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Thinking About Sustainable Business
Gil Friend, 9 Jan 05

Gil Friend is a systems ecologist and business strategist, and is the CEO of Natural Logic, an environmentally-focused strategy, design and management consultancy. He writes a regular blog on issues of business and the environment. Gil has agreed to write occasional essays on sustainable business for our Sustainability Sunday feature, and we are happy to add his voice and perspectives to our site. Take it away, Gil:

[An expanded version of this article is posted at http://www.natlogic.com/resources/nbl/v13/n08.html]

Two weeks ago, writing about the European Union's product take back and product content regulations, I observed that many companies' sustainability initiatives are hampered by a pervasive and deeply wrong-headed assumption: that designing and delivering better, more efficient, less toxic, more recyclable products would necessarily cost more money and yield less profit.

Why does that assumption persist? Let me offer some perspective on both the barriers and the opportunities -- and how companies that understand the ecosystem drivers behind these new regulations can potentially get out ahead of them.

First, there's the great power of "we've always done it this way," with its impact on habits (of thought as well as of action), on cost analysis methods, on capital budgets. What's worse, changing what "we've always done" engages the tacit admission that "what we've always done" may not have been as good as we could have done. This is hard on the human psyche and murder on corporate lawyers.

Second, change is not easy, and is inescapably multi-dimensional -- change in technology, processes, roles, ways of thinking, and more -- can demand investment, in time and money, that conflict with other perceived needs.

Third, business is hampered by analytical methodologies that fail to accurately capture and value the full spectrum of costs and benefits. Boundaries of consideration are typically drawn too narrowly, whether to exclude factors that are considered "someone else's problem," or because it's simply easier to do it that way. Multiple benefits and synergistic impacts are commonly ignored, because familiar financial analysis tools commonly ignore them.

What can be done about it? Here are four steps to consider (expanded versions of each of these steps can be found here).

  • Understand the drivers. No CEO wants his or her business led around by the nose by regulators. No one wants the strategic diversion or the expense of changes that can't be planned for. But the European directives -- both past and future -- are predictable, not random. Those who understand what's driving the EU directives could have seen WEEE/RoHS coming, and can start aligning their future design trajectory with the future regulatory trajectory, eliminate a random factor in their product development cycle, and shift budget from lawyers and lobbyists to engineers and marketers.

  • Drop the assumptions. Face the facts. The notion that better environmental performance necessarily reduces financial performance is all too often rooted in habit, not evidence.

    It's easy to make design improvements that cost more -- just add "green" criteria on to an existing design. It's more challenging -- and more profitable -- to integrate "green" into the design process, by including stakeholder expectations and the system conditions for sustainability into the design specification from the very beginning.

  • Design what works - before it's demanded. The need to integrate "green" will happen eventually; the biochemistry of living systems isn't likely to change in our lifetimes. The only question is how soon the need will arise, and with what degree of pain. Some companies will take the initiative, follow the guidance of 3.8 billion years of nature's R&D, and design products and processes that are both compatible with the inescapable requirements of living systems -- and profitable to boot.

  • Steer by the logic, not the thresholds. Much of environmental regulatory policy, for the past three decades, has focused on a political/scientific process of setting acceptable thresholds for problematic materials -- always a compromise, usually a painful one; always uncertain and unsettled, and ripe for litigation. The biological logic provides a simpler, clearer, more predictable decision path -- and one that can make compelling business sense as well.



    "Regulatory insulation" -- running so clean that you don't really need to care about the regulations -- makes far more sense than regulatory guesswork. "Numerous chip companies," Rachel King notes in Electronic Business, "are redesigning parts so that they contain no hazardous substances, so they'll be compliant no matter what the final requirements specify."

    Which, as radical as it may sound, is in fact the most prudent course of all.

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    Comments

    Shouldn't we emphasize the lunacy of continuing to fund the unstable, terrorist-creating states that sell us oil? That approach might appeal to the people who think that "green" is a liberal plot to raise taxes and undermine capitalism.


    Posted by: Myke on 10 Jan 05

    I don't think you're giving enough emphasis to how Competative Advantage fits within the mind of people in business. They may be all for earthsaving stuff in the long run, but if it is going to be disadvantagous to them in the short run (and possibly put them out of business in the process) they're simply not going to do it. We have to develop arguments about how going Green is going to be good for these folks in the short run, right now, this minute. This is the only way we're going to get their attention.


    Posted by: Marshall Spriggs on 11 Jan 05

    Marshall,

    Note that I wrote of "a pervasive and deeply wrong-headed assumption: that designing and delivering better, more efficient, less toxic, more recyclable products would necessarily cost more money and yield less profit."

    Both "business people" AND "environmentalists" get easily trapped in the moralistic debate that flows from this assumption -- "you should sacrifice for the good of the whole" vs. "we can't afford to do what you ask" -- and miss the innovation opportunity that a commitment to both goals can drive.


    Posted by: Gil Friend on 17 Jan 05



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