2. Formulate Green Strategy to Complement Traditional Strategy

A green strategy for an enterprise, whether public or private, government or commercial, complements or transforms the business, operations, and asset strategies that the enterprise already understands and articulates. As in any other aspect of strategy formulation, cost reduction and revenue growth are only two important dimensions to consider. Other areas include meeting existing regulatory compliance, anticipating new legislative measures, establishing a competitive position and brand image, and building appropriate perceptions in the global community. Green strategy also offers opportunities for enterprises to consider the consequences of their activities, products, and services beyond the four walls of their own business.

The principles that form the basis of a green strategy should lead an enterprise to make decisions based on solid business logic and good business sense, but also to improve environmental stewardship. The four principles in Figure 2.1 could be the tenets of any company’s enterprise-level green strategy. We discuss each of these principles next.

Figure 2.1 Potential tenets of enterprise-level green strategy

Source: Journal of Business Strategy

As with any new strategy formulation, green strategies need to consider and address interdependencies with other corporate programs and projects. In fact, an enterprise-level green strategy can be one key ingredient of a broader corporate social responsibility program, which companies are now formalizing more prevalently than in the past.

Businesses that cultivate a green culture today often stand out as being unique; other times, the differences in a green culture are imperceptibly small yet effective. In the former case, an environmentally sound culture is often part of the core business strategy to encourage “green” considerations in every decision that is made. In the latter, reinforcing simple courtesies that each employee can give to the environment might also have a significant impact on a company’s bottom-line expenses—and even top-line revenue performance.

At some companies, the very idea of discarding an empty beverage container anywhere other than a designated recycle bin makes employees uncomfortable. At other companies, failing to turn off the lights in a conference room as the last person exits is a minor taboo. Still other companies measure and report the quantity of recycled office-use paper as a percentage of new paper purchased through its procurement organization, and set performance targets to increase the amount of recycling as part of continuous improvement efforts. Recycled paper that outside vendors purchase is sometimes considered a revenue stream.

In one straightforward example, a Fortune 500 global corporation in the industrial sector identified a critical need for global warming and climate change training so that employees could easily make connections between their daily activities and the improvement they could make to global environmental trends. In another example, IBM organized a community-building event in California so that employees could volunteer to pick up trash at a neglected beach.

Leading practices that cultivate a common culture of environmental awareness and support a green strategy are already emerging and developing in many companies. Effectively managing change to achieve a common culture of awareness and action that supports a green strategy should anticipate and provide for such organizational needs as leadership, tools, training, performance measurement, roles and responsibilities, and communications. Figure 2.2 shows a few key leading practices, which we briefly describe next.

Figure 2.2 Leading practices that cultivate a common culture

Senior-level support and sponsorship of environmental improvement initiatives with other business partners or in the global community, such as an investment in reforestation, can be another powerful driver of cultural change. This visible investment also enables a workforce to better understand how corporate priorities are changing. As companies organize volunteer efforts that build teams and improve local communities, communicating how these efforts align with broader environmental stewardship goals can drive cultural change.

Reporting tools (ideally, with real-time reports) that inform every employee about how the company is doing with respect to its environmental goals can also foster a common culture of awareness and action. Such tools can report on energy or waste reduction to build a quality-centered culture. As in building a quality culture, the tools and measurements are similar, the business processes are largely the same, the role of leadership is still crucial, and new accountability is still assigned.

Training that connects the science of global warming, the associated climate and weather change, and depletion of scarce natural resources with actions that employees can take to make a difference represents a level of sophistication above awareness training. Many companies are now in a position to effectively provide this type of training to their employees. Environmentally conscientious companies can adapt employee new-hire training and refresher training to strengthen conservation behavior, such as turning off lights and recycling paper. The method by which training is delivered can also offer a case example or a learning exercise. For example, using online, web-based, or webinar-style training tools eliminates travel and the need for classroom facilities. If training is onsite, instructor-led training can be combined with other essential business activities that require co-location, such as job skills training, to avoid additional travel. In a third scenario, offering training on-site in the workplace minimizes environmental impact.

