Talk Green to me baby...

Introduction

Today we are witnessing a period wheretwo critical forces have been posed against each other: environmentaldegradation and corporate prosperity. Given our society’s emphasis oncapitalism and commercial expansion, the environmental impact that industry hason our ecology has been significant - and degrading. This has spurred amovement from some environmentalists who are determined to force corporationsand businesses to change their business practices in order to save the planet.Over time, the environmental concern has spread from being a purely activistideal, to a governmental concern, to consumer preferences, to a new breed ofenvironmentally concerned youth, and even, business students.

Even with all of these externalpressures from communities and the public-at-large demanding that businesspractices change, actual change is difficult to address, let alone implement,within an existing business model. The question becomes, how does one begin toaddress issues of environmental sustainability and environmental preservationwith business executives? Before the specific steps can be implemented across abusiness, those steps and ideas must be approved and resources need to be allocatedto place environmental experts in a position to make actual change.

In an effort to talk “green” with the businessexecutives, it becomes critical to recognize that the executives at that levelhave primary concerns of generating revenue and, in general, adding value totheir business. Adding additional concerns to their plate is not an efficientway of getting their attention. Instead, it is important to reframe sustainableand environmental actions from the perspective of money - a different kind of “green”.Once sustainable business practices are secured and in place, the actualenvironmental benefit will shine through and both sides win. The key herebecomes to embrace the Dominant Social Paradigm of business models as opposed to try to change existing patternsof thought; and much like in the 20^th century, embrace environmentalsustainability initiatives from a Conservationist perspective, as opposed to a purelyenvironmental and Preservationist one.

Findings

Before approaching a business executiveor a board of directors about new strategy development and implementation, itis important to evaluate and recognize the state of current operations and tounderstand what the main priorities of your audience are. In today’s world,business leaders have a single priority of adding value to their businesses. 1970Milton Friedman noted that “there is one and only one social responsibility ofbusiness – to use its resources and engage in activities designed to increaseprofits so long as it stays within the rules of the game, which is to say,engages open and free competition without deception and fraud”[1].Today, this same train of thought holds true, as can be seen asserted from aquote in Fortune Magazine that states that “corporations were put on this earthto, after all, to make money, and to some minds, profit maximization will neverseem all that different from greed. But profits, of course, pay for the latestequipment and technology that produce economic growth and more jobs. Ifcorporations weren’t greedy like that, they’d go out of business and then we’dall be in trouble”[2].This Dominant Social Paradigm within business practices is once againsubstantiated by Forester’s Business Decision-Makers survey of 2010 whichlisted the priorities of business leaders. In this survey, environmentalsustainability ranked as the 10^th lowest priority, while growth,efficiencies, innovation, and employee engagement topped the list[3].

While this Dominant Social Paradigm,or society’s persistence and adherence to economic prosperity with emphasis on afree market economy, prevails in the business world, it can be daunting forthose with concerns about business’ environmental impact to even imagine how toaddress their concerns with big business decision makers. However, the factthat environmental sustainability even made it onto the list is a great signthat decision makers are, at least, aware of the issue. Further, it ispromising to know that there is enough external pressure from the emerging andgrowing New Environmental Paradigm (society’s embrace of the natural world andthe desire to conserve it) that can make big businesses budge when it comes toimplementing environmental sustainability practices. Even if businesses are notleading their enterprises towards sustainable practices on their own, externalpressures will slowly and eventually drive them to make those decisions. BobWillard very accurately formulates the pressures that the New EnvironmentalParadigm will have on businesses in the following quote: “The environment isnot going to disappear as an issue for business. Companies are, and willcontinue to remain, under pressure from customers, investors, employees,legislators…and banks and insurance companies to be more eco-efficient”[4].

If one is to begin the conversationof sustainable business practice, how does one do so? More often than not,activist groups and organizations attack corporations for environmental damagesand malpractices, hoping that they will scare CEOs and business executives tochange their ways. Sometimes this works - but not always. And more often thannot, a company merely reacts to the specific issue, possibly corrects its ways,but the business operations themselves do not become environmentallysustainable.

Instead of attacking existing businessmodels, environmental champions and sustainability agents should present theideas of environmental sustainability in a different light. Sustainabilityleaders must stop “pitting economic success against environmental and socialgoals” and instead promote that these concepts are “all part of the same whole,not separate from each other”[5]. This approach encourages business leaders toembrace the sustainability concept, not as a foreign aspect that is irrelevantto their main business priorities of revenue generation, but rather, a toolthat will help them get to their goals. Earnest Callenbach et al framed this asenvironmental management versus ecological management. He argues thatenvironmental management is a defensive and reactive approach which promotesadherence to compliance regulations and auditing. Ecological management, on theother hand, is more proactive and creative and encourages corporations tominimize their impact on the environment and make all operations ecological[6].

