The Green Economy: Is your CEO a leader or a laggard?

The global economic recession has been relentless and doesn’t seem to be letting up. The world is waiting with bated breath as the USA, Portugal, Greece, Ireland and other developed economies teeter on the brink of economic disaster.

Despite this doom and gloom there is a bright, green light that shines. Over the same period, the environmental products and services industry (the green collar sector) has been steadily growing both in terms of business andjob opportunities. In fact the sector has been dubbed by many in the USA and UK as “recession proof”.  In recognition of this, the subject has been elevated up the boardroom agenda as well as the ranks of the corporate hierarchy of companies, globally.

This is very exciting, as over the last five years, amongst the numerous companies that we have worked with, responsibility for environmental management is like a hot potato that gets bounced around from department to department.

For example, a marketing manager may deal with it because it is seen as an opportunity for differentiation and a lead up to a uber PR campaign (read short term green wash). Perhaps the Safety Health Environmental and Quality Management (SHEQ) people are lumbered with it because environmental non-compliance is regarded as a risk management issue and yet another box ticking exercise. Facilities managers get given it when the goal is to drive efficiency and save money. In fact every time we go into a meeting with a company for the first time, we have a reasonable idea of their objectives depending on who we are about to meet.

It is however, when we deal directly with the CEO or MD of a corporation that it gets really interesting. More often than not in these cases, things move a lot faster and with less resistance.  In fact, we find ourselves dealing with more and more people with C in their titles as they come to the realisation that quite soon, their business success will not only be a function of their financial mastery, but will be intimately linked to their company’s environmental and social performance and decisions will start to be made based on their performance in these areas.

It seems that CEOs are starting to get it. Embarking on a holistic and fully integrated environmental program makes perfect business sense no matter what type of business you are in. Besides it being the right thing to do in terms of rectifying the environmental imbalances that exists; investment in this space ticks all the boxes of a classic business strategy where all returns can be measured and all investment can contribute positively to the value of the enterprise through increased revenue generation, cost efficiencies and brand equity as well as effective risk management.

It is for this reason that companies are taking this as seriously as they are, placing it ahead of other strategies and innovations. According to a recent Calvert study, 65% of all Standard and Poor’s 100 Companies have board of director environmental management committees dedicated to the implementation of environmental programs. In each instance, these groups have been given a clear and strong mandate from the board to integrate these green business models into the company’s core activities.

In terms of timing, there is no better time than now. Based on our observations of the corporate sustainability market in South Africa and the imminent introduction of punitive legislation as well tighter and more consistent sustainability indices, we are clearly past the “innovators” stage and onto the “early adopters” or even the “early majority” of adoption of these new innovations.

What does this mean?  Put simply, this means that whilst the green economy is gaining momentum exponentially; it is yet to achieve critical mass, which means that still only a minority of corporate consumers would currently pay a premium for any alternative green product and services without a significant and measurable return on the other side.

Furthermore if a company is to stand any chance of competing in this new paradigm, investment into innovation needs not only be secured, but bolstered. During tough times, it is common for companies to focus on what is secure and bankable and strengthening their core business is normally the thing that makes the most sense in the short term. In these cases, innovation is generally the loser. Working closely with some of the largest companies, it is encouraging to see how many are actually cranking up their investment into green innovation as they realise that their growth and ultimately their survival, depends on it.

What is critical, however, is to ensure that normal business principles are applied.  Of particular importance is to ensure that systems are implemented to accurately monitor baselines as well as the ongoing environmental and financial performance of any environmental program. Effective monitoring provides proof of performance to justify further investment into the strategy. It also supports reliable and meaningful integrated reporting and the establishment of a clear return on investment as well as an insight into the opportunity cost of the initiative.

For the most part, whilst everyone wants to do the right thing, the thing that you would think would be the biggest driver of all would be the moral imperative. However, we have already seen this not to be true amongst our political and diplomatic leaders who are year in and year out finding it increasingly challenging to reach agreements to stabilise the planet’s climatic systems. Hence, in the absence of bold and courageous political will and leadership, we are encouraged to see that businesses are starting to fill this leadership gap as they become increasingly conscious about the sustainability challenges facing all species on this planet and their own organisation’s contribution to this.

The fact remains that whilst executives debate whether this is good for business or not, we are on collision course with our planet. Our population is set to double to 13.6 billion people in the next 70 years and our natural resources (including fresh air, water, energy) will dwindle with the cost of all commodities rising at an ever increasing pace. It’s not magic; it’s just a law of economics! The message:  Given that ALL companies (and economies) contribute to the problem, yet aspire to achieve double digit annual growth in perpetuity, urgent intervention is required.

Ray Anderson, the Founder and Chairman of Interface Carpets, the largest modular carpet company in the world, passed away last week. 17 years ago, Ray had an epiphany that everything that everyone knew, learned or was doing was ultimately destroying the planet and he himself was one of the bigger perpetrators. For Interface, this marked the beginning of the transformation of the then 21 year old, heavily fossil fuel dependent company into a company that would eventually have zero impact on the environment and become a case study globally as a model green company and a business leader who was bold and prepared to challenge the logic of his industry.

Interface’s mission zero program kicked off in 1994 and aimed towards zero waste, pollution and emissions by 2020 i.e. a closed loop production system. They are now just 9 years away from their target and can already boast the use of 100% renewable energy at eight of their nine plants, have reduced their GHG emissions by 43% despite significant commercial growth, reduced water consumption by 75%, saved $433m in avoided waste costs and diverted 100,000 tons of disposed carpet from landfill.

Interface became the quintessential green corporate success story and Ray Anderson an unassuming and practical environmental icon. While Anderson demonstrated clear business value all along the journey, he was the first to admit that he actually used his company as a tool to prove to other industrialists that it was possible to tread lightly on the planet in a meaningful way and still maintain, if not extend your lead in a market.

Paul Hawken captured it best when he said in a eulogy to Ray Anderson last week that “Ultimately, Ray’s work was not about making a sustainable business, it was about justice, ethics, and honouring creation. Zero waste was the path to 100% respect for living beings.” The world needs more leaders like Ray Anderson.