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"Green Wave": An interview with Andrew Winston

February 8, 2008

Going green can be a smart and profitable business move, and who better to help you get there than Andrew Winston, co-author of Green to Gold?

This bestseller highlights what works – and what doesn't – when companies "go green." Winston is also founder of Winston Eco-Strategies, using environmental thinking to drive growth. He has consulted with companies such as Bank of America, Cisco, and IKEA. He is a nationally recognized expert on green business and has written for or appeared in Time, Newsweek, BusinessWeek, Forbes, The New York Times, The Washington Post, ABC News, National Public Radio, and CNBC.

Here, he joins Kelsey Howarth, Senior Writer for Cognos, an IBM company to discuss how smart companies are using environmental strategy to innovate, create value, and build competitive advantage.

Two big forces, fundamental change

KH: Green to Gold begins with an overview of the "Green Wave." Can you tell us what this is?

AW: The Green Wave is a catch phrase we use to describe the pressure on companies and on society at large for better environmental performance. I see it as two big forces. One is the natural world: climate change and depletion of resources that are available to people and to companies.

"We're all starting to ask companies much tougher questions about how they're handling environmental and social issues."

The second big force is stakeholders, the people who are asking more and tougher questions about environmental issues. These influencers are getting much more diverse and powerful. They're not just non-profits – they're you and me as employees, as customers, and as members of the community.

We're all starting to ask companies much tougher questions about how they're handling environmental and social issues. These two forces together are very powerful. They're forcing fundamental change that companies need to deal with now.

Even banks can go green

KH: Recently I was on the HSBC Web site and I noticed that they've announced they are the first carbon-neutral bank. In the book you discuss how green initiatives are not just the domain of companies that rely on natural resources. Just how pervasive is the Green Wave?

"Even though they don't have smoke stacks, they often have a very big environmental footprint."

AW: I'll answer that question in two ways. The Green Wave is happening everywhere, and it's only the beginning. All kinds of companies are thinking green, even service-based companies like banks.

These businesses are waking up to the fact that even though they don't have smoke stacks or produce something physical, they often have a very big environmental footprint.

I can guarantee you that executives in the top thousand companies are asking themselves what all of the environmental pressure means to them.

It's still about costs and risk

KH: I think that most people would agree that environmental and social responsibility is the right thing to do. But some companies are still making the business case for it. Can you share some of the compelling reasons why this is a smart business decision?

AW: The negative answer is that there's really no alternative – it's where the business world is going. But a more positive answer revolves around the four ways that companies create value.

"Cost and risk are the two areas that companies understand inherently."

One: eco-efficiency and cost reduction – thinking green to help improve resource productivity and costs.

Two: reducing environmentally-driven risk, a range of pitfalls including fines from non-compliance of course, but harder to measure and larger risks such as price swings (energy) or resource constraints in your supply chain or manufacturing (such as water availability).

The other two are relatively new and hold huge opportunity. Smart companies are using the Green Wave to, three: drive revenues by creating new products and services, and four: build intangible value through stronger brand loyalty.

"Smart companies are using the Green Wave to drive revenues by creating new products and building intangible value through stronger brand loyalty."

People ask me if the Green Wave is just a fad. My answer is always "no." Once companies start to create this value, they adopt a better way to do business – with lower costs, higher revenues, and more satisfied customers. Why would they go back?

The new way to compete

KH: You mention in the book that this is a place to experience a real competitive differentiator in a market in which it is harder and harder to be different. Can you speak to that?

AW: This is a real macro-level discussion. Some big tectonic changes are making the Green Wave even stronger, such as globalization, technology, and transparency, The World is Flat, Thomas Friedman kinds of forces.

"Companies used to compete on access to capital or labor. But those things are becoming commodities."

Companies used to compete on factors like access to capital or access to labor. But those things are becoming commodities.

Now, competing on environmental issues is rising up in importance because it can be a distinguishing factor for a business. Environmental responsibility can make it the supplier of choice for its customers.

Companies that do Green right

KH: In the book you give numerous examples of companies that have made environmental strategy not part of their strategy, but core to it. A great example is Patagonia. Can you share what makes them so different?

AW: Patagonia has long been known for its green activities, and with good reason. A core goal of the company is to be sustainable. It's a part of everything they do. Each employee thinking green has unleashed a huge amount of creativity.

