Visionary Leadership
An Agenda for Business: Practical Business Tools for the Next Bottom Line
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| Visionary Leadership An Agenda for Business: Practical Business Tools for the Next Bottom Line |
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While scientists study global problems and policymakers debate the issues, many in business are already moving to seize extraordinary opportunities in protecting the natural environment and meeting social needs.
A growing number of companies are developing new products and services that solve problems and increase profits at the same time. The success of these innovators is proof that a sound business can indeed create a safe environment and stronger communities.
Motivating these business initiatives is the persistence of huge social problems, especially in emerging markets, and the continuing deterioration of air and water quality, the health of fisheries, forests and farmland, and climate stability. Continued global industrial growth along past patterns would put even more pressure on natural systems. At the same time more informed consumers are increasingly intolerant of companies that violate social norms. These changes are altering the context in which companies operate.How can business respond to these challenges? Experience gained from partnerships between the World Resources Institute and several leading corporations suggests some key principles.
Perhaps the most basic reason for businesses to adopt these principles is their own self-interest. The benefits include such powerful business drivers as protecting the right to operate, reducing costs and liabilities, increasing customer loyalty and market position, and market development. Simply abiding by regulatory requirements, for example, is often no longer enough to protect the right to operate: in an instant-news world, negative public reaction can come swiftly and furiously. Eliminating waste can lead to huge cost savings as well as lower liabilities: in one semiconductor business studied by WRI, 96% of its annual $2 billion purchase of chemicals ended up in the waste stream, meaning that reducing waste by half could add up to $1 billion to the firm's bottom line.
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From modern electric power plants (above an AES facility in N. Ireland) to the newest tiny IBM Microchip, technology is reshaping the world. |
Developing countries need basic infrastructure: 1.2 billion people lack clean drinking water, 2 billion lack electricity, and 3 billion lack adequate sanitation. Private corporate investment in water, power and other infrastructure rose almost ten-fold in the 90's.
When a business builds environmental or social benefit into products, it creates added value for the customer. The search for these benefits often yields unforeseen enhancements to product performance, cost, quality, safety, and serviceability. Visionary companies can thus position themselves to supply novel system solutions. This often means rethinking the entire business model.
Matching business drivers to principles creates a familiar strategic planning tool, the matrix, that can provide a simple way to chart out a comprehensive approach to a Next Bottom Line strategy, to benchmark against competitors, or even to spur innovation and new thinking. Some specific examples help to illustrate the possibilities:
DuPont's sulfur products business offers acid handling and recovery services to its customers. Some customers never actually own or handle the materials themselves and instead contract for DuPont's expertise, which is a distinct competitive advantage for the company. All these services make it more costly for customers to switch to competitors, especially when the service is not standard in the industry.
Grameen-Phone is a non-profit organization operating in Bangladesh. Phone lines are rare in this country, in part because of widespread poverty and inadequate infrastructure. This in turn hinders the local economy. Seeing an opportunity, the company is building cellular relay towers around the country and has begun selling cellular phone service to remote villages. In each village, one person is contracted to be the operator of the cellular phone and charged a per-minute rate; the operator in turn charges villagers a slightly higher rate to use the phone, making telephone communication available and affordable for the first time. The company plans to distribute 70,000 phones over six years. This cooperative business model is proving so effective that several multinational companies are now looking to develop similar systems in other regions.
| Aracruz Celulose is a Brazilian wood pulp manufacturer that has recovered land formerly degraded by agriculture and used it for fast-growing eucalyptus plantations, while setting aside some of its land for the regeneration and protection of native forests. Together with a company-wide emphasis on reducing waste whenever possible, this strategy has made the company the world's low cost producer in its market. The strategy also potentially reduces pressure on native forests elsewhere for pulp and paper products. |
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Moving commerce toward the Next Bottom Line is a private sector response to emerging trends and conditions. With a comprehensive strategy, companies can identify new opportunities today and position themselves for tomorrow's market shifts - and are likely to be best prepared for the coming century.
Article adapted from The Next Bottom Line: Making Sustainable Development Tangible, by Matt Arnold and Rob Day (WRI, 1998).
The private sector is organizing globally around ideas like
by-product synergy. 