Simple measures, such as number of bottles and cans recycled from different facilities, weight of paper recycled, and number of people who volunteer for environment improvement projects, can facilitate cultural transformation. These performance indicators can apply to all employees in an organization, whereas others might be customized for a specific division, site, or department. Fuel consumption, weight of scrap material, and volume of byproducts from chemicals consumed might apply specifically to manufacturing facilities. Office facilities might measure electricity usage and percentage of electricity supplied by renewable methods, or the level of telecommuting, web-conferencing, and videoconferencing in lieu of air or automobile travel. Public or investor relations departments might qualitatively measure favorable and unfavorable news reports and articles that have been written, or possibly capture announcements from local city officials that recognize the community contributions from employees.

After identifying the key performance indicators, implementing a measurement system, and establishing baseline performance, an organization is well positioned to begin setting improvement targets and communicating how each employee can help meet those targets. Even though everyone can contribute to improvements, explicit ownership and accountability should be assigned so that as plans are implemented and performance targets are achieved, “benefit owners” and their teams can be recognized. Likewise, when improvement targets fall short, benefit owners can lead efforts to identify the root cause and implement corrective action. Beyond individual accountability, departments, sites, and business units can all have environmental stewardship goals aligned with enterprise objectives.

Enterprises that already have a portfolio of human resource, innovation, and knowledge-management tools can apply them to support a green strategy and ensure that every employee has responsibilities and defined roles to help move a company toward environmental sustainability. For example, Centers of Excellence (COE) can include elements of environmental stewardship in their charters. Many existing performance-management approaches also allow employees to document their goals, discuss them with their managers, and then review progress toward achieving those goals at regular intervals. Typical goals include contributions to cost reduction, revenue generation, thought leadership, and product innovation. By adding dimensions of responsibility for improving environmental stewardship, reducing a company’s carbon footprint, or organizing other employees to generate new ideas, every employee can have an important, recognized role as part of a common culture of awareness and action.

Centralized, decentralized, and even hybrid (combination) models for managing change are all legitimate for companies to consider adopting, and each of them can appropriately manage the risks associated with cultural transformation. Most enterprises operate using at least some principles of scarce funding resources, in which decisions to invest in projects that align with a green strategy could divert funds and sponsorship away from other, more traditional projects. As these decisions are made, it is critical to ensure that the company does not suboptimize core business needs or encounter unwanted risks. For example, a company would want to scrutinize a decision that could divert funds away from scheduled (or even overdue) manufacturing facility and equipment maintenance in favor of installing photovoltaic technology to reduce future electricity costs.

Figure 2.3 Strategy pyramid and operations influenced by a green strategy

Source: Journal of Business Strategy

The green movement is now transforming the landscape of business in another new way. New business models can help companies focus on improving environmental stewardship and establish profitable new market positions. Intel, traditionally a manufacturer of semiconductor computer chips and chip sets, entered the business of manufacturing photovoltaic solar cells for makers of solar modules. In 2008, Intel spun off its SpectraWatt business to focus on this area and capture new growth opportunities in the solar arena.[5] Applied Materials, a company that traditionally has developed and manufactured the semiconductor manufacturing equipment used by companies such as Intel, is developing a position in the business of solar-generated electricity. Initiatives to build a new business model in this area at Applied Materials range from making acquisitions to pursuing technology innovation. Applied Materials’ acquisition of Baccini, a leading supplier of automated metallization and test systems for manufacturing photovoltaic cells,[6] accelerated and strengthened its solar-oriented business model, as did its development of technology such as the Applied SunFab thin film line, for manufacturing thin-film silicon solar modules.[7] As early as 2006, Applied Materials had in place a strategy to reduce the cost per watt of solar power.[8] Other traditional companies in the semiconductor manufacturing industry are also gaining strength in the photovoltaic (solar energy) market. IBM’s researchers have developed a new technology based on thin, flexible films that is being pursued as a competing product to films based on silicon wafer technology.[9] Even the funding and business leadership structures that companies are using to establish new market positions and support environmental stewardship are reaching an impressive level of sophistication. Intel has leveraged its New Business Initiatives group and Intel Capital, the company’s global investment organization; IBM has launched Project Big Green and a Big Green Innovations leadership team to manage a variety of large-scale programs and collaborations, including its Green Data Center offerings.

