Andrew Winston

Missing the SuperFreaking Point (and Ignoring the Business Case for Green)

Thu, 05 Nov 2009 03:08:08 +0000

Stephen Dubner and Steven Levitt's SuperFreakonomics has certainly gotten a lot of people worked up in short order. The point of contention is a chapter about global warming which makes the case that Al Gore and others are too worried about the climate problem because the only way to solve it is to convince people to "put aside their self interest and do the right thing even if it's personally costly."

The authors go on to explain their solution -- geoengineering -- which purportedly isn't going to require us to cut back on our energy use or rethink the way we do business. But what they have completely failed to address -- and what the (ahem) lively discussions on the topic have missed as well -- is what the benefits of tackling climate change might be, instead of just the costs.

The authors have missed a major economic issue: the process of shifting to a low-carbon economy has enormous upsides completely aside from the benefits to climate balance.

I'm not going to try and take apart their arguments or judge the soundness of their climate science as a whole; there are some others who are already doing a detailed job of that. If you like your climate discussions hot and sarcastic (which can be entertaining), see Joe Romm's posts on his Climate Progress blog. Or if you like the cool, dispassionate analysis, I'd recommend the Union of Concerned Scientists or the well-respected journalist Eric Pooley's take on how the authors -- who he says are friends of his -- "flunk" the science.

There's also been a fascinating back and forth which includes the authors and Nobel laureate economist Paul Krugman. In short, Krugman is not pleased and he lays out some devastating concerns about the mental exercise the authors have undertaken ("We're not talking about the ethics of sumo wrestling here; we're talking, quite possibly, about the fate of civilization. It's not a place to play snarky, contrarian games").

The brouhaha is truly unfortunate on many levels. It's not that having a discussion of geo-engineering is a bad thing -- we should explore and assess many options. But the real problem is that the authors of SuperFreakonomics -- and even the big critics who have gotten sucked into it -- seem to have taken too narrow a view of the problem. Although the authors clearly believe that there is too much climate-change hype, they seem to agree that there's a warming problem (or why propose a solution -- the main point of the chapter -- at all?). But the focus of the discussion is entirely on a way to counteract the effects of greenhouse gases, as if there are no other issues related to our reliance on fossil fuels.

Instead, let's just think about the business benefits of changing our products and processes to reduce carbon emissions, regardless of the atmospheric benefits. How will changing to a lower-carbon economy help companies? Well, there's real money involved here -- energy and other resources are getting fundamentally more expensive over time as demand around the world rises and supply gets harder to find. Oddly, the SuperFreakonomics authors acknowledge this Econ 101 supply problem in passing with the statement: "In just a few centuries, we will have burned up most of the fossil fuel that took 300 million years...to make." So why wouldn't we want to move away from a declining resource?

Put really simply, it saves money to reduce greenhouse emissions. It makes businesses more competitive to use less energy and to help customers do the same. It also creates jobs in a wide range of industries that help build a low-carbon economy -- from the obvious solar panel builders and installers to the less sexy home weatherizers, electric vehicle manufacturers and mechanics, and building efficiency consultants and experts.

The countries and companies that decouple themselves from fossil fuels will slash their costs and increase profits mightily. In fact, as Robert Kennedy, Jr. pointed out in a speech recently, the countries that have already reduced their reliance on fossil fuels -- such as Iceland, with its geothermal energy, and Sweden, with a carbon tax driving down energy use as the country grew -- have made their economies richer and more stable. (Yes, Iceland then bet its wealth on bad investments at the heart of the financial crisis in 2008 and bankrupted itself, but that's another story.)

As many have repeatedly argued, we also place ourselves at great risk globally by continuing to pour money into oil markets. We send hundreds of billions of dollars a year to parts of the world that tend to include our enemies (and is a waste of money no matter whom it goes to). And we place ourselves at personal risk -- the National Academy of Sciences just estimated, conservatively, that fossil fuels cost $120 billion per year in health costs and cause 20,000 premature deaths (that's more than six 9/11s if you're counting).

So while we find new ways to pour attention on "contrarians" and have a debate that most of the rest of the world has already stopped having, we risk our health, fall further and further behind the countries we compete with (China and Germany, for example, in renewables), and become more indebted to countries that may not be friends.

Solving climate change is not really about asking people to hold hands and sing "Kumbaya," but about political will and making it easier for business to create the low-carbon solutions we all need. Regardless of the climate science, the benefits of action and the costs of inaction for business are astronomical -- and worth superfreaking out about.

[This post first appeared on Harvard Business Online and on HuffPo -- see the comments...]

