The Green Shift: A Worldwide Revolution Towards Environmentally Friendly Business Practices
1. Introduction
What is sustainability, and how does it relate to business?
To be honest, it is extremely difficult to distinguish between good business practices and sustainability. Often “being green”, or doing things in a sustainable fashion, translates to conducting business operations more efficiently, minimizing waste and cutting expenses.
I'm sure that you've heard phrases like:
I'm sure that you've heard phrases like:
carbon-reduction pledges,
life-cycle engineering,
pollution reduction programs,
waste management systems
But what do these things mean, and how do these programs relate both business and sustainability?
Well, let's start by defining sustainability: Defining sustainability is ambiguous and far reaching. To be sustainable is to have the capacity to endure. But what does that mean for business, and why should businesses be focused on the capacity to endure in the long run?
For business, the definition of sustainability is the intersection of it's financial and responsibilities and their social and ethical responsibilities.
But why should businesses care? We will highlight 4 major motivations behind the green shift:
1. Managing limited resources - principally, we live on a planet of finite and limited resources, at the rate by which we are consuming demand will soon outstrip supply. This would cause an increase in prices, making it harder for businesses to operate.
2. Risk Management - cleaning up after a human derived environmental disaster, or natural disaster has a huge impact on local economies. Paying the cost of cleaning up after an environmental disaster is very often much higher than the price of simple prevention.
3. Consumers care – more and more consumers are beginning to enquire as to where how the products they consume are being produced and what is being used to produce them.
4. Employees care - We are the new generation of workers! And many studies have shown that when we enter the workforce we will care about what values are employer stands for. A company in line with our values is much more likely to recruit top talent.
2. The History of the Green Movement & Sustainable Business
http://upload.wikimedia.org/wikipedia/commons/5/53/GortChart.jpg
http://hemantputhli.com/2009/08/26/convergence-evolution-of-sustainable-business/
- Why is the green shift important?
- To save our planet, think for our future generation. The pollutions that factories cause are very harmful to our planet; this includes plants, animals and people. For example: the dirty water that factories release produce more acid rain, and acid water wakens plants and drives them to die more easily. Animals that are consuming those plans are more likely to starve, or get forced to find new way of survival. The acid water is also making animals both from the land and the sea more easily to get disease and die out. As a result, this will decrease the amount of food that we can consume, which will also leads to increase of foodprices. Also, currently people are using up large amount of natural resource, such as fuels, we should also think for our future generation, we don’t want to finish up our natural resources, and leave our future children with serious environmental problems.
- Another reason why we should think for green trends is also for the better brand image. Business should emphasize more on CSR, they should do business with their good heart by concerning about our global environment issues, and not only solely focus on how to make money, and neglects the negative impacts that they create for the society. CSR doesn’t just involve spending money to become socially responsible, but it is also to encourage company to seek for new ways to produce their product as “green” as possible (Cavett-Goodwin D., 2007). By acting with CSR, the gains are not only to protect our planet, but also gain more respect from consumers. Since more and more people are concerning about going green, consumers are more likely to support companies who are more environmental friendly. Once companies become well known as a CSR companies, it can bring them more customers, because people like to feel good about themselves, by being part of the social responsible group.
- Also, going green can actually reduce cost for manufactures in many aspects. Businesses are strongly encouraged to wisely consume their resources. Some companies now are taking initiatives; Take Avon for example, they upgraded their lighting to electronic ballasts and T8 bulbs in order to reduce energy consumption. In 2008, energy consumption per unit produced was reduced by 13.25%. Avon also converted their vacuum system, which is designed to operate manufacturing equipment, to waterless vacuum pumps. This change alone had saved Avon $63,000 a year, and save the environment 16 million gallons of water a year (enough water to fill more than 24 Olympic size swimming pools or sustain more than 65,000 people per year). In 2007, they also came up with a way to recycled 6.5 million pounds of material in that year. However, such movement can also been used as their marketing strategy. Business can promote their “green” products. “In order to build and protect solid CSR reputations, companies must be committed to actively communicating their CSR activities to relevant audiences.” (Fleishman- Hillard /National Consumers League Study , 2007). Move to “green” operations is not only to benefit the society itself, it is also benefiting the companies with reduced cost and gain more loyal customers.