The high-tech sector is only one area in which traditional, sometimes mature business models are innovating to establish new market positions. For example, General Electric’s Ecomagination business initiative aims to meet customer demand for more energy-efficient products while also driving growth for the company. Reflecting a commitment to finding innovative solutions to environmental challenges, this business initiative helps bring such technology as wind turbines and solar energy to customers.[10]

As early as 2006, Sir Richard Branson, chairman of Virgin Group, sought to advance Virgin’s environmental stewardship initiatives. That year, he announced Virgin Fuels and a new business model to fund environmentally friendly projects and business ventures to combat global warming and promote alternative energy. The products and services that the Virgin Group offers span such areas as mobile telephony, transportation, travel, financial services, leisure, music, publishing, and retailing. Although most of its business operations are in well-established markets, Virgin Group invests some profits from those businesses to fund initiatives for environmental stewardship.[11] By 2009, the Virgin Green Fund had become the primary clean energy and energy-efficiency vehicle for Virgin, making investments in areas such as turning biomass into butanol (a fuel more similar to gasoline than ethanol)[12], building a factory to manufacture flexible thin-film CIS (copper indium diselenide and related alloys) solar technology,[13] recycling petroleum and metal[14], using efficient lighting[15], and investing in automobile driver safety and efficiency technology.[16] But companies do not need to invest billions—or even hundreds of millions—on “make-or-break” business decisions to establish a market position in environmental stewardship and benefit from favorable brand recognition.

Many companies today are gaining at least some level of recognition in the marketplace for incremental improvement efforts for environmental stewardship, thus building their brands at the same time. Meaningful progress toward becoming a greener business can establish a clear position of higher social responsibility for virtually any organization; this is becoming increasingly important to consumers and other business partners. This is true even when the products and services that a business offers are not necessarily themselves better for the environment. Indeed, a company can legitimately make large strides toward becoming carbon neutral in today’s business environment by simply purchasing electricity that has been generated from renewable sources instead of from burning fossil fuel.

Efforts to increase awareness and improve customer perceptions of corporate brands are made visible through traditional means such as press releases and all forms of advertising, and by making significant “green” investments and entering new partnerships with objectives to improve the environment. Office Depot, for example, opened a “green” store in Texas in 2007 that incorporates an energy-efficient green building design and new approaches to green visual merchandising.[17] This is only one move that Office Depot has made to build a greener brand and meet the needs of a customer base that is increasingly asking for environmentally friendly products. In one survey of 2,500 business professionals, more than half indicated that they are interested in making their office greener.[18] The United States Postal Service (USPS) is another enterprise that has tied its brand to environmental stewardship: The USPS has announced that it will cut energy use by one-third by 2015. The range of tools the USPS plans to use range from simple steps such as turning off lights, to significant equipment changes that involve renewable energy systems and alternative fuel vehicles.[19] PepsiCo has analogous goals, to reduce electricity and water consumption by 20 percent and fuel consumption 25 percent by 2015.[20] Its competitor, Coca-Cola plans to improve water efficiency 20 percent by 2012, among other goals [21], with an aspirational goal of being “water neutral.”[22] PricewaterhouseCoopers, LLC (PwC), a leading business audit services firm, plans to cut its greenhouse gas emissions 20 percent by 2012 from better managing travel, office space, and commuting. PwC recognizes that the benefits of these actions go beyond improving environmental impact; they also affect the firm’s reputation and can strategically differentiate a company in the marketplace in areas such as recruiting and workforce engagement [23]. By 2012, JPMorgan Chase is another company that wants to achieve “green” brand recognition by working to reduce carbon emissions 20 percent through facility efficiency improvements, conservation, and the purchase of renewable energy.[24] An online entertainment guide in the U.K., Localnightsout.com, has taken carbon-neutral positioning a step further and established itself as a “carbon growth negative” company, partly by pledging to plant a tree for every new paid display on its web site. It even issues each customer a certificate confirming the planting.[25]

Google, Cisco, Kodak, Wal-Mart, Duke Energy, and Yum! Brands represent only a handful of other companies whose brands are benefiting from a relatively early adoption of green practices and objectives.[26] History reminds businesses that even differentiation based on megatrends has a finite lifespan. It has been years since automatic transmissions were widely advertised as a differentiator in automobiles, and even longer since color differentiated televisions from their black-and-white predecessors.