The U.S. Chamber of Commerce Is Hurting U.S. Competitiveness

Mon, 02 Nov 2009 13:53:30 +0000

What do Exelon, Pacific Gas & Electric, PNM Resources, Apple, and Nike all have in common? In the last month they all dropped out of the U.S. Chamber of Commerce over the group's stance on climate-change legislation.

Sadly, the Chamber's COO told the Wall Street Journal that these defections will not change the Chamber's misguided positions, including constant carping about the potential costs (almost always overstated) of climate change and calling for a mock "trial" on the science of climate change.

Here's why the Chamber is out to lunch. First, tackling climate change is good for business and improves the competitiveness of our industries and the country as a whole. And, oh, on a related note, the Chamber is increasingly out of step with its own members — because they do see how going green will help their businesses.

As so many companies already know, climate legislation will help our nation's businesses stay competitive on the global stage. But don't listen to me, listen to mega-venture capitalist John Doerr and GE's Jeff Immelt. The two staunch capitalists wrote a powerful op-ed in the Washington Post that laid out the series of crises we face: economic, climate, energy security, and now a "competitiveness crisis." As they put it, "this crisis is particularly evident in America's worldwide standing in the next great global industry, green technology."

Their evidence: One in ten of the world's biggest solar and wind companies are based in the U.S. We're falling behind China, Germany, and others fast. Their solution, in part: "Send a long-term signal that low-carbon energy is valuable. We must put a price on carbon and a cap on carbon emissions." With the right price signals, we invest, innovate, and move off of fossil fuels (and stop sending $700 billion every year in oil payments to countries that don't like us — but that's a separate story).

And with the right policy in place around the world, according to HSBC, climate change-related products and services will be a $2 trillion market by 2020. That's a big pie to compete for. But without the right price signals here in the U.S., we can't compete. It's as simple as that.

[See the rest of this post, and the always interesting comments whenever climate change comes up, here on Harvard Business Online]

Green IT: One Path to a Green Recovery

Mon, 26 Oct 2009 22:29:17 +0000

[This post first appeared on a Climate Savers Computing Initiative site. I'll skip the general intro to the greening topic from the original...]

...Five areas of the business are ripe for quick paybacks from green thinking: facilities (heating, cooling and lighting), fleet and distribution, waste, telework, and IT. Let’s look at IT specifically and why companies are still going green.

When industry analyst Gartner Group estimated that information and communications technology was responsible for 2 percent of global carbon emissions — equal to the entire aviation industry — most people outside the IT world (and many inside it) were shocked. At the core of these numbers lies the shocking inefficiency of data centers.

Of all the energy going into a modern server farm, IBM estimates, less than 4 percent actually processes something—you know, what the room was built for. The other 96 percent of electrons are lost at three stages: (1) cooling the room itself, (2) cooling the stacks or “blades” of servers, and (3) keeping idle machines humming. Most of this energy is wasted and costs real money. In recent years, the share of a data center’s variable cost going to energy has grown fast. What was once a tiny part of the budget is now 40 or 50 percent of the operating cost. Over the life of a server, you can easily spend twice as much on electricity as on the capital cost of the server itself.

In response, the competition has been fierce to tackle those three stages of the problem and find ways to slash the energy budget. First, look at the design of the data center itself. One of my favorite “head-slapper” strategies in all of the greening movement is the use of outside air economization — that is, effectively opening the door and letting hot air out rather than cooling it — which Intel estimates can save $3 million in a 10 mega-watt data center.

Second, companies are looking at the server hardware. They’re shutting down orphaned systems — Sun discovered during its “Bring Out Your Dead” day that 4,100 of its servers were unused, but plugged in sucking energy. But sometimes, as the Wall Street Journal suggested earlier this year, “the smartest thing to do is invest in new, more efficient systems.” One company, Fair Isaac Corporation, bought new, more efficient servers and cut the total number in its data processing center in half. This requires some capital expenditure, but the paybacks can be fast.

Third, software companies are vying to help handle server loads and increase the average 20 percent utilization rate (meaning, 4 of 5 servers are basically idle, waiting for peak loads). The buzzword is virtualization, or using software to create pseudoservers that run in parallel on the same physical server and use all that idle processing power.

For companies using all of these tactics, such as Microsoft, newer datacenters can use 50 percent less energy than ones built just a few years ago. And that’s just the large IT systems. Many organizations are now utilizing software to control all the PCs sitting on desks, putting them to sleep overnight and often saving millions. None of this pressure to cut back on IT energy and cost is going away. Forrester reported in January 2009 that 60 percent of IT managers are using green criteria in their procurement decisions and that even in tight times more managers are accelerating green IT efforts than slowing them down.

