Can 'Green' Still Lead to 'Gold'?

Two Steps Forward

Can 'Green' Still Lead to 'Gold'?

Dan Esty, who along with Andrew Winston wrote the 2006 book "Green to Gold," a highly regarded treatise on corporate environmental strategy, has just published a sequel. This time, he’s partnered with P.J. Simmons to write "The Green to Gold Business Playbook: How to Implement Sustainability Practices for Bottom-Line Results in Every Business Function." I caught up with Esty, who now heads the Connecticut Department of Energy and Environmental Protection, and Simmons, who directs the Corporate Eco Forum, to talk about their new book and the state of the art of business and the environment.

Joel Makower: It’s been five years since "Green to Gold" came out. Why another book?

P.J. Simmons: When Dan approached me to work with him on this project, the idea was to respond to the need that we heard from so many companies, of how do you drive this throughout the heart of the business, and into all aspects of business. And do it in a way that appeals to those outside of the sustainability suite, people who don’t have environment and sustainability in their titles.

Dan Esty: I think "Green to Gold" told why it makes sense to bring environment and sustainability into business strategy. "The Green to Gold Business Playbook" tells you how to do it. I think what is valuable here is that this is going to attract people that really want to know, business function by business function, what it is they can do and should do to make sustainability pay off.

For a lot of companies, in the intervening years since "Green to Gold" came out, it’s become clear that they should be paying attention to the environment. A lot of folks didn’t know what to do. For other companies the challenge was they had a game plan, but they needed to execute and needed to have support in making sure they delivered real results in terms of changed behavior and economic and eco-advantage opportunity. I think this new book provides that pathway.

Makower: So, this brings up the topic that I wanted to talk about, which is the state of the art of corporate environmental strategy, or broader still, sustainability strategy. What’s your sense is of the overall state of the art?

Esty: I think we’ve seen a transformation in corporate leaders understanding of the environment or sustainability more broadly as an issue. Five years ago, you had a handful of people who understood this as an opportunity. But most business leaders thought of the environment as a burden, as regulations to follow, costs to bear, risks to manage.

What has now become clear is that many companies see that it’s true that there still are those issues to manage, but they understand that if they manage those regulations, risks, costs, etc. better than the competition, they will step out in front of the pack.

More importantly, a significant number of corporate leaders now recognize there to be an opportunity in addressing environment issues and sustainability. Particularly to the extent they can solve their customers’ environmental challenges, and in doing so become positioned for business success.

People have come to recognize that like any other area of business activity, whether it’s research and development or marketing or advertising, you need to do it in a business-like fashion, which means that not every initiative will pay off. You’ve got to be tough-minded and do your homework, be analytically rigorous. If you bring that kind of sharp-penciled approach to your sustainability efforts, there’s a much higher probability that they will pay off.

And I think it turned out for a lot of companies that just following the trend that others had set didn’t necessarily work out well. You’ve got to tailor the program to your own company’s needs and your own industry’s requirements.

Makower:: How do you do that sharp pencil thing when so many of the payoffs beyond eco-efficiency are intangible?

Esty: You need to become more sophisticated in the analytic framework you bring to bear. That’s one of the contributions I think "The Green to Gold Business Playbook" makes, is to provide tools and checklists and paradigms and models to work with, so that you can get people to be quite systematic in how they chase down where the costs will be and where the paybacks will be. The core framework that we’re bringing to bear of being analytically rigorous and trying to be quantitative is going to yield a higher return on investments made in the sustainability arena.

Makower: What kinds of things haven’t worked?

Simmons: Some companies, for example, jump into solar because it feels like a good PR thing to do. And they might invest in making those capital investments in solar panels on their own, as opposed to leasing the services through companies that would provide the power and own the panels and so forth. They may not have approached that from a hard business standpoint. They may just approach that from “This is the right thing to do” and find that it’s not a smart investment.

And that actually ends up undermining their case over time for other investments. Whereas others that do careful systematic analyses of where they are, and look at the range of options and figure out what the most cost-effective thing that is also going to reduce their footprint -- those are the ones that make sense.

Esty: I think the whole social responsibility framework has now been largely discredited. Because, the social responsibility model told people you should pay attention and do good, and I think that model had a tendency to get people to try to do good indiscriminately without thinking about where the real opportunities were. Frankly, it led people to do things like invest in high-cost, low-return sustainability initiatives. And it actually narrowed their vision, because it basically was about being less bad, rather than understanding the opportunity to cut costs and find efficiencies and to build customer loyalty and improve employee engagement and do all the kinds of things that actually have a positive payoff.

Makower: One of the things that seems to stymie a lot of companies is the overwhelming nature of what needs to be done within a company. I think they get paralyzed -- particularly the newbies, but not necessarily just the newbies. How do you overcome that overwhelmed state?

Esty: One of the things the "Playbook" does is take this whole big area apart and give guidance, business function by business function. And it allows people to not feel like it’s overwhelming, but to dig into whatever piece is in front of them. So, there’s guidance on what to do if you’re in the finance department, or the marketing department, or the buildings department and facilities department. It gives a chance to take issues from high strategy down to a much more on-the-ground and approachable level.

Simmons: The other general philosophy I think that runs throughout the "Playbook" is that it takes a village to get success. The companies that thrive are the ones that integrate this over time into their cultures and it goes beyond a sort of small, balkanized group of the sustainability department, but actually spreads throughout.

Makower: It sounds like you’re still pretty optimistic about what’s going on given that the economy, the politics, and the challenges companies face.

Esty: I am quite pessimistic about the prospects of our political system, particularly in Washington, to help move us forward on a whole range of challenges. But I’m pleased that in the vacuum left by that political breakdown, so many companies are stepping up and doing very exciting things and proving that being a solutions provider is both possible for businesses and in many cases will pay off in the marketplace.

Makower: Do you think that this is happening in enough companies -- that we’re not just seeing a few good apples unspoil the bunch, to pardon the tortured metaphor?

Esty: I think you’ve got companies that are finding their way forward. Not everything is paying off, and I think that was an important lesson. You know, we had some environment and sustainability gurus saying, “Well, anything you do in this arena is going to pay off.” And that proved to be absolutely wrong. You do have to be careful and analytically rigorous as you look at what the opportunity set is and figure out where the business case lies.

But, I think you’ve got a number of companies that are breaking new ground. I think what Dow is doing -- providing sustainability solutions, particularly in advanced materials, improving the efficiency of wind turbines and paints, and windows -- is quite stunning. I think what DuPont is doing in the way of biofuels, and the work they’re doing to try and transform the opportunities from biology to solve environmental problems, is fantastic. GE has done a fantastic job of betting across the board on a clean-energy future. They’re deep into building out the charging stations needed for an electric vehicle future. And they just have announced that they’re going to build a new major facility to build photovoltaic cells [in the U.S.] and compete with places like China.

So, I’m very excited about the leadership of a wide range of companies -- and not just big ones, but small ones too -- that are being entrepreneurial, seeing potential problems in the sustainability world and then jumping in to solve them.