OpportunityisGreen

ByS.DevAppanahInTheCorporation,whatisnowamonumentaldocumentary,RayAnderson,founderofcarpettilecompanyInterface,confessestohisplunderingpast,“OnedayearlyinthisjourneyitdawnedonmethatthewayI’dbeenrunningInterfaceisthewayoftheplunderer;plunderingsomethingthat’snotmine,somethingthatbelongstoeverycreatureonearth.AndIsaidtomyself,mygoodness,thedaymustcomewhenthisisillegal,whenplunderingisnotallowed.Itmustcome.So,Isaidtomyself,mygoodness,somedaypeoplelikemewillendupinjail”.Ray’s‘confession’marksatippingpointintheworldofbusinessandeconomics.Foralongtime,wehavetakenforgrantedthatbusinesscanrapeandpillagetheplanetinsearchofprofitswhilehandingoutsmallamountsofphilanthropytonon‐profitstocleanupthemessthatisleftbehind.Capitalism,aspracticedtoday,mightbefinanciallyprofitable,butitisdefinitelyunsustainableforhumandevelopment.Wehavefailedtoattachvaluestoourlargestandfastdepletingstocksofcapital‐naturalresources,livingsystemsandtheenvironment.Weextractrawmaterialsatreallylowcosts,uselabourandtechnologiestotransformtheseresourcesintoproductswhichareultimatelysoldforprofits,andthensomehowdiscardthewastecreatedsomewhere.Atthesametime,wehaveingrainedourselvesinamindsetthathaslongbecomeobsolete.Wecontinuetodelineatefor‐profitentitiesascreatorsofeconomicvalueandnon‐profitorganizationsascreatorsofsocialvalue.Therearemanyinherentproblemswiththismindset.Wecanclearlyseethatthecreationofvalueineitherthefor‐profitornon‐profitsectorisnotcreatedinisolation.Businessesdocreateagreatdealofsocialvalueaswellaseconomicvalue.Bycreatingjobs,payingtaxesandprovidingproductsandservicestopeople,theyareintrinsicallycreatingsocialvalue.Non‐profitsalsocreateeconomicaswellassocialvalue;inmanycountries,NGOsrepresentasignificantpartofthenationalGDP.Theotherproblemwiththismindsetisthatitsanctionscompaniestoengageinsocialprograms(corporatesocialresponsibility)whichareexternalandatmostirrelevanttothecoreofit’sbusinessmodel.Italsoadvocatesmanynon‐profitstorelyonthe‘chumpchange’intermsofcharityorgrantsfromcompanies.AlthoughitdoessoundcharmingforacarcompanytoengageanNGOtoraiseawarenessonsavingturtles,itdoesn’thelpitbecome‘sustainable’inthelong‐run.Suchpracticeshavebecomepublicrelationsexercisesaimedatcreatingtheillusionthatcorporationsareconcernedcitizensliketherestofus.Overthepastfewyears,asmall,butgrowinggroupofbusinessleadersisbeginningtoacknowledgetheneedfortraditionalbusinessthinkingandpracticestobereformulatedtoaccommodateamoresustainablemodelthatcreatesandmaximizesnotonlyoneconomicvaluebutalsosocialandenvironmentalvaluesatthesametime.Thisnewphilosophyisbasedonemergingevidencethatbusinessperformancecorrelateshighlywithsocialandenvironmentalconditions.Likeaplant,it’sgrowthwillbestuntedifitisn’tinanecosystemthatprovidesaccesstosupportiveelementssuchassunlight,water,fertilesoil,andpropercare.Inshort,ithasbecomeprofitabletobesustainable.ThedebatewhetherbusinessshouldbecomemoreaccountabletosocietyandtheenvironmentcanbetracedbacktoeraofMiltonFriedman.Hewasastrongadvocateoflaissez‐fairecapitalism.Inhisbook,CapitalismandFreedom,Friedman,wrote,“thereisoneandonlyonesocialresponsibilityofbusiness–touseitsresourcesandengageinactivitiesdesignedtoincreaseitsprofits…”Toburdenbusinesswithwidergoals,heargued,was“pureandunadulteratedsocialism”.TheopposingviewsofRayAndersonandMiltonFriedmanshowushowpolarizedtheworldis.Ononesidewehavetraditionalbusinessleadersandintellectualswhobelievethatthecurrentformofcapitalismisasocialgoodbyitselfandthatmarketsshouldnotbeburdenedwithresponsibilitiesoutsidethecoreofbusiness.Andontheopposingsidearethenewbusinessandnonprofitleadersandintellectualswhobelievebusinessisaccountableformorethanthecreationofpureeconomicvaluebecausedecisionsmadeinthebusinessspheredocreatesocialandenvironmentalrepercussions,andviceversa.

