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July 22, 2016

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Green practices don’t absolve our responsibility for sustainable future

IN a society nurtured on market-based doctrines, it is imperative to justify new concepts in terms of economics.

Thus in spite of increasing signs of environmental degradation as a consequence of reckless growth, there have been repeated portrayals of green concepts as innovation-promoting, job-creating, profit-friendly and GDP-driving forces.

One such attempt is set out by E. Freya Williams in her book “Green Giants: How Smart Companies Turn Sustainability into Billion-Dollar Businesses,” which explains how some of the world’s largest companies have profited without compromising the environment.

The “Green Giants” referred to by Williams include many distinctive billion-dollar businesses committed to sustainability, social conscience, as well as profit.

According to one study, companies with a social commitment outperform their profit-driven competitors on a range of metrics. By one calculation, publicly traded Green Giants firms average 11.7 percent higher public returns than their leading rivals.

It is not easy to achieve green transformation. As the author observes, “Bringing a sustainable business idea to market is inherently fraught with obstacles. You are swimming against the tide of conventional business theory and practice.”

What is common among such companies is that they all have an “iconoclastic leader, disruptive innovation, a higher purpose,” a mission that is “built in, not bolted on,” and a “new behavioral contract.” To integrate social good with profit-making entails iconoclastic leaders who display four characteristics, referred to by Williams as the “4 C’s.”

“Conviction” — In 1999, after Chipotle founder Steve Ells visited an Iowa farm that supplied pork to his restaurants, he was so disturbed by what he saw that he decided to buy his meat from farms committed to humane practices. This led to the largest US restaurant seller of naturally raised meats. In 2014, Chipotle’s revenues topped US$4 billion.

“Courage” — In 2001, Jeff Immelt, then CEO of General Electric, came up with an ambitious corporate strategy that included investing in clean technologies, improving energy efficiency and reducing greenhouse emissions.

“Commitment” — In 2008, Elon Musk, co-founder and CEO of Tesla, was on the verge of losing US$70 million on his much-awaited Roadster, a brand of electric car. The first recipients of the cars were enthusiastic, and then private equity investors put US$82.5 million into Tesla’s expansion. By 2014, Musk’s worth rebounded to US$8.4 billion.

“Contrarian” — Hannah Jones became Nike’s vice president of corporate responsibility in 2004, when the athletic apparel brand was reeling from a labor scandal. She worked to make Nike’s supply chain transparent by disclosing the location of every factory it worked with. She was also behind the development of the brand’s Flyknit technology, which produces 80 percent less waste and led to a billion-dollar product line.

These successes, claims Williams, suggest the irrefutably positive impact of sustainability on business profitability. “Ideas pioneered by the Green Giants, ideas that once seemed niche, have become so popular that they’ve changed expectations of entire industries and are becoming the new normal,” she observes. She adds that efforts from the Green Giants mean that “green” and “sustainable” are no longer seen as synonymous with “primitive, unsophisticated and low-tech.”

Five practices can lead to disruptive innovations.

1. “Make it better, not just greener” — At the 2012 Summer Olympics, 400 athletes wore neon yellow Nike Flyknit shoes, an eco-friendly shoe that is 19 percent lighter than other alternatives.

2. “Embrace the counterintuitive” — Green Giants engage in “calculated counterintuition” because they understand that previously successful business models can quickly become obsolete.

3. “Bet on yourself” — Green Giants support their convictions by investing in R&D, as typified by Elon Musk who sank his entire fortune into Tesla.

4. “Engage the problem solvers” — Green Giants do what other people say can’t be done. For instance, a 1,000-member Toyota team worked around the clock and came out with a vehicle that can travel 66 miles on a gallon of gas.

5. “Cultivate pervasive innovation” —Green Giants instill respect for innovation in their company cultures.

What sets a Green Giant apart from its mundane rivals is purpose, not profit. A purpose-based company works to make the world a better place, elevate the human experience and safeguard the environment. Purpose-based companies consistently outstrip profit-focused competitors for three reasons: Clarity of purpose gives them focus and direction; employees are more likely to stay with Green Giant companies, and customers stay loyal to a brand with a social mission. As the book concludes, “When quality and price are equal, the most important factor influencing brand choice is purpose, outpacing design and innovation and brand loyalty.”

Green Giants integrate social purpose into all areas of their business, in terms of corporate strategy, organization, governance, cost and incentives.

In embracing responsibility and transparency, Green Giants exemplify the initiative to enter a new behavioral contract with the public, on the assumption that “If you are making a product, you’re at least partly responsible for it, from sourcing all the way through to end-of-life.”

This elevation of “greenness” as an article of faith is inspiring, though the whole faith is still predicated on consumption.

It is very well for companies to go for green in the rare condition where corporate profitability and social responsibility align. But this championing of transforming technologies or ideas is a luxury only a few big players can afford. Cut-throat market competition more often instills cynicism in corporate actors. Are the Green Giants really what they claim to be, or have they given themselves a coat of green paint as a marketing stunt?

Making a profound and lasting sustainable future will hinge more on the choices of individuals and governments.

Individuals can enforce fundamental change if they refrain from consuming unnecessary products, and governments can send strong signal if they decouple green policies from debates about growth.

As pointed out in “Trendy talk about ‘green economy’ misses need for more assertive government action” (July 12, Shanghai Daily), relying on corporate actors in the “green” economy and market mechanisms to lead us into a more sustainable future fails to recognize the depth of the transformation that is required. “Instead of rethinking our economies with a view to adapting their functioning to environmental limits and imperatives, today’s green economy seeks to redefine nature, in order to adapt it to existing economic systems,” according to its writers.

This led to a host of fancy market-based mechanisms like carbon metrics. “None of this prevents the destruction of nature; it simply reorganizes that destruction along market lines,” the article concludes.

As green ideas and innovations are obviously neither automatic nor inevitable for all players, they can be truly transforming when sustainability is viewed as a political priority, for only strong political will can overcome entrenched economic interests.




 

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