3. Case Study
Corporate Social Responsibility • The World Bank defines CSR as: “Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development” (World Bank Group’s). More simply put, not only is a business responsible to its bottom line (stockholders) but also to society as a whole and their well being. It is important to note that CSR is not how corporations should respond to social pressure but rather should be their long-term role in society be (Goodwin).When watching Ray Anderson (CEO of Interface) give his keynote at TED talks it is easy to see his conviction to reducing his company's impact. As the CEO his same goals are reflected in his business, and thus begins Mission Zero™. Anderson's burden to be responsible to society and the environment is reflected in Interface's corporate policy. It is simply a major bonus that CSR positively affects the bottom line, albeit no coincidence.
Ethical Decision Making •The Interface Global business plan has evolved from being a predominately cost-benefit ethical approach to, an almost entirely, utilitarian approach. They now have realized that the greatest result for the greatest number of people actually positively affects the bottom line and appears to still be a cost-benefit approach. This illustrates a sort of eureka moment for the business world. It has now been tried and proven that being a better steward for the earth also increases revenue and creates more new jobs.
Risk management • Ideally risk is avoided therefore a proactive approach is necessary in order to conduct business more efficiently and avoid risk. Inevitably demand for energy is going to rise, thus creating a more volatile market, and potentially leading to shortages and brownouts. This also means that energy prices are likely to rise, and be unpredictable. It makes good business sense to lower exposure to the volatile markets and in this case the energy market. Risk management can be generally categorized into three major approaches:
• Pre-Crisis (signal detection, prevention, preparation)
• Crisis Event (recognition, containment)
• Post-Crisis (evaluation, learning, follow up communication)
If being at the highest level of CSR and making good solid ethical decisions weren't enough, it turn out that Interface had yet another easy benefit or Mission Zero™. As illustrated above, a factor best used in risk management is to be pro-active in approach. Interface has done exactly this. A bi-product of Mission Zero™ is, currently, reduced dependence on power from the grid and in the future zero dependence.
If being at the highest level of CSR and making good solid ethical decisions weren't enough, it turn out that Interface had yet another easy benefit or Mission Zero™. As illustrated above, a factor best used in risk management is to be pro-active in approach. Interface has done exactly this. A bi-product of Mission Zero™ is, currently, reduced dependence on power from the grid and in the future zero dependence.
Steps and achievements since Interface Global’s plan for 0 impact started in 1996:
Since its inception, Achieving Mission Zero™ has made vast strides in the right direction. The ultimate goal being to be self-sufficient and have 0 impact on the environment. The economic crash in 2008 certainly slowed progress toward their goal, but Interface was much less affected than most other business. Interface's profits continued to grow. As seen in the figure above, Interface has made major reductions, and during the same time period, the company grew net sales by 27%. While some of this increase is certainly related to growth in control of the market, that portion of growth is indirectly related to Interface's value-added green brand. In short Interface is making less waste and taking more cash to the bank.
UPS has committed to improving the miles per gallon (MPG) performance of its entire U.S. package delivery fleet (some 60,000 vehicles) by 20 percent between 2000 and 2020. Over the past decade, the company increased the MPG of its U.S. ground fleet by 10%. As a result, in 2009, UPS drivers logged 77.3 million more miles than in 2000, but consumed 3.2 million gallons less fuel
Ten Things You May Not Know About UPS's Environmental Initiatives
1. UPS has 99,869 vehicles, 2,900 facilities and is the ninth largest airline worldwide, but as early as the 1930s, UPS has experimented with environmental innovation and improvements. What else would you expect from a company that started out on bicycles?
2. UPS's alternative fuel vehicle fleet totals more than 1,900 vehicles, the largest fleet in the industry, and since 2000, has driven more than 185 million miles!