This idea of reframing concepts ofenvironmentalism into a framework that is concurrent with existing businessmodels is very much reminiscent of the idea of utilitarianism with respect tothe environment. Within the utilitarian framework, which encourages thepromotion of actions that deliver the most good to the most amount of people, businesseswould incorporate environmental sustainability practices so as to promote theirtraditional business goals; or as Bob Willard put it “managers [would] look atenvironmental problems as business issues…and expect them to deliver positivereturns and reduce risks”. Ifenvironmental champions succeed in reframing the environmental argument into autilitarian one, then “saving the world and making a profit [would not be] aneither/or proposition, [but] a both/and proposition”[7].

In this reframing process, itbecomes critical for environmental champions to clearly align the profitseeking goals of the business leaders with the sustainable business practices. Willardrecommends the following: “the trick is to focus on the ‘selfish’ bottom-linebenefits, not the seemingly altruistic societal and environmental results.Environmental benefits can be a happy byproduct, not necessarily the initialmotivating rational”[8].At the end of the day, environmental champions need to underscore businessleaders’ priorities and “sell the sizzle, not the steak”[9]when it comes to environmentally sustainable business practices.

The basic outline for this approachconsists of three stages. First – engage business leaders in conversations thatalign their interests with environmental sustainability ones. Second– identifythe concrete areas, the focus of which would be beneficial to both businessleaders and environmental champions. Third – clearly articulate both short termand long term results and benefits in a quantitative manner.

The first stage is critical as itallows for the building of a foundation upon which both business leaders andenvironmental champions can discuss goals and strategies. This is done byengaging business executives in conversations around topics that are ofcritical issue to them, while positioning sustainable business practices withinthose subject matters. This is very similar to the way the Conservationistspositioned their environmental agenda back in the early twentieth century.Conservationists were able to align the needs of the environment with the needsof the people and today’s efforts should be no different. In order to engagebusiness leaders in environmentally conscientious activities, it is import tocreate value propositions within the leaders’ areas of interest. Below is alist of subjects that create value for both the business and the environmentalchampion[10]:

- Ways in which sustainable businesspractices can contribute to increased sales, reduced costs, or enhancedcorporate image

- New product opportunities thatcapitalize on customers’ green-product preferences

- Ways to leverage environmentalactivities to increase the impact on key organizational stakeholders

- Ways that sustainable business practicescan improve quality and efficiency

- Ways in which sustainable businesspractices can lead to recognized standard compliances and accolades

- Way in which sustainable businesspractices can mitigate risks to the organization

These conversation topics cansuccessfully capture the attention of business executives as they addressbusiness issues that are of a priority to these leaders. Meanwhile, this hascleverly positioned sustainability, not as an additional category to allocateresources to and monitor, but rather as a tool that can be easily integrated intothe current flow of organizational activities.

Once this foundation is established, itis easy to transition to the second stage – the point at which both sides,business and environmental, identify what is called the ‘point of intersection’or the ‘sweet spot’. This is the point at which “issues or areas [that form] amutual dependence between corporation and society, thus offering opportunitiesfor both to benefit from the ‘shared value’”[11].

The opportunity of utilizing sustainablebusiness practices allows businesses to take advantage of “green” opportunitiessuch as creating new products, discovering new markets and business models, andimproving operations and process. In the example below, major corporations, GE andPepsiCo, were able to utilize this approach and utilize the tool of sustainablebusiness practice to meet their business needs: GE developed new products andincreased profits by addressing the issues of climate, and PepsiCo addressedthe issue of cost and business risk reduction by conserving natural resourcesand enhancing water quality[12].

The SustainabilitySweet Spot GE’sSustainability Sweet Spot

PepsiCo’s Sustainability Sweet Spot PepsiCo’sSustainability Sweet Spot

Once again, we see the method ofconservationism and utilitarianism prevail when it comes to environmentalsuccesses among business practices.

Finally, the third, and possibly mostpersuasive stage, is the absolute necessity to quantify the positive results ofthe integration of sustainable business practices into existing businesspractices, while not forgetting to identify the issues that could negativelyimpact the organization if the suggested actions are not taken. Below is a listof just some items that can be tracked and measured and then presented tobusiness leaders[13]:

- Income and percentage of sales from“green products”

- Income from sales of cause-relatedmarketing affiliations

- Income from recycled products

- Income from recycled waste materials

- Increased sales from improved reputation

- Cost savings from reduction in energycosts

- Cost savings from pollution reduction

- Cost savings from reduction in cost ofdebt

- Cost avoidance from environmentalactions

- Cost savings from employee turnoverreduction

- Workers’ compensation costs

- Cost savings from reduction in naturalresource use

- EVA (economic value added)

- ROI (return on investment)

- ROCE (return on capital employed)

- Percentage of proactive vs reactiveexpenditures

- Increase in relative percentage of proactiveexpenditures

- Percentage of environmental costsdirect-traced

- Cost of capital investments

- Cost of operating expenditures

- Disposal costs

- Cost of fines/penalties

- Reduction in hiring costs

- Legal costs

Back in the early twentieth centuryduring the famed Hetch Hetchy debate, the conservationists’ success inquantifying the environmental benefits allowed them to sway opinions towardstheir needs. Today, the same applies because “most helpful for understandingthe financial value of environmental, social, and governance programs are thosethat quantify the financial impact, measure business opportunities as well asrisks, and are transparent in their methodology”[14].