But what’s the most powerful thing you can do to reduce IT energy use? Every time I speak to tech companies or sustainability execs, I hear one theme over and over: The people who create the energy use don’t have a clue how much it’s costing. The prescription: Add the power bill to the CIO’s budget.

Get Lean on Stuff, Not People

Wed, 07 Oct 2009 14:23:15 +0000

This may be hard for anyone below 40 to fathom, but companies didn't always fire people to save money. IBM was famous for "full-time employment," but then its first layoffs in the early 90s changed the game forever. Over the last 20 years it has become (supposedly) good management practice to slash people costs — remember the famous cutters like "Chainsaw" Al Dunlop? A company's stock price rose whenever it announced cuts.

But as we face a carbon-constrained future with volatile, rising energy and commodity prices, companies will soon realize that they're often "fatter" in energy and resource waste than in human capital.

I wish things were different today than in Dunlop's time, but when this downturn began, companies raced to cut people ahead of the coming decline in sales and profits. It didn't seem to occur to anyone that layoffs would accelerate the recession as fired employees — also known as consumers — had no money to spend. As we enter what seems to be a jobless recovery, it's past time for us to realize that layoffs are not always the right answer.

I can't say with a straight face that saving energy will eliminate the need for all layoffs. If your sales drop by 50 percent, which has happened to some automakers, you can't afford to keep everyone on the payroll. But layoffs can also cost fundamentally sound companies more than they save. On the heels of the early 2000s recession, Bain & Company conducted a study on the true costs of firing people. Their conclusion: if you refill a job within six to eighteen months, you lose money on the deal. The drag on savings, they said, includes "severance packages, temporary declines in productivity or quality, and rehiring and retraining costs that more than offset the short-term wage savings."

More recently, Fortune reporter Geoff Colvin laid out all the costs of layoffs, which, he points out, companies mistakenly equate with only severance costs. Colvin included brand equity costs, leadership costs, Wall Street costs, rehiring costs, and my personal favorite, morale costs.

To stay strong in tight times, to find opportunities to cut costs in smart ways, and to innovate your way to the future, you'll need everyone on board. So undermining morale may not be a great idea right now. You'll also need people with deep knowledge of the business — and mass layoffs ensure that you lose critical perspectives and information. In many cases, there's another way (or two). Some companies, for example, have been paying everyone a bit less rather than resorting to layoffs.

Others are turning to the task of getting lean and getting creative.

[See full post at Harvard Business Online here]

Why the Military Is Going Green

Mon, 21 Sep 2009 15:28:11 +0000

[This post originally appeared on Harvard Business Online here]

In recent months, which radical, tree-hugging group has upped the volume on pushing for action on climate change? I bet you wouldn't have guessed American military leaders. Apparently, the people standing on the proverbial (and actual) walls defending our freedoms are very concerned about the dangers our soldiers face in an uncertain, physically changing world. It's something that businesses need to pay attention to, since the military's top strategists are now getting involved in developing solutions that may well be useful to — or even critical to — individual companies' success.

Generals and admirals are now making the case that climate change is a threat to our national security. Changing regional climates, more natural disasters, and displaced peoples will force us to put troops in harm's way more frequently — and the military must be prepared.

For the leading thinking on climate and security, look no further than CNA Corporation, a think tank funded by the Pentagon, which has, in the words of the New York Times, spoken "ominously of climate change as a 'threat multiplier' that could lead to wide conflict over resources."

I recently spoke at an event in DC and sat at lunch with retired Vice Admiral Lee Gunn, the President of both CNA's Institute for Public Research and the American Security Project (ASP). In his powerful keynote address, Vice Admiral Gunn spoke about the risks global climate change presents to America. His view on the science was simple: "Some are still not convinced about the science on human-induced climate change — I am."

The Admiral laid out three large shifts in military practice and strategy that climate change will bring about:

1. Why the U.S. fights, gives aid, and responds to disasters: Natural disasters, water shortages, and the weakening of some states mean "we will deploy more often to more places."
2. How logistics patterns will change: One of our primary military bases in the Middle East, Diego Garcia in the Indian Ocean, is only a few feet above sea level. The physical shifts and the changes in force structure related to #1 and #2 will all be expensive.

3. What will happen to international relations: The loss of sea ice is changing commercial and military sea patterns. The Arctic represents a new area of resources for countries to potentially compete over (remember Russia planting a flag last year on the North Pole sea bed?).

