Outgreening Delivers Sustainable Competitive Advantage

Columnist Dov Seidman explains how green behavior in business should be seen as a strategy for success

By Dov Seidman

In my last column (BusinessWeek.com, 10/7/08), I discussed outbehaving as the source of sustainable competitive differentiation in the 21st century. In this column, I will discuss one of the most powerful ways of outbehaving the competition: outgreening it. And there are benefits beyond the obvious—albeit highly important—environmental ones.

Outgreening Defined

Pulitzer Prize winner and New York Times columnist Thomas Friedman first published the term "outgreening" in his new book Hot, Flat and Crowded: Why We Need a Green Revolution and How it Can Renew America (Farrar, Straus & Giroux, 2008). Friedman noted that "outgreening is going to become more and more important."

This is because the old strategies for success—outmining, outdrilling, outconsuming, outperforming, outspending—no longer offer a sustainable competitive advantage in our hypertransparent, connected, and environmentally distressed world. Of course, these strategies are still used and deliver value to some, but they work less well for those who don't have access to resources.

Further, these strategies are quickly becoming exhausted, primarily because they rely on finite sources of energy that damage the air we breathe and other natural resources we need to thrive. In short, these strategies are not sustainable. As Friedman notes, "the greenest, cleanest, and most efficient manufacturers, institutions, products, countries, schools, communities, and families will thrive the most, for the longest."

Renewable Power

Companies and countries that outgreen their competitors do so through two types of behaviors: efficiency (or conservation) and innovation.

Indeed, the push for greater energy efficiency is escalating within many organizations. A Wal-Mart (WMT) sustainability program helped the retailer reduce its use of shipping containers, saving roughly 1,000 barrels of oil and thousands of trees while generating more than $2 million in annual cost savings. Numerous manufacturers, such as Nestlé Waters (BusinessWeek.com, 11/7/08) and Nike (NKE), have decreased the amount of plastic and other waste materials used in their products and packaging, which diminishes landfill loads while simultaneously decreasing manufacturing and shipping costs. Harvard Business School's computerized irrigation system saves the institution 5 million gallons of water and $50,000 annually.

It is evident in these cases that efficiency—or conservation—efforts are delivering business value. But there is emerging evidence that behaviors related to green innovations are equally important—and will deliver greater competitive advantage. Companies can't expect to flourish in the future by only embracing discrete energy-efficiency initiatives, reducing their carbon footprint or boosting their use of alternative fuels. Instead they must be rooted in a culture that acts, thinks, and behaves according to green principles.

General Electric's (GE) ecomagination strategy (BusinessWeek.com, 3/4/08) is an example of a corporate initiative driven at the highest level by the CEO with these goals in mind. GE's success has been well-documented and is not merely a testament to CEO Jeff Immelt's vision. It lies in GE's ability to get business units to examine the growing demand for greener products, invest in research and development to create such products, and then leverage that innovation with appropriate marketing to commercialize them.