Government organizations, analyst opinions, new industry awards, and watchdog organizations are leading other efforts to improve perceptions and position corporate brands for a greener world. The U.S. Environmental Protection Agency (EPA), for example, maintains a “Green Power List” of organizations that purchase electricity generated from clean, renewable resources, such as solar, wind, geothermal, biogas, biomass, and low-impact hydro sources.[27] The EPA also presents a prestigious Climate Protection Award.[28] Innovest has developed its proprietary EcoValue’21, an assessment tool that correlates eco-efficiency with financial performance and value-creation potential.[29] Similarly, the Ceres investor coalition ranks leading companies for their climate change strategies.[30] Innovest and Corporate Knights maintain an annually updated list of the “global 100 most sustainable corporations.”[31] Energy Star, the World Environmental Center (WEC), the Council on Economic Priorities (CEP), and the International Energy Agency (IEA) are just a few organizations that bestow awards on companies for their leadership roles as environmental stewards. Also, analysis from research organizations such as Gartner, Inc., and Forrester Research, Inc., increasingly recognizes companies that demonstrate strength in green business practices. Being at the top of environmental stewardship ranking lists, receiving awards, and gaining favorable analyst coverage has become a competitive tool for companies to advertise and strengthen their brand. At the other end of the spectrum, rankings such as the “Climate Watch List” of laggards compared to industry peers [32] may have different implications for brand recognition.

Not all industries are displaying their green activities with the same degree of enthusiasm, though. Most companies are quick to declare carbon neutrality or establish environmentally friendly practices before definitions and standards for compliance are fully mature, but others are more careful. The wine industry, for example, recognizes that being green, biodynamic, sustainable, and organic all have important and potentially different implications for their various customer segments. Cohesive and meaningful answers are needed for marketplace questions regarding green involvement in this industry.[33] For example, one winery that uses fewer harmful pesticides in its vineyards might want to project a certain image of “being green” to its target customers. Another winery that uses environmentally conscious packaging with its products might use a different image of “being green.” Without a way to remove the ambiguity in the meaning of “being green” for two such companies, confusion in the marketplace could result around product attributes that customers deem important.

Regardless of the specific approach, pursuing valuable and environmentally beneficial initiatives is undoubtedly helping companies reposition their brands in the global marketplace and achieve a sustainable competitive advantage. All businesses have many options to create stronger brand recognition and improve their market position; they simply need to consider which options and actions to take when identifying, prioritizing, implementing, and communicating progress toward environmental sustainability.

Environmental stewardship is one area of brand development in which companies can benefit from communicating both internal and external progress: They can emphasize more efficient operations and environmentally friendly practices internally, and they can point to external progress by offering “greener” products and services to customers—who, in turn, provide benefits to the environment when using those products.

Every business has its own perspective on the customers and customer segments it serves, as well as a viewpoint on how to effectively sell to each of those segments. When rethinking a company’s product and service portfolio to improve environmental stewardship, companies must understand the value created from the customer’s perspective. Certainly, companies can view green products and services in more than one way based on customer value, but useful categorizations might focus on performance, ingredients, substitutes, and innovative new values. Each of these categories are discussed next.

Some consumer-oriented products that fit into this category include energy-efficient household appliances such as refrigerators and ovens, efficient lighting technology, motion-activated light switches, and fuel-efficient automobiles that burn traditional fossil fuels. Energy-efficient heating, ventilation, and air-conditioning equipment also fits into this category. Alternative, energy-efficient building materials also have been growing more popular for several years. In fact, a number of products in this category are already mature enough that legislation likely will become more pervasive and will accelerate market adoption. For example, recent actions by some governments to phase out incandescent lighting will likely accelerate the adoption of more efficient lighting technology.

Other consumer-oriented products are evolving in the efficiency category, and more are yet to be invented. Sony’s green television is an example of a product that consumers use every day: Adding an easily described feature that more efficiently delivers lighting to conserve energy can help Sony differentiate its product with existing customers and reach a potentially new customer segment.[36] Sanyo has also announced plans to launch a green TV[37] that can conceivably compete in the same space.

Business-oriented products and services are also developing in this category. In 2007, IBM announced that it would partner with APC to create an energy-efficient Green Data Center for Bryant University. About the same time, IBM announced that it is using state-of-the-art technology to build a Green Data Center as part of Project Big Green to help the company and its clients reduce energy costs.[38] Market adoption has continued: IBM announced in 2009 that it would deploy energy-efficient, green Scalable Modular Data Centers in a $3.1 million agreement with Religare Enterprises Limited (REL), one of the leading integrated financial services groups of India [39].