[Please see the rest of the post here]

Sustainable Business Truths: The Least Your Employees Need to Know

Sat, 12 Sep 2009 21:02:56 +0000

[This appeared first on my Harvard Business blog here]

In hard times, focusing your company on environmental challenges and opportunities — or "greening" your business — can be a terrific source of employee motivation. But I make the case in my new book Green Recovery that increasing engagement and knowledge around green issues isn't just about pumping up morale — it also gives your people a solid foundation to innovate and create value in new ways.

The world is changing, and fast. Profound shifts are under way as the world mutates demographically (more, younger, less white), politically (new bases of power to the East), and perhaps most importantly, physically (climate change, water stress, resource constraints). How can your company prepare for markets that will be driven, unavoidably, by a quest for sustainability? As I argue in the book, you need to get all your employees on the same page on three essential realities:

1. Resources are not infinite. This goes against everything we've experienced as a species for millennia. We are reaching limits in resource availability, from fossil fuels to water. You know it's serious when Forbes Magazine casually mentions that Exxon is going to natural gas because it's "running out of oil."

2. The value is in the value chain. In most industries, the largest part of a company's environmental footprint lies outside of its direct control, falling either upstream in the supply chain or downstream with customers using the product. The environmental risks (such as discovering lead in your toys like Mattel did in 2007) and opportunities (like creating energy-efficient products that consumers lap up) reside outside your four walls. Everyone will need to think more holistically.

3. Climate change is a political and business reality regardless of what anyone thinks about the scientific reality. I won't belabor this idea, but getting lost in debates about whether Al Gore is plotting to take away your SUV is missing the point. Virtually every country in the world is joining international negotiations about climate or directly regulating carbon. Most of the world's largest businesses are actively tackling their own carbon emissions and demanding the same of their suppliers. The cost of doing business is changing permanently and being carbon-fat is getting much more expensive. These are critical business issues to understand and prepare for.

[Please see the rest of the post here]

Exxon is Green? CFL's "Probably" Reduce Energy Use?

Tue, 08 Sep 2009 22:10:42 +0000

Excuse a brief rant about what seems to be a rise in ridiculous cover stories and op-eds. Apparently, the only way to get printed these days is to say something that makes 'counterintuitive' seem quaint. No, you have to go all the way to crazy-town.

This kind of nonsense is happening on all topics (do I even have to mention "death panels"?), but in my wheelhouse, I've seen some doozies in the green world. A couple cases in point lately:

1) Forbes Magazine declares Exxon the Green Company of the Year. The basic argument of this piece is that Exxon is the world's best producer of natural gas, which is lower carbon than coal. That alone apparently makes the company "green."

2) An op-ed in the Wall Street Journal today declares that switching to compact fluorescents is not worth it because of "bad lighting." The core absurdity: "Will some energy be saved? Probably. The problem is this benefit will be more than offset by rampant dissatisfaction with lighting." Really? Cutting energy use and expense 75% for each bulb changed probably saves energy? And it will be outweighed by lighting concerns?

What makes these kinds of arguments so dangerous is that chunks of the discussion are logical and well-thought out. Those are the flowers growing out of a turd of argument. But gullible people will latch onto the most ridiculous claims and just remember those.

Is natural gas cleaner than coal? Of course. Does that make Exxon green given its role as the prime funder of climate change deniers over the last decade? Hardly. The company has done more than any single entity (save perhaps Fox Networks) to undermine the vast consensus of scientists on the challenges of climate change. I believe those payments to junk "scientists" to make it seem like there's disagreement as to the extent of the problem will go down as one of the more immoral acts in corporate history. Can Exxon become green? Sure. God knows it's one of the most efficient, effective companies in the world. If it turned those operational powers to greener energy pursuits, it could lead. Look what happened to Wal-Mart and GE under new CEOs Lee Scott and Jeff Immelt.

And do CFLs create some challenges in lighting style? Sure. But those are being addressed quickly by companies selling better and better options (e.g., you don't have to buy the white-light curly-cue bulbs anymore -- they come in frosted bulb covers that make the light very close to "normal"). The op-ed also decries the inability of CFLs to handle dimming well. But LED lighting, which is infinitely dimmable, is coming on strong and fast.

Anyway, to say that the vast decreases in energy use and expense -- which the author seems to skip over entirely in his railing against an "energy-saving agenda" -- are outweighed by some possible, and avoidable, inconvenience in finding the right light for the situation, is totally absurd.

I hesitate to give these arguments more ink, since that's why our media prints silly articles. But I'd rather scream from the rafters about the silliness then let it slide by.