At the end of the day, it is import todemonstrate quantitatively that both in the short and long term, shareholder valuewould increase, for example, between 29% and 85%. In addition, it is helpful tonote that “companies that belong to the World Business Council for Sustainabledevelopment outperformed their respective national stock exchanges by 15 to 25percent over the past three years. From 1999 to 2003, the Winslow Green Indexof 100 “green-screened” companies increased in value by over 73%, whereas thenumbers of the comparable benchmark Russell 2000 Index increased by less than17%”. The stock performances of companies that have integrated green practicesinto their business models set a powerful and convincing precedent for otherfirms to follow[15].

Summary

While environmental preservation maybe the end goal of environmental champions, it is important to recognize that sucha goal is not on the radar of most business leaders. If environmentallysustainable business practices are to be embraced by business leaders, it willbe done when the primary needs of the business are met. It is thereforecritical to analyze your audience and your audience’s priorities. In so doing,environmental Preservationists are forced to abandon their pure altruisticgoals, and align with the Dominant Social Paradigm that prevails in thebusiness environment. The alignment of the two agendas is the best way to beginto shift the practices of businesses from purely profit-seeking-at-no-cost toprofit-seeking-while-preserving-the-environment. Instead of pitting the twogoals against each other, it becomes wiser to combine the two, and form apartnership that is mutually beneficial. Business leaders want to talk abouttheir bottom line – environmental leaders can talk about the same bottom line,just from a “green” perspective.

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[1] Bird,Ron, et al. “What Corporate Social Responsibility Activities are Valued by theMarket.”

Journal of Business Ethics (2007) 76: 189-206

[2]Willard, Bob. “Aligning ESG Benefits with Executives’ Top 10 Priorities” SustainabilityAdvantage. May 2011 <http://sustainabilityadvantage.com/2011/05/17/aligning-esg-benefits-with-executives%E2%80%99-top-10-priorities/>

[3]Willard, Bob. “Aligning ESG Benefits with Executives’ Top 10 Priorities” SustainabilityAdvantage. May 2011 <http://sustainabilityadvantage.com/2011/05/17/aligning-esg-benefits-with-executives%E2%80%99-top-10-priorities/>

[4]Willard, Bob. “Forum: Straight Talk on Sustainability” The SustainabilityAdvantage <http://www.dolphinblue.com/pg-forum-sustainability-advantage-willard.html>

[5]Willard, Bob. “Forum: Straight Talk on Sustainability” The SustainabilityAdvantage <http://www.dolphinblue.com/pg-forum-sustainability-advantage-willard.html>

[6]Callenbach, Ernest, et al. Ecomanagement. San Francisco, CA:Berrett-Koehler Publishers, 1993

[7]Willard, Bob. “Forum: Straight Talk on Sustainability” The SustainabilityAdvantage <http://www.dolphinblue.com/pg-forum-sustainability-advantage-willard.html>

[8]Willard, Bob. “Forum: Straight Talk on Sustainability” The SustainabilityAdvantage <http://www.dolphinblue.com/pg-forum-sustainability-advantage-willard.html>

[9]Willard, Bob. “Aligning ESG Benefits with Executives’ Top 10 Priorities” SustainabilityAdvantage. May 2011 <http://sustainabilityadvantage.com/2011/05/17/aligning-esg-benefits-with-executives%E2%80%99-top-10-priorities/>

[10]Milliman, John, et al. “Securing Executive Support for Sustainability ProgramsThrough Integrative and Partnering Skills.” Wiley InterScience Winter2009 <www.interscience.wiley.com>

[11]Milliman, John, et al. “Securing Executive Support for Sustainability ProgramsThrough Integrative and Partnering Skills.” Wiley InterScience Winter2009 <www.interscience.wiley.com>

[12]Savitz, Andrew W. and Karl Weber. “The Sustainability Sweet Spot.” WileyInterScience Winter 2007<www.interscience.wiley.com>

[13]Epstein, Marc J. Making Sustainability Work. San Francisco, CA: Berrett-KoehlerPublishers, 2008

[14]McKinsey Global Survey Results: “Valuing Corporate Social Responsibility” 2009<http://www.mckinseyquarterly.com>

[15]Savitz, Andrew W. and Karl Weber. “The Sustainability Sweet Spot.” WileyInterScience Winter 2007<www.interscience.wiley.com>