Companies must communicate performance improvement information to customers and articulate an explicit connection with environmental stewardship. Communicating the cumulative environmental benefits over the product’s lifetime and comparing the overall environmental impact with that of traditional alternatives can be effective.

Some ingredient-based green products have been available and widely used for many years. One example is recycled paper in its many different forms. Unleaded gasoline is another early example of an ingredient-based, environmentally friendly product; it replaced leaded gasoline several decades ago.

More recent examples of ingredient-based products are emerging in virtually every industry. Consumers can now purchase bottled drinking water from brands such as Arrowhead [41] and Poland Spring [42] in eco-designed bottles that have a smaller environmental impact. Although these bottles are still made of plastic, which is a subject of ongoing debate over bottled versus tap water,[43] they use less material to manufacture, are lighter to transport, and are easier to crush for recycling. Organic jeans made by Greensource are now part of private-label clothing lines that Wal-Mart and Kmart stores offer.[44] Businesses can now purchase electricity that has been produced from renewable energy sources, wood can be purchased from forests that were replanted after logging, and reclaimed water can be used in some areas for irrigation. In fact, any product that is produced from recycled materials or manufactured by more efficient, environmentally friendly means falls into this category.

Businesses are also developing innovative ingredient-based services that differ little from traditional offerings but still improve the environment. Many hotels replace towels and bedding only when the customer wishes (the customer usually places them on the floor or leaves an indicator card on the bed) instead of automatically doing this every day. In this case, the customer experience is virtually unchanged, but the impact on the environment from water usage, detergent chemicals, and washer and dryer energy consumption is significantly lower. Starwood, Hilton, and Marriott hotels are just a few that offer this service.

AISO.net, a company that has partnered with IBM, claims to be the first company with 100 percent solar-powered web hosting. Moreover, the company has reduced its power and cooling costs associated with the company’s IT operations by 60 percent through a massive consolidation effort.[45] This company provides another ingredient-based product whose environmental stewardship role is valuable to customers only if it is effectively communicated.

Companies must communicate the essential “ingredients” that go into the product before it reaches the customer and why they are important to the environment. Whether the ingredients are recycled content, less wasteful manufacturing processes, or more efficient transportation and delivery modes, customers need to have access to the information so they can make an informed purchasing decision to improve their role as environmental stewards.

Other substitute-based products include many mature but still-improving solutions that consumers are more rapidly adopting. These include on-site photovoltaic or wind-driven generators as a substitute for utility-supplied electrical power, solar or geothermal water and air heaters as an alternative to gas-powered systems, and modes of transportation that consume less fuel and result in a smaller carbon footprint. For example, public transportation and carpooling are well-established substitutes for individual automobile transportation.

On an enterprise, macro scale, nuclear power facilities, hydropower, or “wind farms” can represent substitute electricity-generating solutions for utility companies that might otherwise construct more traditional coal-burning power plants. To the end user of electricity, however, the product is an ingredient-based one.

Companies should carefully consider where the sources of green ideas will likely come from and how they should develop those ideas. Sometimes identifying and evaluating green ideas can leverage traditional stage-gate processes from existing research-and-development (R&D) practices. For example, “IBM’s Big Green Innovations was built extensively on innovation with the corporation’s existing core competencies.”[46]

GE Money, a unit of GE Corporation, introduced its Earth Rewards credit card in 2007. GE advertises that it will invest 1 percent of a cardholder’s purchases in emission-reduction projects. Promotional material claims that $9,000 a year in purchases offsets all the emissions the cardholder is expected to produce in a year from travel and home energy use.[47] The Nature Conservancy Visa credit card offers an analogous product: Among other benefits, trees are planted based on enrollment and use.[48] These are clearly differentiated from other points-based consumer loyalty programs.

