With issues like global warming, sustainability, small industrial footprint, industrial ecology, and carbon calculus swirling in the press and the minds of many, there is increased attention on how organizations do or don’t incorporate environmental thinking into their business strategy. There have been numerous articles in the Harvard Business Review (most recently a special report titled “Climate Business-Business Climate”) and other business journals. The Wall Street Journal has been sponsoring a prominent conference titled “ECO:NOMICS, Creating Environmental Capital.”
A recent book by Dan Esty at Yale University, titled Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, takes these issues to a new level. As a thought-leader in environmental policy and management, Esty has done an excellent job identifying and researching companies who have integrated environmental thinking into to their overall business strategy. Extensive research was conducted of companies that have strong EHS records and ways EHS-related functions have influenced business strategy. The findings of this work yields a valuable set of characteristics that others can use to both strengthen their EHS function as well as use it to influence overall business strategy.
Green to Gold introduces numerous important concepts that are not new in the organizational science arena, but relatively new in the EHS organizational management arena. One of the central distinctions is developing a new way of thinking about EHS management, Esty calls this the Eco-Advantage Mindset. Organization’s that have embraced this new thinking report higher revenues, lower operating costs, lower lending rates, and increased brand-trust and credibility. Some common qualities in organization’s that have done this are: top executive support; beyond compliance thinking; and looking from the whole, from a systems perspective.
The Eco-Advantage Profile
Esty suggests that there is no single profile on how to develop and strengthen the interface between environmental thinking and business strategy; however there are patterns. Esty correctly observes that each organization needs to find the language and organizational structures that work with its own culture. Some of the general attributes he identifies are: beyond compliance thinking/acting; cutting waste; operating efficiently; integrating the environmental thinking into all aspects of their operations.
Porter’s Competitive Advantage Model
In making his Green to Gold case, Esty examined Michael Porter’s Competitive Advantage model. Porter’s model published in 1980, has been a cornerstone in the world of business strategy. Through this lens, Esty examined how organizations manage their threats, such as costs and risks, as well as how they manage their positives such as revenues and intangible value when environmental thinking is elevated at the level of being a driver in competitive advantage. This examination looks how upstream costs and risks, and down stream revenues and intangibles are impacted. Costs and risks are impacted through:
- Improved resource productivity
- Reduced expense, cut EHS costs and lower regulatory burden
- Focus on value chain, lower costs upstream and downstream
- Risk management and reduction of overall EHS risk.
Revenues and intangibles are impacted through:
- Developing products that meet customer EHS expectations
- Marketing that promote EHS qualities
- Creating new market dimensions that promote innovation and breakthrough products
- Internal intangibles of strong employee confidence, engagement and morale
- External intangibles of reputation and trusted brands.
Tool-Kit
Green to Gold’s research, layered on top of Porter’s competitive advantage model, led Esty to prepare a tool kit that organization’s can use to gain what he calls an Eco-Advantage. The four components of the tool kit are:
- Eco-advantage mindset
- Eco-tracking
- Culture
- Redesign
The Eco-Advantage journey starts with the right mindset and focus on driving EHS thinking deep into organizational strategy. To express the mindset, tools are needed that include culture, structures, and tracking. With the Eco-Advantage Mindset at its core, culture, systems, and tracking tools provide the basis for meaningful action and successful execution of the business strategies.
Mindset
The way we think about things impacts our actions. American Heritage defines the mindset as “a fixed mental attitude or disposition that predetermines a person’s responses to and interpretation of situations.” In the organizational learning circles the terms mental model and current reality are used to capture a bundle distinctions on how we view situations.
We see in many of our organization’s strongly fixed mindsets about the EHS function by the EHS professionals, executives, managers, and other employees. Unfortunately, in far too many instances, these mindsets are not very encouraging.
Central to Green to Gold’s proposition in gaining competitive advantage with the environmental function is building a foundation by reframing how everyone on the organization looks at the EHS function. This new mindset is critical, if not necessary, to managing and reducing EHS risks, and driving innovation. Some of the qualities and actions necessary for this reframing include:
- Looking from the whole – from a systems perspectiveUnderstanding the interconnected nature of value chains, customers, employees, regulators, suppliers, etc. There is a broaden perspective of timeframes involved in investment and strategy decisions. There is a broadened perspective of potential payoffs from these investments, including hard-to-measure intangible gains.
- Executive EngagementCommitment and support to EHS thinking from the board of directors, president, CEO, and senior management team.
- Focus and resolveAn unshakable commitment to fulfillment of the organization’s EHS thinking and vision.
- Perceptions and feelings matterRecognition that stakeholder perceptions and feelings matter. This includes employees, customers, NGO’s, communities, regulators, trial attorneys, etc.
- Ethical Imperative Making decisions on core values, including caring for environmental, community, and worker health and sustainability, even when it might not pay off in the short run.
Green to Gold provides an important set of ideas and a framework in the on-going integration of environmental thinking into business strategy. It validates observation that we are entering, or have entered, a new era in EHS organizational management that is well beyond simple regulatory compliance or protection from civil litigation.
What about the Workers?
Noticeably absent in Green to Gold and the general literature in this area is any mention or discussion about people inside the fence line. The predominate focus in this new era of environmental thinking has been on the environmental function, not the more broad function that also includes worker health and safety. This phenomenon is not new and has a long history. It is my observation that organizations that have actively and purposefully include worker safety and health functions in Green to Gold initiatives are a step ahead in their overall EHS and organizational performance.
© Redinger EHS, Inc. (2010)