Entries RSS · 5 reasons why business is going green
Hello again, Vincent here.
Let’s face it, even with nature knocking on our door, some accountant will still ask what this whole thing is going to cost. Science, facts, morality… it’s not enough. I compare it to smoking; even though everyone knows smoking kills, it took pressure—social, governmental, commercial—for people to quit. And the same applies to businesses going green.
Without further ado, here’s five pressures that make the business-case for companies to change.
1. Governmental pressure – let’s ignore for a fact that government is the one keeping its finger on the pulse of scientific research, social, business, and technological trends. But what is hard to ignore is that the government is actively pushing businesses to change, either by punishing the wrong-doers, by subsidising clean practices and technologies, or by providing new infrastructures around these new rules, allowing for businesses to dispose of their waste in better ways and use alternative, cleaner energy-sources.
2. Consumer pressure – like with smoking, not all consumers have been following the new green “religion” quite as passionately. That said, there are the early adopters, the geeks, the pressure-groups, that are insisting on businesses changing their ways. And those businesses are themselves customers to their suppliers and are doing the same thing to them.
3. Business climate pressure – apart from the above, two things will strongly pressure businesses to change: costs and competition. The rising cost of fuel, electricity, and water, etc., as well as the cost of disposing their waste, is a good incentive to implement technologies that help conserve energy and produce less waste. Similarly, as competition will do the same, businesses are forced to respond.
4. Knowledge-carriers – with the amount of scientific research being produced everyday, it was only a matter of time before methodologies would be developed to help businesses become greener. Since this is still a specialised activity, both commercial parties (consultants) and governmental institutions are there to advise companies on how to change.
5. New technologies – new inventions are constantly being brought to the market, that help businesses conserve energy or get it from alternative sources. Think: technology to monitor and regulate energy-use, water-conserving toilets, more efficient lights, green roofs, etc.
Anything I missed?
In a way, you can’t blame businesses for resisting. There have been lot’s of change-initiatives these last decades—from ERP to joint ventures—which have produced questionable, if not disastrous results. For change to happen, it must be driven by strategy first, because doing business is like doing war. There is a high price for failure and no one will be congratulating the loser.
But what is certain, is that eventually there will be no more choice. Those that are slow to react will do so at the cost of an unsympathetic government, of the competition racing ahead, and of customers dropping their support.
This article is mirror-posted on my blog.
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…and let’s face it, green sells. No matter if the advertised beneficial effect for the enivornment actually works, everything is superficially green. Just last weekend as I read my newspaper’s monthly magazine, I noticed all car manufactures were selling their cars as green.
Wasn’t the basic tenent of the book you, Vince, got your avatar from that the corporations will only optimize their value to their shareholders?
The government and climate pressure have, in some cases, lead to companies build their wasteful plants in developing countries with lax environmental and governmental standards instead of succumbing to these pressures in the western world.
And while there are activist-consumers, they are still a small niche. The rest are easily mislead with clever marketing. I fail to see the logic of selling something as green when the only green alternative is not buying said product.
Without global, supergovernmental action, I’m afraid there will not be any change. As long these safe havens for non-green activities exist, there is choice.
Well, technically I did not actually read or watch “the corporation,” whose logo I have “stolen,” to the chagrin of several of my more liberal-minded friends.
As far as stakeholders go, their interest is determined by several things, most of which surrounds profit. That includes keeping costs low, meeting demand, and growing the company. All of which, I argue implicitly or explicitly, is compatible with operating in a green fashion.
And yes, the sales-aspect of green is a given and also implied by point two: consumer-pressure.
As far as niches go. It’s hard to tell how small or large the consumer-interest is at present, but it’s hard to ignore the amount of media-attention environmentalism is getting. Therefore, in combination with other pressures, I have little doubt that the niche will eventually become mass-market.
Interesting that you mentioned green car adverts. In the links I covered on my blog this Sunday, I discussed a measure in Norway where they ban adverts from any innovation that’s causing carbon-related problems. That includes cars. I think there should be stricter regulation on what companies can advertise, though clearly there are plenty of loopholes, e.g. vista-capable, HD-capable, and green, and the only way out, I fear, is a more informed consumer.
What about Ethics?
I would even put it #1 in your list… More and more people -as you said in your consumer point- are “green”-friendly, but these consumers are also, at some point decision makers for their companies, given by this mean a true “ethics” dimension to the choices they make!