But in Green to Gold we don't spend a lot of time on Patagonia because they are unique and don't provide a perfect model for the typical middle manager to emulate. Because only one person owns the company, they have a little more agility than a big company owned by many.

"It's that full look at the entire value chain that really separates the leaders from everyone else."

Of the publicly owned companies, one of my favorites is IKEA. They think comprehensively about the environmental impact across their full value chain, from the wood that comes out of the forest to the end of a product's life.

They take care to make sure you don't have toxic chemicals in your home and that the products you purchase have a low environmental impact. It's that full look at the entire value chain that really separates the leaders from everyone else.

Visibility into the supply chain

KH: In terms of the supply chain, it seems it's not enough for companies to monitor their own initiatives, but they also have to have transparency into that supply chain, which can include partners, suppliers, and a host of other players.

AW: Lately we've seen a couple of very high-profile toy recalls. Anything for kids involving a toxic element is going to be a huge and disturbing story. Tracking every element in your supply chain isn't cheap.

"The big brands face the most scrutiny. Nobody cares which company put the lead in the paint. They care who put it on the shelves."

IKEA has about 100 people that work full time on supply chain issues. But how expensive would a recall be? What would it do to your sales? Your brand? It isn't enough for companies to say, after the fact, that now they're going to check the paint on everything.

The big brands face the most scrutiny. Nobody cares which company in China put the lead in the paint. They care who put it on the shelves.

What role performance management?

KH: Reading Green to Gold, certain words jumped out at me: scorecards, metrics, data. Cognos being a performance management software company, this is the world we live in. We help people make sense of their data. But I wonder how readily available are the data and metrics to properly monitor these activities?

AW: I would say that by and large the data is not available at all. Most companies have almost no data on their environmental footprint. They can close their financial books in a day and tell you what their cash flow is to the penny, but if you ask them how much energy their facilities used last month, they have no idea.

"Most companies have almost no data on their environmental footprint. They're looking at financial metrics, but missing the social and environmental metrics."

I think it's an incredible opportunity for companies to create the tools to help them get a handle on this data.

The role of IT

KH: What role can IT play in all this?

AW: IT has to look at its own footprint. The IT industry has been under scrutiny lately because of the tremendous amount of energy data centers use, inefficiently.

Some reliable estimates tell us that roughly four percent of the energy going into a server farm ends up actually processing data. Most of it goes to cooling, space, and idle servers.

"IT has to look at its own footprint...not just at energy, but at the physical elements of their products – for both toxicicity and end of life."

IT will also have to look not just at energy, but at the physical elements of their products—for both toxicicity and end of life.

The EU and other regions are mandating that companies look at their waste and figure out how to recycle products at the end of their lifecycle.

A company that is doing things differently is Dell. It has a business it calls Asset Recovery Services that takes computers back from customers, wipes out the data, and recycles them properly.

It's smart business because companies getting rid of their computers are usually going into a buying cycle. Dell is building a closer connection to its customers and increasing market share at the same time.

How to get started

KH: Green to Gold outlines some really good short term, medium term, and long term goals that companies can strive towards. What is your best advice for getting started?

"The first thing is to get a handle on that footprint and collect data on the whole value chain."

AW: The first thing is for companies to get a handle on that footprint and collect data on the whole value chain. As the saying goes, "what gets measured gets managed." It's hard to collect but it's pretty vital.

Most managers work with half-blank scorecards and dashboards. They're looking at financial metrics, but missing the social and environmental metrics. Without those they're in real danger of running aground.

A final word on leadership

KH: Over the last year we've talked to business authors, and thought leaders about what the essence of leadership is. What does leadership mean to you?

AW: For me a true leader is someone that takes a broader view of a company's role in society and their own personal role within it. A leader is someone who moves beyond profits and sees their own responsibility. Many leading companies have a strong sense that environmental and social responsibility is vitally important.

Good leadership in a company isn't that different from what makes a good human being. I's about taking responsibility for your impact on the world and working hard to make that impact positive.

Good leaders realize the importance of being able to look their kids and grandkids in the eye one day and say: "I did what I could. I did the right thing." And, by the way, they realize it's pretty good for business too.