3. UPS's alternative fuel vehicle fleet is diverse, with 527 propane-powered vehicles in Canada, more than 1,100 Compressed Natural Gas (CNG) vehicles (the largest private fleet in the United States), 250 Hybrid Electric Vehicles in Washington D.C., Long Island, Minneapolis, Philadelphia, Austin, Louisville, Dallas, Houston, Phoenix and Atlanta, 11 Liquefied Natural Gas (LNG) tractor-trailers, 11 Liquefied Petroleum Gas (LPG) in Korea, two zero-emissions vehicles in Manhattan, NY and 11 electric vehicles in Europe.
4. UPS's Delivery Information Acquisition Devices (DIADs) which electronically record delivery information have saved 89 million sheets of paper each year, the equivalent of 7,308 trees annually.
5. UPS has given customers the opportunity to save even more trees by switching to Paperless Billing and Paperless Invoice. Approximately 124 million sheets of paper could be eliminated annually if UPS customers went paperless with their billing statements and 86 million sheets of paper could be eliminated if international UPS customers converted to Paperless Invoice!
6. UPS has invested more than US$15 million to deploy significant numbers of alternative fuel vehicles in its fleet.
7. UPS has recycled 24.5 million pounds of electronic equipment since 2000.
8. Beyond saving fuel, UPS saves motor oil too. In fact, UPS has saved 330,000 quarts of it since implementing Preventative Maintenance Inspections (PMIs), saving the company almost US$3 million annually.
9. UPS has set up 11,000 computers at four facilities with "sleep" software to conserve energy when not in use, saving US$145,000 annually, as part of the ENERGY STAR Million Monitor Drive program.
10. UPS's Palm Springs, California facility uses 145 solar panels as its primary power source.
4. Measuring all the shift’s implications
a. The irony of globalization
Ecological degradation has only recently begun to operate on a global scale. This fact creates a set of systemic constraints that require global collective action (Chase-Dun, Kawano & Nikitin 1998). Today, world organizations like the World Business Council for Sustainable Development (WBCSD) have hundreds of multinationals as members, involving some 1,000 business leaders globally. Since its founding in 1983, the Green America Green Business Network(TM) has expanded from 345 members to nearly 5000 members. These kinds of organizations have been able to develop thanks to world initiatives and global forums. Sustainable development is now part of a global mindset in business. These companies publish annual reports about their “sustainable development”, proving how they improve their performance continuously. Many of them have even committed voluntary programs related to environmental problems. Most of them even affirm that they apply the same environmental standards to any of all their facilities across the world. This idea kills the arguments about a massive transfer of pollution to the poorest countries.
Given all these facts, we could think that the world is definitely taking the right direction. However, since 1990, global emissions of greenhouse gases have increased by 20%, despite the UN Framework on Climate Change signed in 1992 and the Kyoto Protocol, adopted in December 1997. These texts aim to achieve a stabilization of emissions in industrialized countries: the first was for 2000 to return to 1990 level. It was broadly respected by Europe - and from there, to reduce them further by 5% 2012. This could only be understood if all signatories of the protocol ratifying it, and obviously, it was not the case.
Since 1990, all indicators show that the ecological situation of the planet has continued to deteriorate: land degradation (erosion, salinization), regression of the rainforest, advancing desertification, diffusion of a chemical pollution and heavy metal, overfishing, worsening economic and social effects of natural disasters (floods, landslides, earthquakes, typhoons), coastal ecosystem degradation (mangroves, coral reefs), worsening conditions of access to water in the arid, erosion of biodiversity… Thus the fate of the environment warming is now subject to catastrophic news, lamentations, protests, exhortations and promises.
The contrast between the two images is striking. We can’t deny that the multinationals are focusing more and more on ecological and objectives of good development. But at the same time global environmental conditions degrade massively despite all these efforts of preservation or restoration here and there. So again, the power of multinationals is still controversially the object of our attention and the focus of all disputes.
