Issue Date: January 19, 2004
SUSTAINABLE GROWTH: A NEW COMPANY VALUE
When economic growth and broader concerns, such as environmental protection, come head-to-head, economic growth usually wins. Addressing this apparent dilemma can cause heated debates and strong reactions. Activists use campaigns and lobbying to compel politicians and regulators to enact laws that force companies to pollute less. Businesses argue that excess regulations are costly and have a negative impact on both economic growth and job creation. In the middle of this struggle is the general public, the people who want someone else to protect the environment but refuse to translate this inner ethic into any change in lifestyle or buying habits.
A concept that reconciles this quandary is sustainable growth--that is, the creation of economic value (sought by shareholders) and societal value (sought by consumers) while also reducing environmental impact. This is not about either/or; it is about both. The trick is to incorporate this concept into all business decisions, all major pieces of legislation, and actions at the local community level.
In "The Sustainable Company," author Chris Laszlo, an economist by training, has created a useful addition to the growing literature on sustainability and corporate social responsibility. It is an easy read--more practical than most books on this topic--and uses several case studies to illustrate sustainable-growth approaches by companies in different business sectors.
Laszlo argues that the "sustainable" company integrates economic, environmental, and societal values as part of its business strategy rather than managing them separately or as trade-offs. He includes a useful shareholder-stakeholder value map, which illustrates that sustainability occurs only when both shareholder and stakeholder concerns are addressed together, not transferred from one to the other.
For example, energy supplied by fossil fuels is finite, cyclical in cost, and generates gases that affect the environment. Using Laszlo's approach, sustainable value is created when economic growth occurs while holding energy use flat, with an added bonus if that energy is increasingly supplied from renewable sources.
My company, DuPont, is pursuing this strategy. Our total global energy use for 2002 was 9% below our 1990 level, even though production has increased by almost 30%. Conservatively, this has saved the company $2 billion in cumulative energy costs versus a linear increase in energy with production. Many companies in energy-intensive industries have a similar story. In addition, DuPont now has 2% of its global energy needs supplied from renewable energy sources, with savings of about $15 million per year versus the best available fossil fuels. DuPont has set a goal to increase this amount to 10% by 2010.
The sustainable company in the future will be one that consistently creates consumer value using nondepletable resources, such as renewable feedstocks to make plastics. DuPont's Sorona, for example, is a polypropylene terephthalate where the 1,3-propanediol monomer is synthesized from corn-derived glucose using an engineered bacterium. Another example is Cargill Dow's NatureWorks, a polylactic acid based on a similar process.
Laszlo makes another important contribution by describing the path to sustainability. It begins with risk and reputation management and runs through process, product, and market approaches, ultimately influencing the business environment. A good example is hybrid and fuel-cell technologies, which will increasingly displace the internal combustion engine to benefit society while increasing shareholder value for those companies leading the transformation. It's in these lead companies' best interests to take steps to ensure that the political and social environment is supportive of, not restraining, this important change in the marketplace.
The success of several companies in establishing a mechanism for trading credits for greenhouse gas emissions reductions will depend on a public policy that supports eventual stabilization of carbon emissions at levels lower than those of today. Achieving this goal will reduce the likelihood of catastrophic climate changes and encourage innovative technologies for producing products that are significantly less energy intensive. The economic success of this transition will require that companies recognize the need for an orderly turnover of invested infrastructure and commercialization of new technologies.
Laszlo's book also emphasizes the importance of understanding and addressing stakeholder values. Most companies are very good at understanding the "voice of the customer." But they are relatively weak at understanding the "voice of society" unless they are confronted with a major public issue like ozone depletion, supplier sweatshops, or genetic engineering.
Stimulated by the American Chemistry Council's Responsible Care program, ACC member companies have established community interaction processes or advisory panels at their manufacturing sites. Many companies have made this a requirement of all sites around the world. In addition, several companies have active corporate advisory panels.
In sum, Laszlo's book provides practical advice on how to make sustainability an integral part of a business strategy. Written at a basic level, it will be useful to those wanting to move their sustainability effort from a functional focus to a business focus. Separated from the business, sustainability is only a feel-good strategy. Anchored in the business, sustainability is a shareholder value-creation strategy that uses the full power of the marketplace.
Paul Tebo, a chemical engineer, has 35 years of experience at DuPont as a researcher and manager. His current responsibility as a corporate vice president is to integrate safety, health, and environmental excellence as a core business strategy.
ALSO OF INTEREST
Inventing for the Environment, edited by Arthur Molella and Joyce Bedi, MIT Press, 2003, 398 pages, $29.95 (ISBN 0-262-13427-6)
Risk Analysis and Society: An Interdisciplinary Characterization of the Field, edited by Timothy McDaniels and Mitchell J. Small, Cambridge University Press, 2004, 468 pages, $40 (ISBN 0-521-53263-9)
Identity and the Natural Environment: The Psychological Significance of Nature, edited by Susan Clayton and Susan Opotow, MIT Press, 2003, 353 pages, $29 (ISBN 0-262-53206-9)
Sustainability and Environmental Impact of Renewable Energy Resources, edited by Ronald E. Hester and Roy M. Harrison, Royal Society of Chemistry, 2003, 139 pages, $80 (ISBN 0-85404-290-3)
- Chemical & Engineering News
- ISSN 0009-2347
- Copyright © American Chemical Society