It's a Sustainable World After All

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From a consumer's point of view, don't more efficient products cost more money, and might that be a disincentive for people to buy them?

Absolutely not. If the devices use 30% less energy, your energy bill is lower. Yes, maybe the upfront investment is a little bit higher for energy-efficient lighting, but the return is much better over the long term.

At the Eiffel Tower in Paris two years ago, we were able to reduce the energy cost by 30%. The lighting at night is more beautiful, but it uses less energy and costs less.

What percentage of Philips products now are more energy-efficient than when you started as head of sustainability?

In 2004, our revenue from green products was 1 billion euros. By 2006, it had grown by more than 30%. And in 2007, it was 5.2 billion euros ($7.8 billion). Today, green products account for 20% of our total revenues.

Are European CEOs ahead of their U.S. counterparts in seeing climate and energy challenges as a business opportunity?

I wouldn't say it's more European than American.

But doesn't it seem that American CEOs spend more time on disputing the assertion that we face climate or energy challenges?

Perhaps, but there are great examples of American companies that are working on finding the right technologies and the right solutions. There are a number of large companies but also niche players. I look at it more on a global scale.

The Dow Jones Sustainability Index, which we use, is a very sophisticated way to measure the sustainability performance of global companies. It measures not only your efforts in green business areas but also how you deal with your supply base and your employees.

What's another example of how Philips has found a green business opportunity in the emerging or developing worlds?

We have developed solar-powered portable lighting for rural areas where you have almost no energy at all. In addition, we have developed a wood stove because open fires are widely used in many emerging countries, specifically in rural India and China. So we developed a product that does a better job of controlling fire emissions, and we're in the process of launching it.

We're already seeing India and China emerge as major consumers of petroleum and coal in ways that are not very green. Might they be able to develop but use less energy?

They need to leapfrog existing technologies and use better solutions. If you have lighting technology available with 40% less energy use, using the old technology doesn't make a lot of sense.

As head of procurement, how do you buy components and materials in a more environmentally positive fashion?

We want to make our supply base more economical, of course, but we also want to make it closer to some of the growth economies. It's a combined effect: We lower the costs compared with more mature markets, and we establish a supply base for growth in emerging markets.

Are you demanding that suppliers themselves adhere to higher standards?

Absolutely, our suppliers have to adhere to our sustainability declaration, which also covers labor conditions in addition to environmental standards, for instance. We give them a self-assessment tool so they can assess their levels.

We have also started audits, some of which are done in-house, but we also use an external company, Société Générale Surveillance (SGS), to make it more objective.

Where are we overall in the business world's effort to respond to climate change and energy shortages?

We are not the in early stages any more. We're in the roll-out stage. Just do it.

In addition to writing Armchair MBA for BusinessWeek.com, William J. Holstein writes for The New York Times, Fortune, Corporate Board Member, Dealmaker, and Strategy + Business.