[This appeared last week on Huffington Post. Since then, another ridiculous op-ed appeared today in the Wall Street Journal about wind farms killing birds. They do, but this is an absurd, and sort of old, argument against wind farms -- climate change will kill entire species of birds.]

Why GM Will Go Bankrupt Again

Wed, 02 Sep 2009 22:16:26 +0000

[This article first appeared on Forbes.com]

Ford is profitable again. General Motors is exiting bankruptcy much faster than anyone expected. It would seem that Detroit is recovering and that GM will limp through the rest of the recession. But the real question is whether the biggest of the Big Three will make the strategic shifts necessary to survive until the next one.

Early signs indicate it won't.

First, look at how GM got into this mess. The decline of the American automakers took decades, but one massive misstep lies at the core of what happened more recently. GM and its Detroit brethren missed a seismic green wave that swept the business world and society, a rising tide of real environmental challenges and growing public concern about those challenges. When GM was hit by a deadly combination of global resource constraints--which drove energy prices to historic highs--and changing consumer preferences, the already-weakened giant was unready. Indeed, former chief executive officer Rick Wagoner actually recommitted the company to big, energy-inefficient vehicles as late as 2005.

The frightening thing now is how many companies--not just automakers--remain overexposed to environmentally driven risks. Gas will not stay under $3 a gallon much longer. It already appears that China and India will soon resume their torrid growth, and when the full global economy recovers along with the rising East, the demand for fossil fuels will outstrip supply. Add to that the reality that governments everywhere will make fossil fuels even more expensive through legislation aimed at reducing greenhouse gases. Climate action is now a political and business reality. But how many companies are changing their products and strategies to deal with that fact?

The "new GM" certainly hasn't done so so far. As recently as last year, vice chairman Bob Lutz, who is now in charge of GM's communications of all things, called climate change "a crock of s--t." Imagine what sort of language he must have used to describe U.S. auto sales for the first eight months of 2008. During that crucial period of high fuel prices, sales at GM, Ford and Chrysler fell a bone-jarring 15% to 25% (year over year). Over that same stretch, Subaru, Honda and Nissan actually increased their sales. With gas prices at historic highs and consumers demanding more energy-efficient vehicles, the automakers with greener portfolios performed much better.

GM apologists will be tempted to make excuses by blaming the higher costs of producing vehicles in the United States, or even the credit crunch. But higher labor, pension, and health care costs affect profitability, not, necessarily, sales. And the deep recession came after those critical eight months. Only by putting those stale excuses aside can GM move forward.

What would success look like? GM could learn from other American giants that have proved adept at riding the green wave. Leaders such as Wal-Mart, General Electric, and DuPont have realized that "going green" is now a matter of survival. They're not scaling back their sustainability efforts because of the current downturn; they're accelerating them. They've realized that environmental strategy doesn't raise the cost of doing business, as many fear; it actually lowers expenses, reduces risk and drives innovation and sales.

GM can also look to its direct competitors to see the benefits of having a longer-range environmental strategy. Toyota announced this spring that it had received 80,000 preorders for the new 2010 Prius, and that it had instituted overtime production to meet the demand. Meanwhile Honda's Insight was the bestselling car in Japan in April--not the bestselling hybrid, but the bestselling vehicle. These results must have been very welcome during the worst decline in auto sales in history, but they were not overnight successes. Toyota started developing its "environmental" car not one but two recessions ago.

It takes foresight, hard work and courage to get ready for a green and carbon-constrained future. For GM to survive--and for American taxpayers to avoid having to bail it out again--it will have to completely overhaul its portfolio. Developing one new green model, the much-hyped Chevy Volt, will not be enough, especially when the Warren Buffett-backed Chinese firm BYD has already produced a similar vehicle. No, GM's only hope is to design all its cars to reduce resource use in the supply chain, require less energy to manufacture, and of course, need much less or no gas to drive.

Missing the green wave cost GM dearly. The realities of higher resource prices, political action on climate change and changing consumer demand are poised to swamp it again. And unless we see big changes soon across the business community, GM won't be the only company to go under.

Moore's Law and the Environment: An Opportunity

Sat, 22 Aug 2009 15:37:17 +0000

Everything's getting faster these days—you've heard it before. Two mega-trends in particular are merging: rapidly accelerating technological change and rapidly evolving environmental issues and pressures. Lucky for us, the first change is going to save our butts from the second. Fast-evolving, smart IT will play a critical role in helping us navigate and profit from environmental challenges. The two trends together are combining to make for enduring change in how business is done, a movement to a permanently higher plane of green and tech-driven activity.

