As business leaders, we understand there are constraints on our growth. We can be limited in revenue by our headcount. We can only sell as many products as we can purchase parts for or build in a given time. There are only so many hours in a day, people in the factory and dollars in the bank.
Natural systems have limitations too. Some experts estimate that $33 trillion worth of “free” services are provided by the planet each year, including soil, fresh water, breathable air, pest control and livable climate. These services never appear on balance sheets, but they are beginning to impact businesses.
At worst, these free services — or the lack of them — can constrain business, shape markets and threaten the planet. However, these impacts are not immediate. We do not know the timeline for when a resource will become scarce, too expensive or disappear. All we can do is watch for the indicators.
Some simple indicators from environmental issues that you may already be aware of are environmental laws and regulations, challenges from Non-Government Organizations (NGOs), large customers putting pressure on suppliers to be green and the speed of developing and holding market share in business today.
One of the fastest growing and most immediate business threats related to the environment comes from investors and stakeholders, who in growing numbers are watching the indicators and asking hard questions about environmental responsibility. Business leaders who ignore these stakeholders can be subject to a public relations scandal, a destroyed market, ended careers and millions to billions of dollars lost.
In the past, a leading soft drink company learned this the hard way when its bottled water was pulled from the British market for failing European Union water quality tests as Esty and Winston noted in their book, “Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage.” The same company has been targeted by activists in India for water consumption in drought-prone areas. And in January 2006, a major U.S. university suspended the purchase of this company’s products, in part because of concerns over environmental issues. While it is difficult to measure the full financial impact of these actions, the company has suffered irreparable brand damage in the second most populated country in the world. That is disruptive change.
Apple Computer has also received this message loud and clear, and responded quickly. In 2006, Greenpeace targeted Apple “iWaste” with a “Green my Apple campaign.” Then in spring of 2007, Greenpeace issued a guide to electronics that ranked major corporations on their reduction of toxic chemicals and electronic waste, with Apple ranked last. This coincided with the release of the iPhone and stockholders took notice. America’s most innovative brand cannot afford an environmental attack. Quickly Steve Jobs, the company’s CEO, issued a letter that promised a “greener Apple.”
Further evidence of the importance of this issue was found in a more unlikely spot. Sports Illustrated published a cover story on climate change that discussed its impact on sports. While many readers were irritated by coverage of the highly charged environmental issue and the magazine’s take on the topic, the article made an interesting point about climate change — it will change the games that we play.
Many companies with well known brands and multinational operations are finding that customers and shareholders have become vocal about business practices. Your customers and your bottom line are what are driving climate initiatives and business innovation. That’s exactly what makes it so disruptive.
But where do you start? How do you make progress? And how do you measure success? These are hard questions that need real answers now.
What are some steps you have taken to drive change and how have they worked so far? Let us know in the comments.