The real problem is actually the ideological and political influences of multinationals in the globalized environment. It seems that their power is so large that they can even challenge the government initiatives that are necessary to help sustainable development.
Nowadays, multinationals are the real decision-makers of environmental rules and policies. That is why international management has a large role to play in making the shift towards greener businesses more efficient.
A double-edged globalization?
b. A question of accessibility and culture
All countries are not at the same stage of development in terms of environmental awareness. Poorest countries or emerging countries are just seeing some eco-friendly initiatives starting. Corporate Social Responsibility is not anymore just a trend for large multinationals in rich countries. Emerging markets also see a value in being environmentally responsible, but not at the same rhythm. It is still a beginning, and all cultures are not willing to “go green” on anything.
First, if we have a look at Africa, the emissions of greenhouse gases are still quite low compared to developed countries. However, they are more and more affected by industrial countries’ activities which endanger the global population. Moreover, multinationals continue to move their production activities and so a part of the pollution to the poor countries where the labor is cheaper. The global climate change is even tougher for these populations, who are much more vulnerable to it in terms of health system. Not to forget that environmental knowledge is higly linked to education level, which tends to be very low in some countries.
In Asia also, some regions are not educated at all in terms of ecology. So they do not demand any greener initiatives. The green awareness is still very low, but is rising in all Asian countries. Indeed, the green concept is in line with the Buddhist belief that everything is intertwined. Many companies start to show interest in sustainable development, renewable energy, green supply chain management… However, the lack of skills, financial supports and knowledge block this process. So far, people in China for instance see green projects just as an additional cost for the company, and not as a benefit. People need to be trained, and a new business model needs to be established, with joint efforts of all the governments.
The roles of multinationals might also be to invest in the education of emerging markets, as the climate change impacts the global population.
Some initiatives have already been developed on this way. For instance, the eco cities’ projects in China, like in Gondtan in 2006, but that never happened. Dongtan was the first of four “eco-cities” to be designed and built in China by Arup, a British company and by the American architecture firm of William McDonough. The China Digital Times reported:
“Dongtan and other highly touted eco-cities across China were meant to be models of sustainable design for the future. Instead they’ve become models of bold visions that mostly stayed on the drawing boards — or collapsed from shoddy implementation. More often than not, these vaunted eco-cities have been designed by big-name foreign architectural and engineering firms who plunged into the projects with little understanding of Chinese politics, culture, and economics — and with little feel for the needs of local residents whom the utopian communities were designed to serve....”
This project was more a promotion of the power of foreign firm and government investment, but It didn’t answer the local population needs and the cultural aspects of the basic principle of a city. That’s why international managers should also take the country rules and culture into consideration when developing green initiatives. The same projects are not suitable anywhere, and populations are more or less sensitive to some topics. Foreigners tend to believe anything is possible in booming countries. However they should not try to impose their projects without real knowledge of how things work there. Green management also requires respecting some core values like cultural differences. There are fundamental values that cross cultures, and companies must uphold them (Donaldson, 1996). Emerging markets should not become the workshop for any attempt in futurist attempt of westerners. This is where ethics enter the game.
c. You’ve been “greenwashed”
Ethics have a large role to play in the green business development, given that many companies use it in order to build their image and not necessarily to have a real positive impact on the environment – or at least reducing their existing one. Some companies have understood that and developed some sincere concrete measures and CSR principles. CSR does not just involve spending money to become socially responsible […] CSR is about looking of a firm’s activities on society and the environment. It would not be out of line for a firm to introduce more environmentally friendly measures as their approach to CSR. “For example, several companies have reported enhanced productivity and reduced costs from introducing new technologies aimed at reducing pollution” (Cavett-Goodwin 2007).
On another side, plenty of companies also fool the consumer with a green image with is actually more about papers, certification and commercials than real actions to reduce their foot print. This is called doing “green washing”. Gong green has become a very trendy and profitable way to conduct business. On the shelves of any store, you can find products that claim being green, eco-friendly, energy efficient, organic, partially recycled….How many of these claims are completely true?