A recent Wall Street Journal op-ed, "Ten-Year Century," makes the well-known case that the pace of transformation in society is accelerating. More has changed, the authors say, in this decade than in the previous century. To be specific,

Changes that used to take generations—economic cycles, cultural shifts, mass migrations, changes in the structures of families and institutions—now unfurl in a span of years... Game-changing consumer products and services (iPod, smart phones, YouTube, Twitter, blogs) that historically might have appeared once every five or more years roll out within months.

The "Laws" of Technology that the authors highlight—Moore's and Metcalfe's—perfectly describe how quickly both computational power and networking capacity are growing (double the computing power on every chip every 18 months, for example). It's a "law" in the world of technology that things are steadily getting faster.

But this op-ed and other "tech is changing the world so fast" stories—and I'm a sucker for them—miss the another big shift that's moving just as fast: the degradation of the natural world and the resulting pressure to green society and business.

[The rest of this blog appears on Harvard Business Online here]

Will Videoconferencing Kill Business Class Travel?

Tue, 18 Aug 2009 19:01:42 +0000

[My column last week on Harvard Business Online]

In a tight economy, with companies spending much less on IT, the tech giants will take growth wherever they can find it. The Wall Street Journal reported recently that Cisco and HP are in a pitched battle for customers for their high-end teleconferencing systems. According to the report, it's "one of the few technologies that has benefited from the downturn, growing 30% from last year as businesses look to reduce travel expenses."

Cisco, HP, Nortel, and telepresence-focused players like Teleris have developed impressive, beautiful systems that make you feel like you're in the same room with your colleagues. The pitch is that you'll save money — but you'll also reduce your environmental footprint through reduced travel. These companies are cashing in on the business world's pressing need to get lean, while also appealing to the desire to get green. In my new book Green Recovery, I lay out five areas of a business that hold real promise for fast payback: facilities (lighting, heating, cooling), IT, fleet, waste, and telework. While companies are finding savings in all these operational areas, telework may be the most underleveraged of them all.

Just a few companies have made a concerted effort to reduce business travel through a combination of high-end telepresence systems and everyday technologies like WebEx. Most of the big users are, not surprisingly, tech companies that are acting in the spirit of "eat your own dog food." British Telecom calculated that it was saving $330 million per year on avoided travel costs and time saved, and Microsoft pegged its savings at $90 million. Non-tech leaders such as P&G and Deloitte have installed dozens of systems around the world — you need the network effect to kick in and make the investment worth it. They're saving millions every month on reduced travel expense.

It would seem that telework fits service and knowledge-based businesses best, but even companies with mostly hard assets see the value. David Ratcliffe, CEO of electric utility Southern Company, talked to the Journal in early 2009 about ways to cut costs in the downturn. He focused on two items: slashing $200 million from the capital expenditure budget by delaying some work on the physical plant and "more meetings with technology instead."

The business of telework is interesting to me on two levels. First, from the customer's side, even though the upfront investment is not small, it clearly saves a lot of money. Telework also represents a great way to show your most harried and valued employees that you care both about their life balance AND about greening your business.

But second, from the perspective of the suppliers of these technologies, the story has some interesting strategic angles. With their pitch of reducing travel, who are Cisco, HP, and the others truly competing against? The phone? No, they're going after the airlines — and targeting their best, most frequent, business-class customers. Do you think the airlines ever thought they'd be competing with IT companies?

[the rest of the blog is here]

How the Wal-Mart Eco-Ratings Will Save Money

Tue, 04 Aug 2009 03:01:29 +0000

[Post #3 of 3 on Wal-Mart's activity in the last couple of months. This appeared at Harvard Business Online]

I wouldn't normally focus on the same company twice in a week, but Wal-Mart just keeps making news in the world of sustainability — and in the world of commerce for that matter. With a major PR push, the company announced its latest initiative targeting supplier sustainability performance. After a lot of huffing and puffing, the announcement itself was fairly simple (at least for now).

In short, Wal-Mart will be asking all suppliers 15 questions about their approaches on four key issues: energy and climate, material efficiency, natural resources, and people and community. A few sample questions:

--> Have you measured your corporate greenhouse gas emissions?
--> Please report total water use from the facilities that produce your product(s) for Wal-Mart.
--> Do you know the location of 100% of the facilities that produce your product(s)?

For now, these questions are mainly for data collection, but they represent the first step toward (a) truly comparing suppliers on their sustainability performance and (b) creating a real sustainability index that consumers can use to compare products. Most of the press coverage on this was making it sound like a product green label was around the corner. But Wal-Mart, according to one top exec, is "maybe five years" away from that level of data and consumer communication.

