GOOD TO GREEN
MANAGING BUSINESS RISKS AND OPPORTUNITIES IN THE AGE OF ENVIRONMENTAL AWARENESS
JOHN-DAVID PHYPER AND PAUL MACLEAN
WILEY 2009
PART 1
Preface
On a sunny day in the spring of 2008, several months before the cataclysmic economic events that will be remembered for decades, we discussed how corporate environmental management had evolved during our twenty years working in the field, and what lay ahead. We reflected on the many hundreds of projects in which we helped companies to implement environmental management systems (EMSs), to understand sustainable development (SD) and to address corporate social responsibility (CRS) concerns.
- There are a few key attributes that distinguish “good” companies from truly “green” companies.
- We noted that companies that demonstrate leadership through sustained action on global environmental challenges and achieve business success in the process also succeed in overcoming two problematic trends that continue to plague the rest of the pack.
- The first is “cosmetic environmentalism” whereby companies focus on easy to do activities that provide an aesthetic fix.
The second issue: environmental management is typically fragmented in “silos” of activity – often focusing on SD initiatives, CRS reporting obligations or, more recently, climate change – contributing to further weakening of the approach. Activity in a particular silo may extend from the shop floor to upper management, but an absence of communication and exchange across key functions prevents companies from realizing the true value of management’s efforts.
This unfortunately common situation has often left a number of important questions unanswered. Among these are the following:
v Why are companies not assessing the impact of environmental issues on their business models?
v Who has overall responsibility for environmental issues at a company and do they have the authority to make real changes?
v Why do departments that own a business function (e.g., product management, manufacturing, procurement, logistics) not have full ownership/accountability for environmental issues pertinent to their activities?
v What obstacles are hindering companies’ shift from a “repair/refine” model for their products to a “redesign/rethink” approach that allows them to capitalize on business opportunities?
v Why are companies not proactively assessing what hazardous chemicals may be in their products and thus pose harm to company’s brand (not based upon scientific peer review, but the court of public opinion, with the Internet elevating awareness)?
v What is stopping companies from addressing the environmental/product issues associated with their complex web of suppliers, instead of allowing a “chain of uncertainty” to continue?
v What criteria are companies using to invest in clean technology initiatives? Many clean technologies require long-term subsidies to compete, lack scalability (i.e., declining costs over time) and are solutions to “side issues.”
v Why have so few companies automated compliance and risk management activities through their IT systems?
Our goal is to guide managers and executives in making informed business decisions on the management of risks and opportunities related to environmental issues. As IT is now business-critical for companies, we also discuss how environmental issues must be incorporated into IT systems to facilitate compliance and proper risk management. We deliberately avoid describing the impact of humans on the environment, nor do we discuss how to implement standard, well-known environmental programs such as the ISO 14001 EMS standard. There are plenty of good books on these topics.
- While we drafted the manuscript, dramatic economic and political events were unfolding – the petroleum price spike of $140 per barrel and subsequent crash to $40 per barrel; the failure of the financial system leading to global recession; and the election of a Democratic president in the United States who supports action to mitigate climate change and promote a green economy.
Fortunately for us, they reinforced our basic premise that a shift has begun in which leading companies are starting to focus on business risk and opportunities related to environmental issues and in doing so, they
v Assign ownership and accountability to the individuals/groups that manage key business functions and break down the EMS/SD/CSR silos
v Redesign and rethink products to ensure the elimination of hazardous ingredients, optimization of energy efficiency and reduction of emissions, while boosting revenue
v Seek out mismanagement (inefficiencies leading to elevated energy use, emissions, waste, etc.) in the supply chain to improve the bottom line and prevent environment impact of operations
v Identify new business opportunities in both clean technology (clean water, renewable energy) as well as product life cycle management (PLM)
No longer are environmental issues viewed exclusively as a cost of doing business but now are seen as opportunities for revenue generation and cost reduction, and in some cases are seen as a way to create new business models with less reliance on carbon energy sources and as a shift from owning things to a service economy. It is important, however, to realize that these changes do not happen overnight and that for real revolutionary change to occur, we need to invest alternative energies and products that strive to be sustainable, are superior to what they are replacing and have a trajectory that allows them to be cheaper within a short period of time.