A company is more defined by its “employees” as human, than by the country in which it resides, the consumers to who it sells, the competitors it competes, or the technologies it uses…
Mmm business and ethics, a very novel combination
No, of course you are right. Ethics should be on top of that list. Without ethics, no one would care or do anything.
That said, I still see a lot of parallels to the non-smoking movement here. People have been told that smoking is bad, both for them and their environment. It was both ethically and morally right to change, but it was only after certain pressures were applied, that we are seeing big changes.
Philosophically speaking, I don’t think ethics is a reason exactly. It is an emotion. Reason is something that directs logical operations, and to me, business-logic is dependant on economic principles such as demand, the cost of operating, and the tools to change. Combine logic with emotion however, and you have a very powerful strategy for change.
That’s just my interpretation though…
The issue nowdays is getting stronger and hot. Accountants all around the world are aware about the environmental issue. So new area in accounting world has been dicovered called environmental accounting.
But no matter what business you operate in the world profits are their main goals. Lets look at Tata Nano(the cheapest car in the world) produced by India, how bad can it damaged our planet?
Hey Vince,
Beautiful post.
I would add a sixth pressure case if you don’t mind: competitive pressure.
A sound green strategy coupled with a perfect execution (that as of today includes too often communication only) is a way for companies to differentiate from their competitors and hence attract & retain the best talents as well as position themselves as foremovers in the minds of their stakeholders (clients, suppliers, investors, business partners, etc.).
How do you feel about this addendum?
Hi Jeremy,
I included it in the point under business-climate, but you’re right, it could be considered as separate source of pressure as it’s definitely an important and complex driver for businesses to change.
@Maj: a very good point about “environmental accounting.” It had actually popped up on my radar a few months ago, but I had forgotten about it when I wrote this post. I’ll have to check into it sometime.
As far as the Tata Nano goes, I hear that it’s trying to meet certain eco-standards. But I’m not knowledgeable enough to pass comment on that, except that no car produced right now is ever 100% green.
One fun thing that The Corporation pointed out is that if “ethics” do not bring more profits for the company, it is actually illegal (as in against the law pretty much in every country) for the CEO and other executives to follow such agenda. Fortunately, as Vince’s reasons point out, through the environment many companies see reasonable connection between ethics and profits.
Vince, there’s one thing that bothers me with your analogy with smoking. As you say, smoking is (directly) self-destructive and therefore no “rational” being would do so. So far so good, but smoking does not have (almost) any effect on the enivornment or people around the smoker (there are no externalities other than causing discomfort in crowded places), companies being wasteful of the natural resources on the other hand are externalities and on the short/medium-term have no effect on itself (other than through the 5 reasons you point out).
Probably I’m just nitpicking, but there’s just something that doesn’t work with your smoking analogy. You’re correct though that the only way smoking has been in decline is because of the environment has changed (stricter legislation, image of smokers, health concerns…)
Best “we don’t get it” was from an energy company that shall go nameless that declared that they don’t want to be part of the problem, but part of the solution. This is totally stupid and proves that the empty-headed marketing people just fast-forwarded Inconvienient Truth. An energy company is always a burden for the environment unless it’s 100% green, and even then it is NOT part of the solution UNLESS it’s actions reverse the effects of global warming.
As many scientists have pointed out, we need solutions for reversing the global warming, not just decreasing the speed of it.
Well, a large part of my smoking-analogy relies on secondary smoke. People harming themselves is their right, but causing harm to others is where the analogy kicks in. I wasn’t aware that this wasn’t proven however. Being the son to two chain-smoking parents (of which one recently quit), you’d think I’d be more knowledgeable about it
And, an interesting insight into ‘The Corporation.’ Maybe I should read/watch it after all. I do think that ethics and profit can be compatible to some extent and in other ways it doesn’t work at all. For ethics to work, you need to work in an ecosystem where everyone has similar values. Sometimes these values can be enforced by law and other pressures, sometimes they can’t.
Yeah, it’s true that second hand smoking is harmful (for sure it is not harmless). Sorry, I didn’t consider that side of smoking. I only focused on it being harmful/self-destructive for the user – and the reason why companies pollute is just because they don’t feel any of the pain.
Guess it might quite difficult to find an analogy for externalities, in economics textbooks it’s always a paper factory and a lake.