Rather than analyze the announcement details any further, I want to put yesterday's announcement in context within the range of Wal-Mart's sustainability actions and within some larger trends. But first, let's be clear: this kind of sustainability data collection is good for business, and it's definitely good for Wal-Mart. And while it may seem like a total pain to suppliers, it will be good for them as well.

The logic is simple: knowing your business better makes it easier to find hidden value.

Read the rest of this post...

Wal-Mart Asks, Where's the Beef (From)?

Tue, 28 Jul 2009 15:14:18 +0000

[Post #2 of 3 on Wal-Mart's activity in the last couple of months. This appeared at Harvard Business Online and then on BusinessWeek online]

In the last month, what event had the greatest potential for changing business as usual forever? If you said the passage of the climate change bill in the U.S. House of Representatives, it would be hard to argue with you. But I'm going to make the case for another event as the most influential (or at least a very close second): the Wal-Mart Sustainability Summit held in Sao Paolo, Brazil.

Following the model of the historic meeting Wal-Mart held for its Chinese suppliers last year, the President of Wal-Mart Brazil, Héctor Núñez, decided to hold a similar event for his suppliers. (Full disclosure: I was hired to give a keynote about the greening of business for larger context setting, but I have no consulting relationship with Wal-Mart).

Speakers at the event included the Brazilian Minister of the Environment and the director of Greenpeace Brazil, an organization that just a few weeks ago produced a damning report titled "Slaughtering the Amazon" that points the finger at the cattle industry as the primary cause of deforestation (growing soy is another leading cause). I had an interesting talk with Hector about his conversations with the aggressive NGO. He commented that "when you talk to Greenpeace, it's hard to argue with what they're saying."

But, I thought, arguing with the environmentalist perspective is exactly what business leaders normally do. But the world is changing—fast. In fact, Hector's speech at the summit, with its soaring rhetoric about global environmental damage, made him sound more like a Greenpeace activist than a hard-nosed manager.

At the Summit, Wal-Mart announced significant goals and mandates to tackle some of the thorniest environmental and social problems in the world. Wal-Mart Brazil will now, in essence, ensure that its supply chain uses...

• No companies that employ slave labor; "forced" labor (read, slavery) is a rampant problem in developing countries.

• No soybeans sourced from illegally deforested areas; 20% of the world's carbon emissions (and 70% of Brazil's emissions) come from burning down trees.

• No beef sourced from any newly cleared Amazonian land; globally, deforestation emits more carbon than all vehicles. Brazil and Indonesia are at the heart of this enormous challenge.

[For the rest of this column, please see BusinessWeek]

"A Plastic Bag Is a Pain in the Butt"

Thu, 23 Jul 2009 13:52:36 +0000

[I've been delayed in posting my blogs from other sites, so i'll put up a few in a row, and they all happen to be about Wal-Mart -- lots going on with the giant retailer. This one is from Huffington Post here]

A few weeks ago in Sao Paolo, Brazil, I heard the distinct sound of "taps" being played for the simple plastic shopping bag. Wal-Mart Brazil had invited all its suppliers to come and discuss its sustainability goals -- and sign a public agreement to match them. The pact dealt with everything from saving the Amazon forest, mostly through bans on sourcing beef and soy that come from cleared lands, to reducing phosphates in detergents (see the agreements here). It was an historic meeting that covered a lot of ground (full disclosure: I was hired to speak at the event and provide context on the greening of business globally).

But aside from the much larger and thornier Amazon-related initiatives, one announcement was both fun and indicative of the green pressures coming to bear on companies and particular products. Wal-Mart Brazil is sponsoring a nationwide campaign, in conjunction with the Brazilian government, to drastically reduce plastic bag use. The minister of the environment, Carlos Minc, was on hand to co-announce the project. Wal-Mart's own internal goal is a 50% reduction by 2013 (a larger reduction than the company's global goal, which I've commented was perhaps not strong enough).

The humorous national campaign includes television ads featuring the hip "Junior" (only the coolest have one name), a leader of youth-oriented NGO AfroReggae. The slogan for the campaign, "Saco E um Saco," translates roughly into "A bag is a pain in the butt" -- or at least that's what the simultaneous translators tried to convey...they seemed at a loss on how to handle it. One Portuguese executive told me that it's closer to "A bag sucks" which plays on the double use of "saco." Either way, it's a funny, yet aggressive way to get people to stop using these things.

Brazil is hardly alone in the national effort to eliminate bags. China starting taxing all shopping bags and has cut total usage 66%.