According to a study from Terra Choice Environmental marketing, over 50% of products tested in eco-friendly labels fail to mention the enormous environmental drawbacks such as waste and travel costs. These need to be considered when buying an eco-friendly product. In 99.9% of the cases, the environmental impact of products claiming to be green is not eco-friendly.
When the core business of the company is by itself not eco-friendly…
Can a can be eco-friendly?
Can a Hummer be eco-friendly?
The best examples to illustrate this point are probably the automobile industry and the oil and gas companies.
BP and ExxonMobil have been ranked among the greenest companies in the world several years in a row. Every year, they comply with their objectives of reduced emissions, and the companies continue to grow. They are also implement some worldwide projects about greener fuels. BP was the first oil giant to publicly acknowledge the risks of global warming, back in 1997.
In 2006, BP’s Exploration Alaska subsidiary spilled more than 200,000 gallons of crude oil near Prudhoe Bay, the largest North Slope spill ever. A Federal grand jury is investigating the spill, caused by a rupture in a corroded pipeline, and may bring criminal charges. BP has denied that it acted negligently regarding the spill.
Exxon records are not better, in reference to the Exxon Valdez oil spill in 1989, considered as an “environmental genocide”. They both make big commitments in terms of alternative energy, cutting greenhouse gases and educating the public about conservation. However, the natural gas pumped still contributes to climate change. Indeed, natural gas is currently responsible for about 20 percent of US carbon emissions.
So, why in 2009 the Forbes’ magazine elected ExxonMobile as the “Green Company of the Year”? The reasons are still unclear, but again, probably because it is profitable for both parties. There is a kind of hypocrisy around green management, that expand companies’ pride without limits, forgetting to remind them the real impact of the business on the environment, even when reducing emissions. They advertise an image of perfect eco-responsibility, and fool the customer, who will feel better to buy from a company he sees as “green”.
So, why in 2009 the Forbes’ magazine elected ExxonMobile as the “Green Company of the Year”? The reasons are still unclear, but again, probably because it is profitable for both parties. There is a kind of hypocrisy around green management, that expand companies’ pride without limits, forgetting to remind them the real impact of the business on the environment, even when reducing emissions. They advertise an image of perfect eco-responsibility, and fool the customer, who will feel better to buy from a company he sees as “green”.
When the companies communicate on a "lie"…
In the cosmetics industry, most of brands like to present themselves as natural, organic…
But if the customer looks closer at the real components of the products, most of the time he will discover that these brands fool them.
Josie Maran (US) launched an empire of natural, organic, and free from parabens, phthalates, and most petrochemicals products. She even received the Elle 2009 Green Star Awards. When she is interviewed, Josie Maran explains that her brand refuses to use any toxic ingredient, and is signed some agreements in the related industry. In reality, written in small on her website, you can learn that all the products are made of petrochemicals.
Same case with Tarte Cosmetics (US), who have recently claimed that “Tarte is the leader in earth engineered beauty offering the widest selection of healthy cosmetics full of skinvigorating ingredients.” Indeed, Sephora sells the brand giving it their ‘natural’ seal of approval stating that the products contain no petrochemicals. Again, this is far from the reality: all the products contain a veritable cornucopia of petrochemicals and chemicals, petroleum derivatives and synthetic colors.
Many companies use the words “natural”, “green”, “eco-friendly”, “organic” just to sell more and build a trendy image. Now, it seems that even certifications are not enough to show that a company really made a shift in its supply chain management and its politics towards an eco-friendly attitude.
References:
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Birkin F., Cashman A., Koh S.C.L. & Liu Z, 2009, New Sustainable Business Models in China, Business Strategy and the Environment
Larson C., 2009, China’s Grand Plans for Eco-Cities Now Lie Abandoned, environment 360 Blog. Retrieved from the Web: http://e360.yale.edu/content/feature.msp?id=2138
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