From a Movement to a Market

[Editor's note: In this exclusive excerpt from Joel Makower's new book, "Strategies for the Green Economy," he describes a four-minute history of green business. Joel has also written a blog post offering some background on what went in to writing this book, online here: http://greenbiz.com/column/2008/09/29/strategies-green-economy.]

Most people -- in business, the media, politics, and activism, as well as individual consumers -- view green business as a recent phenomenon, something that's suddenly sprung up, perhaps thanks to Al Gore's movie or other influencers. In fact, this is an "overnight sensation" that's been several decades in the making. To fully understand the greening of mainstream business, it's important to understand this trajectory.

Following is a four-minute history of green business.

In the beginning -- let's say the 1960s -- there was pollution. It was dirty and unhealthy and threatened our very way of life. So began the notion of pollution control -- stopping illegal activities as well as the spewing smokestacks and drainpipes that were legal but seen as egregious. In 1970 came the U.S. Environmental Protection Agency, followed by a series of laws in the United States and other countries that for the first time regulated pollution of air and water. Enter the scrubbers-and-filters crowd, the engineers who learned how to capture and control emissions sufficiently to comply with those mandates.

By the 1980s, a few smart companies figured out that if you didn't pollute in the first place, you didn't have to worry about controlling it or cleaning it up. So began the idea of pollution prevention and its cousins, waste reduction and energy efficiency, in which companies began rethinking their processes and management systems to reduce waste and costs. One of the pioneers, 3M, maker of everything from Post-it Notes to Scotchgard, created a pollution-prevention program in the 1970s that continues to this day, having saved the company billions of dollars.

By the 1990s management stepped in and declared, "We need systems!" and "What gets measured, gets managed!" and other management bromides. And so environmental management systems and something called ISO 14001 were created, the latter promulgated by the International Organization for Standardization, which established a baseline set of rules for how companies should organize themselves environmentally. And somewhere in the 1980s, while the work of W. Edwards Deming was in vogue, the notion of total quality environmental management had 15 minutes of fame.

While more companies began to understand the many environmental impacts of how things were manufactured, a few companies realized that they needed to look at the "things" themselves -- the full environmental impacts of their products. And so began the notion of cradle-tograve thinking, along with an entire toolkit. Suddenly, environmental managers were tossing around such terms as life-cycle assessments, design for the environment, end-of-life management, dematerialization, demanufacturing, remanufacturing, reverse logistics, product takeback, and extended producer responsibility. Companies began to better measure, and manage, their materials throughput -- how many units of product emerged from every unit of raw material used. Eventually, a wellknown green designer and architect, William McDonough, and a Swiss chemist, Michael Braungart, came together to tell us that cradle-to-grave thinking shouldn't be the goal, that we needed to set our compass to achieve closed-loop, cradle-to-cradle products and processes. They developed a methodology for doing this and, eventually, a certification scheme for such products.

As companies scrutinized their products and operations, they began to understand how much of their environmental impacts were affected by those outside their organizations -- their suppliers, contractors, and business partners. And so, supply-chain environmental management became the watchword, with companies striving to push the clean-and-green mantra ever further upstream. In some cases, they partnered with their suppliers to identify and procure nontoxic alternatives or alternative materials derived from plants instead of oil or trees or to use other techniques that could reduce or eliminate problematic ingredients. A science writer named Janine Benyus taught companies about "biomimicry," design inspired by nature, that married biology with engineering and industrial design to create innovative new products and processes that borrowed knowledge from a myriad of insects, fungi, animals, and other critters. It asked the question, "How would nature design this?" and identified a toolkit born of Mother Nature's more than three billion years of research and development activity. (Biomimicry eventually would become implemented in such companies as DuPont, General Electric, Hewlett-Packard, Nike, Steelcase, and a host of smaller firms.) A group of chemists put forward the seemingly oxymoronic notion of green chemistry, a breed of more environmentally friendly chemistry that reduces waste and yields fewer hazardous substances, all while creating safer products.

While all these activities gained popularity, some leading-edge business models emerged -- for example, industrial ecology, in which business systems behaved like forests or other natural systems, with waste products from one process becoming the feedstock for another. Some companies pursued the vision of zero waste, closed-loop factories with no smokestacks, drainpipes, or dumpsters. Others strived for products, facilities, or events in which the associated climate emissions would be offset to the extent that these things could be declared carbon-neutral. And companies learned that by embracing the principles of natural capitalism, they could be not merely benign, but actually restorative.

And companies ultimately came to learn the S-word -- sustainability -- the three-legged stool consisting of people, profit, and planet.

For more and more companies, this intergenerational Golden Rule has become the new goal post, albeit an aspirational one, because true sustainability -- the ability to continue one's business operations indefinitely in a way that doesn't create limits for future generations -- is out of reach for most companies. For better or worse, sustainability has become a term of art, even though it is frequently used, inappropriately, as an interchangeable term for environment or green.

The past few decades of green business evolution can be represented by three waves of change. It began with a sort of eco-Hippocratic oath -- "First, do no harm" -- in which companies aimed to get the worst environmental abuses under control.

Next came "Doing well by doing good," in which companies found that they could reduce costs -- and enhance their reputations -- by taking a few proactive steps.

And then came "Green is green" (as coined by General Electric Chairman Jeffrey Immelt), the recognition that environmental thinking can do more than improve the bottom line. It can help to grow the top line through innovation, new markets, and new business opportunities.

This is the point at which sustainability becomes, well, sustainable.

It's important to note that this entire spectrum of change still exists -- from pollution control to the most cutting-edge thinking -- sometimes within a single company. Indeed, it is this wide range of green actions and behaviors, across a single company or an entire economy, that is confusing and confounding to the public. It makes identifying the real leaders an extraordinarily difficult task for everyone involved. And it creates both challenges and opportunities for companies seeking to differentiate themselves as true green leaders.