“Green rooftops” are another innovation-based solution that helps building-management companies, owners, and occupants to improve their impact on the environment while benefiting from an improved rooftop space. By 2006, Chicago had installed more than 200 green roofs, covering 2.5 million square feet of space with garden plants and other foliage that both absorbs carbon from the atmosphere and provides vegetables and new recreation space.[49] The 2008 Green Roofs for Healthy Cities Awards went to designs in a diverse group of cities, including Chicago, Vancouver, and Austin.[50] The Schwab Rehabilitation Hospital in Chicago uses its green roof as a place for patients to practice life skills or participate in horticulture-oriented physical therapy without having to leave the security of the hospital.[51]

Green financial products are another example of an innovation-based offering that allows investors to channel money into companies that are recognized for their environmental stewardship. For example, Green Century Capital Management administers Green Century Funds, a family of environmentally friendly mutual funds that include the Green Century Balanced Fund and the Green Century Equity Fund.[52]

Innovation-based information services are also developing and being offered to consumers. In 2008, Hewlett-Packard started its Eco Solutions program with an ambitious goal of allowing companies to reduce their environmental impact by 30 percent. The program includes a carbon footprint calculator and a printing assessment that measures a company’s impact and costs from its printing activity.[53] Xerox also offers a carbon calculator as a service to customers, to track the environmental impact of office equipment usage.[54]

Capital.com, a hub for small businesses, highlights that companies can benefit from energy audit services that help business leaders learn how to better conserve energy by taking advantage of solar power, water conservation, and other energy-saving methods. Taking appropriate post-audit action not only increases energy efficiency, but reduces operating costs and gives the company some positive “We’ve gone green” publicity.[55]

Other innovation-based products and services have been developed to help businesses focus on capturing and managing information, to make better decisions to improve environmental impacts. IBM offers its Green Sigma solution, which combines sensor-based measurements with statistical analysis and dashboard-reporting technology to show business leaders their carbon footprint and other areas of waste. Microsoft’s Environmental Sustainability Dashboard also makes businesses more aware of their impact on the environment.[56] In 2008, the Accenture Green Technology Suite was introduced to help organizations use information technology to assess their green agenda, including a green maturity model to assess environmental efficiency.[57]

Every industry has examples of new products and services that germinate from green strategies, and the number of them grows every day. Clearly, top-line revenue growth can benefit from an enterprise-level green strategy. Companies still have enormous opportunities to differentiate themselves from competitors through products and services based on efficiency, ingredients, substitutes, and innovation. First movers are already strategically positioning themselves in the marketplace and establishing market share early.

Some partnerships are forming for enterprises to more effectively take action in the community and improve infrastructure for public use. In one partnership formed in 2007, the San Jose Unified School District, Chevron, and Bank of America collaborated to establish the largest K–12 solar power and energy-efficiency program in the U.S. This collaboration is expected to yield benefits of $25 million over the life of the solar power system and is heralded as a model for other public sector renewable-energy programs.[58] Without a partnership such as this, the project simply might not have been possible.

The Green Highways Partnership (GHP) is another example in which concepts such as integrated planning, regulatory flexibility, and market-based rewards allow for environmental streamlining and stewardship in all aspects of the highway lifecycle. Global corporations such as Chevron have supported this partnership, and it also includes members of government agencies, such as the U.S. Environmental Protection Agency (EPA), the U.S. Federal Highway Administration, and the Maryland State Highway Administration.[59]

Other partnerships have formed with the objective to improve business performance for environmental stewardship. Ricoh, a $17 billion Japan-based company that offers digital office solutions, has organized a comprehensive network of green partnerships to promote effective environmental conservation. These green partnerships include customers, logistics companies, recycling companies, nonprofit and nongovernmental organizations, suppliers, and administrative organizations.[60]

The EPA Green Power Partnership is a voluntary program that supports the procurement of green power by offering advice, support, tools, and other resources. Participating in this partnership can help companies lower the costs of buying green power, reduce their carbon footprints, and communicate their leadership in environmental stewardship. This partnership explains to participants that buying green power is one of the easiest ways for a company to improve its environmental performance.[61] The Global Water Challenge (GWC) is one example that focuses on water and sanitation, not carbon. This coalition of companies has a common goal of universal access to safe water and sanitation.[62]

Other partnerships have formed to help companies develop new products that might not have been possible with the businesses working separately. For example, International Paper and Green Mountain Coffee Roasters won a Sustainability Award in 2007 from the Specialty Coffee Association of America (SCAA), the world’s largest coffee trade association. The award came in the category of “Sustainable Business Partnerships Resulting in a Sustainable Product” for the partnership that resulted in the ecotainer cup, the first hot paper beverage cup made from fully renewable resources.[63]

As businesses invest in partnerships and alliances to improve environmental stewardship, they must consider their alignment with strategic business objectives. Partnerships can complement core competencies to better meet market needs, jump-start involvement in local and global communities, and support philanthropic efforts that boost brand recognition and public perception.

