies to look beyond an internal “green” strategy </li></ul></ul>
Examples of “Green” Regulations <ul><li>The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980 </li></ul><ul><ul><li>Kalik et. Al. v. Allis Chalmers Corp. et al. </li></ul></ul><ul><li>The Executive Order 12780 </li></ul><ul><li>China’s enactment of the Restriction of Hazardous Substances </li></ul>
External “Green” Strategy <ul><li>Strategy that analyzes the whole value-chain, from suppliers to end product and move beyond complying with regulations and just reducing their energy use (Kauffeld, Malhotra, Higgins, 2009) </li></ul><ul><li>Companies must examine manufacturing processes and convince suppliers to do the same </li></ul><ul><li>Create innovative marketing </li></ul><ul><li>Involve stakeholders </li></ul>
External “Green” Strategy <ul><li>Pros: </li></ul><ul><ul><li>Strong link between environmental performance and organizational profitability </li></ul></ul><ul><ul><li>Increase margins, market share and Differentiation </li></ul></ul><ul><li>Cons: </li></ul><ul><ul><li>Expensive </li></ul></ul>
Going forward with “Green” <ul><li>Set “Green” goals and be able to track their progress </li></ul>
References <ul><li>Ginsberg, Jill M. and Bloom, Paul N. 2004. Choosing the right Green Marketing Strategy. MIT Sloan Management Review , 46(1): 79-84. </li></ul><ul><li>Greengard, Samuel. 2009. USEC puts Energy into Virtualization. Baseline , (95): 38-39 </li></ul><ul><li>Hall, Mitchell. 2009. Green Real Estate Glossary. Active Rain . http://activerain.com/blogsview/931587/Green-Real-Estate-Glossary </li></ul><ul><li>Kauffeld, Rich, Malholtra, Abhishek, and Higgins, Susan. 2009. Green is a Strategy. Strategy- </li></ul><ul><li>Business.com , December 21. http://www.strategy-business.com/article/00013?gko=e5d36 </li></ul><ul><li>Pierce, Alan. 2006. Saving Energy one Lightbulb at a Time. Tech Directions , 65 (9): 11. </li></ul><ul><li>Sturdevant, Cameron. 2008. How Green IT Measure Up. eWeek , 25 (31): 27-39. </li></ul><ul><li>Watson, Brian P. 2008. Are Businesses getting Greener? CIO Insight , 96: 31-37. </li></ul><ul><li>Winston, Andrew. 2008. Green to Gold. Retail Merchandiser , 48 (5):15-17. </li></ul>