How Companies Manage the Sustainability Tradeoffs

MIT Sloan Management Review

How Companies Manage the Sustainability Tradeoffs

[This article is part of a series of interviews from the MIT Sloan Management Review published on It is adapted from "The Sustainability Tradeoffs" an interview published by MIT Sloan Management Review in July 2009. The complete interview is available here. © Massachusetts Institute of Technology, 2009. All rights reserved. To read all of's interviews with MIT thought leaders, visit]

Let's start by talking about how you define sustainability and how your ideas differ from those of others.

I see sustainability as continued economic development that meets environmental and social concerns. That idea can take you in many directions, from better design of a product in terms of trade-offs between energy and cost and weight all the way up to asking, "How do you run a sustainable organization?"

A "sustainable organization" will train people to be more flexible, able to change functions within the company as it evolves quickly. That's a very different definition of sustainability, but one that could have an impact on environmental sustainability as well.

Which sustainability issues will have the biggest implications for business?

A carbon-constrained environment will affect every business in the long run. All companies, even the really conservative ones, know that legislation is coming. We haven't paid back the full cost of certain types of resource use, and it's coming back to haunt us. The Kyoto Protocol was not an entirely great agreement, but it clearly signaled that rules to reduce carbon pouring into the atmosphere were coming. The new Copenhagen Round will improve things, we hope.

What other drivers do you imagine, in addition to carbon?

Water is going to be a big driver. Here are some interesting statistics: What percentage of the world does not have electricity? About one-third, two billion people. What percentage doesn't have an adequate clean water supply? It's also one-third -- and it's not necessarily the same third. These are not technological problems. We know how to clean water and how to provide electricity. They are problems of economics and policy. Who pays? How are projects financed?

Do you anticipate that spending on sustainability will put companies at a competitive disadvantage?

Not if handled properly. The right strategy could become a competitive advantage. The right regulatory regime can help a company find what's right for them. If a company can do a better job of managing waste, managing factory inputs and production processes, and defining what kind of product they will make, it is liable to be more efficient -- which will pay sustainability dividends to the company and the environment.

What else is a challenge?

It's a challenge to make sustainability concepts operational. You get into trouble making vague ideas operational and, absent regulation, there's not a clear metric.

With sustainability it's even harder to establish [a clear metric]. Generally when I talk about sustainability I'm talking about a lifecycle view, whether things are going into the environment or whether they're coming back and being reused.

Looking at the lifecycle of a product, including all processes and substances, is a huge task but can reveal new ways to proceed. At first, there will certainly be a certain inertia, due to lack of information. To higher-ups it seems like a great idea. But down among the people who actually have to make the choices and do the work of change, there is resistance and considerable uncertainty.

What kinds of opportunities do you think will emerge as a result of paying more attention to sustainability?

The opportunities will come from improved organizational structure and better management. We in the engineering and science areas are thrilled that Sloan is taking a leadership role in thinking about sustainability right now. Lifecycle analysis can point to trade-offs that can help a company see over the horizon.

What are the greatest challenges and opportunities for undertaking sustainability efforts?

To me, sustainability will have come of age when environmental awareness and action are not just altruistic but are integral to the successful function of an organization in society. Success will include being careful about resources -- both human and natural resources -- and about the impacts their production processes and their products will have beyond the factory gates.