Suppliers, channel partners, and logistics partners are also important business relationships to consider in the context of green strategy. Many companies already recognize that improving the environment involves not only their own environmental stewardship position, but also the position of their upstream suppliers and downstream channel and logistics partners. For example, Dell has told its major suppliers that it plans to take their emission levels into account when deciding whether to continue doing business with them. This message came at a time when many of them had not yet even calculated their emission levels, according to Dave Parker, Dell’s director of environment, health, and safety.[64] A 2008 cross-industry survey of more than 200 procurement professionals showed that many businesses support practices like this, although opportunities to improve in this area still exist. The survey found that one-third of the respondents are already following green practices according to established company policies, and nearly a quarter said their companies have written their green purchasing policies.[65] A different survey in 2009 strengthened the finding that a gap remains to be closed: It concludes that only one in ten companies actively manage their supply chain carbon footprint, and that more than one-third do not know the level of emissions in their supply chain network.[66]

Wal-Mart provides an example of a company that is successfully working with its suppliers and other stakeholders to improve environment stewardship throughout its value chain. One of its many “sustainable value networks” aims to reduce the amount of packaging for products on the shelf. In one successful case, General Mills straightened the noodles offered in its Hamburger Helper product. Straight noodles lie flatter than curled ones and require less space, so this made the packaging box smaller. As a result, the company saved 900,000 pounds of paper fiber every year, reduced General Mills’ greenhouse gas emissions by 11 percent, and took 500 trucks off the road. Moreover, the effort increased the number of Hamburger Helper boxes on Wal-Mart shelves by 20 percent.[67] This is only one of many successes that the sustainable value networks have achieved. Another company, Tesco, introduced earlier in Chapter 1, “Driving Forces and Challenges That Organizations Face,” works with its customers by allowing them to return excess packaging to stores for recycling.[68] This practice essentially allows customers to share the burden and cost in a “reverse logistics” channel for recyclable packaging.

In addition to suppliers, logistics and channel partners are important to consider. Even though transportation often accounts for only a small part of a product’s carbon footprint, its contribution varies by product category and should not be overlooked as a potential area of opportunity. Some companies own and operate their own retail stores and logistics operations; others partner with distributors, retailers, and third-party logistics providers for the services. Companies that partner for these services to bring their products to the marketplace have essentially externalized the environmental impact of the associated activities so that the impact occurs outside the four walls of the enterprise. Many times the business drivers to outsource are well aligned with environmental stewardship and take advantage of economies-of-scale and efficient retail schemes. However, paradoxes do arise. For example, service agreements with logistics companies might prescribe reliability and on-time freight-delivery metrics that drive the provider to use air and truck transportation modes instead of more efficient means such as ships and rail. Reducing the need for company-owned warehousing can also paradoxically result in inventory shifting to public roads or into containers that contribute to highway congestion and inefficient space utilization. Some estimates show that congestion costs account for 8.5 percent of the gross domestic product (GDP). Clearly, the negative effect on waste can be large when logistics are not managed with environmental stewardship in mind.[69]

Channels through which companies offer products to customers are evolving under green strategies. For example, today consumers often have a range of shipping options for products they order through catalogs or web sites. Overnight air versus ground shipping is a common combination. A new option, “green delivery,” is easy to imagine as an enhanced shipping option: The shipping company could consider not just timing, but also the greenhouse gas emissions from each transportation mode to minimize environmental impact. And with enterprises such as the USPS setting goals to cut energy use by one-third by 2015, offering choices like this might make more sense as the future unfolds over the next several years.

When developing a green channel strategy, businesses can follow channel strategy best practices from areas outside environmental stewardship. For marketing and sales, channels with low carbon footprints, such as Internet portals, virtual shopping carts, online order status tracking, electronic billing, and online customer (self) service are all low-cost, low-energy-consumption ways to reach, service, and sell to customers. For distribution channels and transportation modes, some air freight can be shifted to trucks or ships; and some truck cargo can be shifted to railways through transportation optimization. Outsourcing to logistics companies can take better advantage of economies-of-scale, with container shipments more likely to be full and making the most efficient use of each transportation mode. Further steps might include giving priority to fleets that consume alternative fuel. Some products, such as software and entertainment media, can shift from physical to online distribution channels that have a lower environmental impact.