Last Updated Jul 5, 2011 2:06 PM EDT
We've come a long way from the days when "going green" was something only a handful of pioneering startups with a passion for turning a profit responsibly attempted to do. Now virtually all major organizations recognize the value of sustainability and corporate social responsibility.
But most of these companies are going about it all wrong -- at least so say the authors of the new book, "Embedded Sustainability: The Next Big Competitive Advantage" (Stanford Business Books, 2011).
Co-authors Chris Laszlo and Nadya Zhexembayeva argue that too many companies make empty gestures at sustainability rather than embed it in their business models. They may try to reduce energy consumption or fund philanthropic causes, but these firms fail to use their unique expertise to make their own products and services more sustainable. "This is not a moral argument or an argument just about reducing costs or enhancing a brand," Laszlo says. "We're saying that the companies that thrive in today's environment embed sustainability in everything they do."
Laszlo spoke with BNET about what it means to embed sustainability and why doing so is essential in today's marketplace.
BNET: In your book you describe three major shifts that make sustainability more important for businesses than ever before. What are these shifts?
First, there are declining natural resources. The rise of emerging economies puts an increasing pressure on our supply of commodities and natural resources. That's a daily reality for many businesses around the world. Second, there's a shift toward radical transparency. The Internet and other emerging platforms allow people to see what businesses are up to, whether the businesses want them to or not. When a company becomes transparent involuntarily, I call that radical transparency. Third, there are rising expectations, not from the environmentalist fringe but from mainstream consumers.
BNET: What does it mean to "embed" sustainability? How is that different from other approaches?
We contrast "embedded" with "bolted-on," which typically involves symbolic or peripheral efforts to be green. Bolted-on sustainability is often a way to charge a customer more for a product that doesn't last as long or perform as well. But the days of companies offering one or two symbolic green or socially responsible products are over. Due to the changes I just described, that's no longer a viable option in the market. What is becoming the norm is for companies to incorporate environmental health and social value into their core business without trade-offs for customers or investors. It's really about using the pressure of sustainability to drive innovation, so that at the end of the day you come up with a product that has even more value for your customer and your company.
BNET: Can you provide some examples?
One good example comes from the world of industrial floor cleaners. Sustainability pressures have pushed a lot of companies to reduce the harshness of the chemicals in these products. Well, there's one company in Minneapolis called Tennant Company that developed a technology that runs an electric current through tap water inside a scrubber machine in order to ionize it and turn it into an acidic state. It's been proven by a number of external studies that it is equally or more effective at cleaning non-petroleum based floors than chemical based cleaners. The total costs for the customer is reduced and the toxicity of the chemicals is gone.
Another great example is electric cars. Some of the auto companies are investing billions into building these products and they aren't just doing it as a sideshow; they're doing it because they believe it is a path to leadership in the future.
BNET: How would you respond to a business owner who insists that embedding sustainability simply costs too much?
I would say that if you're looking at things that are too expensive, then don't do it. But fair warning: You may have competitors who are thinking creatively about sustainability pressures and who may come up with a greener product that competes with yours.
And because of the shift towards radical transparency, consumers are going to be able to use resources like Goodguide.com and Sourcemap.org to learn how and where products are made and what chemicals they contain. If your product is not sustainable, customers will be aware.
BNET: How would a company that profits primarily from practices that harm the environment or our health - say, a coal mining company or tobacco company -- pursue embedded sustainability?
I don't agree with those who say we shouldn't engage with these companies. I think there's an opportunity to help them see that it's not in their interest to continue with their business model as it exists today. There are plenty of opportunities for a coal mining company, for example, to invest in renewable energy sources. It's a matter of getting them to recognize a market reality: that they're going to have to listen closely to a group of stakeholders whom they've treated as enemies in the past.
BNET: What about the ethical argument for sustainability?
If you begin with the moral argument, that really gets people defensive. I'm interested in engaging with mainstream managers who may not know much about sustainability or even believe in climate change. They want to get on with their business, rather than worry about saving polar bears.
If we're going to go fast enough and far enough in the direction of sustainability, we're going to have to reach the 95% of business owners who aren't open to the argument that there's a moral imperative. We at least have to tell them that it's also in their self-interest.