Thesignsthatwe’relivinginapostFriedmanesqueworldarefastemerging.Youwouldn’thavetolookfartoseehowradicallytheclimateisfluctuating,thewideninggapbetweentherichandthepoorinaperiodoftremendouswealth,andthesharplydecliningsuppliesofourmostbasiccommoditiessuchascleanair,potablewater,arableland,fossilfuels,aswellasvitalindustrialcommoditiessuchasaluminum,steelandsilicon.Ifbusinessdoesn’tchangeitswayssoon,we’rescrewed.Intheirbook,TheTripleBottomLine,AndrewSavitzandKarlWeberclaimthat“…thetrulysustainablecompanywouldhavenoneedtowritecheckstocharityor‘giveback’tothelocalcommunity,becausethecompany’sdailyoperationswouldn’tdeprivethecommunity,butwouldenrichit”.Theycontinuetoaddthat“sustainablecompaniesfindareasofmutualinterestandwaystomake‘doinggood’and‘doingwell’synonymous,thusavoidingtheimpliedconflictbetweensocietyandshareholders”.Inotherwords,asustainablecompanyisonethatcreatesprofitforitsshareholderswhileprotectingtheenvironmentandimprovingthelivesofthosewithwhomitinteracts.Companiesshouldthinkofsustainabilityasmoreofanopportunitythanachallengethatdrivesthemawayfromtheircore.Opportunityinthissensecanpresentitselfinmanywayssuchas,anentryintonewmarketsthroughthedevelopmentofnewproductsandservices,reducedenergycosts,improvedcustomerrelationshipsandahappierworkforce.Ultimately,companiesthatembracesustainabilitycanactuallyhelpdriveinnovationandboostprofits.Traditionally,carpettilemanufacturerslikeInterfaceareresponsibleforusingimmenseamountsofenergyandcreatinglotsofwasteduringitsproductionprocesses.It’smoredistressingtoknowthatoncethecarpetshavewornout,they’resimplydiscardedintolandfillsandremainthereforthousandsofyears.Today,undertheleadershipofRayAnderson,Interfaceintendstobecomeoneofthemostsustainablecompaniesby2020.Thecompanyisexperimentingwithanewbusinessmodelwhere,insteadofsellingcarpetstoitscustomers,ithasbegunleasingfloor‐coveringservicestothem.Atasmallmonthlyfee,Interfacewillmaintainandreplacethecarpetswhenevernecessary.Thishashelpedreduceoverallmanufacturing,energyusageandwastecreated.Ithasalsohelpedcreatemorejobsthatcatertothemaintenanceofthecarpets.Additionally,thecompany’scustomersarehappythataoncecapitalinvestmentcannowbetreatedasaleaseexpense.Allinall,Interfacehasbeenabletostrengthenitsrelationshipswithitscustomers.Addressingclimatechangepresentsahugeopportunityformanyexistingandemergingcompanies.In2005GeneralElectric(GE)launchedanewinitiativecalledEcomaginationwhichaimstodevelopcleantechnologytohelpitscustomersreducetheirenvironmentalimpact.SuzlonEnergy,anewkidontheblock,isreportedtobeoneoftheworld’stopplayersinalternativeenergy,withaglobalmarketshareofsixpercent.LocatedinIndiaandheadedbyTulsiTanti,thiseightbilliondollarventurenotonlymanufactureswindturbinesforglobaldemand,butalsodevelopsandmanageswindfarms.Tantifirstbecameinterestedinwind‐powerwhenhewastryingtolookforwaystolowerenergycostsofhisoriginalbusiness,atextilemill.TheshifttowardssustainabilityasanopportunityisundoubtedlyemerginginThailandtoo.Alocalsilk‐fabricmanufacturingplant,GreenVilleTrading,isclearlyreapingthebenefitsofusingcleanermanufacturingtechnologyandalternativeenergysources.LedbyPilanDhammonkol,theplanthasdevelopedaninnovativefabricdyingtechniquethatusesfewerenvironmentallydangerouschemicalsandislessenergyintensive.Thisnewtechniquehascuttheproductionprocessfrompreviouslyfourhourstojustthreeminutesandhasreducedtheplant’senergyconsumptionbyabouteightypercent.Recently,theplantreceivedtheEUFlowerenvironmentalcertification,makingittheworld’sfirstsilk‐fabricmakerthatisabletofulfilltheEuropeanUnion’senvironmentalpreservationstandards.Opportunityisnotjustlimitedtotherealmofenergyandclimatechange.Thailand‐basedSwiftaddressesbothhealthfoodsandpovertyreductionatthesametime.LocatedinKampaengsen,itisoneofthecountry’sleadingsuppliersoforganicfruitsandvegetables.Thecompany’smostpopularproduceincludeorganicasparagus,corn,mangoandmangosteen,whichitexportsmainlytomarkets