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The Business of Environmental Sustainability

Is your business successful? Traditionally the answer has come in the form of a question: Do you make more money than you spend operating the business? Increasingly, however, shareholders demand their companies create a social payoff as well as a financial one -- everything from providing financial support for a local teen center to grants for disease research.

Now global pressure is mounting on business leaders to meet a new social goal: environmental sustainability. The question isn't even if this will happen, says Babson professor Thomas Davenport, in Why Sustainability is the Next Big Thing. It's how business will respond, starting yesterday.

Here's the rub. In order to manage a sustainability program, you need data, standards, and a way to report results -- the same ingredients necessary to put together a quality-control program, say. But these measures don't yet exist in a corporate context. Government, at least in the U.S., is no where near creating such standards, so it's likely that nongovernmental organizations will be the early drivers. But not immediately.

So what does this mean for your business? How do you do the right thing when effective -- or at least agreed upon -- metrics are lacking. Davenport suggests that each company so inclined develop internal measures in a type of "laboratory of sustainability." But do so quietly. "I recommend going easy on the external touting of sustainability information. Even if you are serious about sustainability, the lack of common measures means that outsiders may not be able to accurately assess your sincerity."

At Harvard Business School, MBA students study the real-world decisions made by companies looking to be environmental leaders. A recent case study on how financial services powerhouse UBS approached climate change issues yielded several takeaways.

  • Activist organizations won't reward corporate green initiatives motivated solely by profit maximization and cost cutting (We're lowering our thermostats!). The good general manager figures out a strategy to accomplish both a business goal and a social improvement goal.
  • Companies crowing about environmental leadership become big targets when something goes wrong.
What does environmental sustainability mean to you? Do you reward companies that stand for green principles?
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