The potential is illustrated by Texas Industries, which
operates a mill in Midlothian, Texas, that produces steel from recycled scrap; a separate
division of the company in the same town manufactures cement. It turned out that the slag
produced from the steel mill could be used as a raw material for making cement instead of
being disposed of as waste. The result was by-product synergy: reduced use of natural
resources, increased production, more than a 10% reduction in energy use and carbon
dioxide emissions, and increased profits.
Strong social commitments also do not prevent a company from competing successfully. Indigenous Designs, a California-based supplier of outerwear, works with nonprofits in developing regions from the Appalachians to the Andes to contract with local artisans, often women who work out of their homes. While maintaining strict quality standards, the company provides its workers with fair wages and makes every effort to treat them ethically. Notwithstanding its social commitment, the company competes on the basis of quality and fashion and its products are sold in some of the most upscale outdoor equipment stores in the United States.
Interface is a $1 billion multinational company that is making major changes to its operations in the belief that sustainable development is a good business strategy. Led by CEO Ray Anderson, a vocal champion for the environment, this carpet company has developed the "Evergreen Lease." Through this program, the company aims to never again sell another roll of carpet, instead transforming itself into a service company by leasing flooring systems to customers. With such a system, Interface will be able to collect its old carpet tiles and recycle them into new ones, building customer loyalty while driving down material costs. Interface's commitment has also led to a waste-reduction program and a pledge to switch entirely to renewable energy sources.
U.S. and European economies consume 80 tons of natural resources per person annually. Innovation is creating more eco-efficient processes.In the United States, the private sector Welfare to Work Partnership, launched by UPS, Burger King, Sprint, Monsanto, and United Airlines, has made a major effort to help the national commitment to reform welfare. The group has expanded to include 10,000 companies committed to hiring workers from welfare roles and has helped move an estimated 410,000 people off welfare. UPS, which has one of the largest programs in the country, counts 20,000 former welfare recipients who have become valuable employees with a little extra training and mentoring. The jobs typically pay more than minimum wage and include health insurance and other benefits. The company partners with local transportation or social service agencies or church-based groups to help these new workers find transportation or child care, teach them basic communication and workplace skills, or meet other special needs. Working with the Alliance for Environmental Innovation, UPS has also developed re-usable overnight air delivery envelopes made of recycled fiber, significantly reducing raw materials use and waste.
Rarely does a
successful company assert that it exists as a business to fulfill an environmental credo. Patagonia,
a maker of outdoor sports clothing and gear, not only does so, but backs it up by giving
10% of its profits to support grassroots environmental causes and actively seeking to
educate its customers and suppliers about environmental issues. This unconventional
business model has succeeded beyond all expectations.
The company has a hard-earned reputation for quality and product innovation, much of it driven by its environmental commitment. For example, it was the first to make fleece from recycled plastic soda bottles, and its recycled Synchilla remains a signature Patagonia fabric. The company has not hesitated to abandon successful product lines for environmental reasons. Recently it decided to convert its entire sportswear line to 100% organically-grown cotton, even though costs were significantly higher, because conventionally-grown cotton is the most pesticide-intensive of all crops, consuming 10% of agricultural chemicals used in the United States. Sales have continued to grow.
A company doesn't have to be huge to have a big impact well beyond its local community. Furniture manufacturer Herman Miller, with only 7,500 employees, holds "living with integrity and respecting the environment" as one of its five core values. The employee-owned company strives for superior environmental characteristics in all its products and has pledged to eliminate the use of landfills, to reduce material waste by 30%, to develop people both inside and outside the company, and to become a "sustainable business" by 2005.
In 1991, Herman Miller discontinued the use of any wood products that do not come from sustainable forest resources. Two species, rosewood and teak, were completely removed from the product line because of their rainforest origins. This early move by the company and the resulting publicity increased awareness of rainforest destruction among governments and other companies. A Herman Miller employee was invited to participate in a United Nations effort to develop a treaty governing the international trade of rainforest woods. Herman Miller also helped to found the U.S. Green Building Council.
The Freeplay Group is producing self-powered products that bring together the promise of information technology with urgent social needs. It makes a wind-up radio that allows anyone to be connected to the world, even without access to electric power or batteries. In South Africa, the radios have been distributed and a program matched to teaching materials is broadcast for 30 minutes a day as part of an effort to teach school children basic English.