Companies are also trying many methods to get customers on board. Charging for bags is one clear signal to consumers to use fewer. British retailer Marks & Spencer recently announced an 80% drop in use at its stores after adding a small charge (IKEA and others have witnessed 80-90% drops in usage as well after charging a nickel to any customer wanting one).

Wal-Mart Brazil has experimented with refunds instead. If you don't take the bags, you get a discount off your grocery bill (so it's revenue neutral to the company and basically charges those who DO take the bag, without raising anybody's bill).

All companies should take note of this kind of coordinated effort by governments and other companies -- imagine what happens if your product, manufacturing process, or sourcing strategy ends up on the societal bad list. I've talked about the risk to business from these kinds of market shifts on green principles before. While we might have some guesses as to what's next (did your meat come from cleared Amazon? Do you use too much water from dry regions in your production?), it's unfortunately somewhat unpredictable where the questions might come from.

Bags are not the only products facing this kind of challenge -- it's happening to bottled water as well. But nothing compares to the coordinated global attack on plastic bags. Once your product is declared a pain in the butt, where do you go from there?

Shouting Into the Void: My Twitter Experiment

Tue, 21 Jul 2009 13:43:40 +0000

Well, the rumors of Twitter’s life may be greatly exaggerated. I’ve been playing around with this social media thing for a few months. I joined Twitter and Facebook, sought out old friends and colleagues, etc. But I’ve been wondering, particularly with Twitter, whether anyone was really listening. Are we all standing in a big room yelling through megaphones at each other?

So here was my little experiment. I sent out a tweet yesterday at 12:30 EST to see how many people even see any given missive. Here was the text:

“Ever wonder what % of people read your tweets? An Experiment: If you read this, please reply or DM me with "Got it!" -- i'll tweet results”

The results were not promising. At the moment I sent out the tweet, I had 1,090 followers. Most of these people are interested in or work in the field of green business or environmentalism (I think). After a few hours, a grand total of 19 people responded...and none after that. That’s less than 2%.

Why such a ridiculously low response (I could send a direct mail package and do better)? A few interpretations:

1. I’m a wildly unpopular tweeter and people follow me out of pity, but have blocked all my tweets from bothering them.

2. Green-minded people are too busy enjoying the weather or hugging trees to check their Twitter feed.

3. I didn’t choose a good time to tweet. I figured lunch time on the east coast and during the business day for everywhere else was good. But maybe most people check at night.

4. People follow so many other people, that they only see a tiny fraction of the tweets that go by – only the ones they happen to see in the few minutes they check.

5. On a related note, people follow many others, but use TweetDeck or other software to truly follow a much smaller number.

While the first couple may be true, I’m leaning toward the latter explanations. People really pay attention to only a small number of people they follow, and nobody really knows who those are. But as this is one data point, I’d love it if a few of you out there ran the same experiment to see what response rate they get and got back to me.

So what should one do with this knowledge? One answer is to tweet a lot more so you reach more people throughout the day. But that’s sort of unappealing to manage and really unappealing for the few who do see most of your tweets. Another is to not worry too much about repeating yourself since so few see any one tweet. If you have something important to say or promote, maybe you post it a few times at different times of day. But that could also get annoying for your best followers.

I'm not sure what the answer is, but I’m thinking that expecting much from Twitter in the way of conversation, awareness building, or brand enhancement may be a mistake. I welcome your thoughts.

How to Beat the NEXT Recession

Tue, 30 Jun 2009 22:51:17 +0000

[My new column on Harvard Business Online]

We're in the midst of the worst decline in auto sales history — yet Toyota can't make the newest model of its hybrid gas-electric Prius fast enough. According to the New York Times, the world's largest automaker has received 80,000 pre-orders already, one-fifth of the company's Prius sales goal for the year. On the heels of the depressing GM and Chrysler bankruptcies and layoffs, Toyota has instituted overtime production in its Tsutsumi plant in Japan.

This news comes on the heels of one of Honda's latest entries in the hybrid market, the significantly revamped Insight, becoming the bestselling car in Japan in April — not the bestselling hybrid, but the bestselling vehicle — racking up over 10,000 sales at $19,000 a pop.

The era of niche eco-vehicles is over. With Toyota and Honda experiencing their first losses in decades, the vast success of the green parts of their product portfolios must be very welcome — a life boat in troubled times.

It's educational to think for a minute about when the foundations of these successes were built. Toyota started development on the first generation of Prius, not one, but two recessions ago. Sixteen years ago, on the heels of the early 90s downturn, Toyota started designing what it thought would fit the demands of the 21st Century. Early in the process — and even though oil was only $17 per barrel — the team decided that a critical focus should be "environment." And while I can't say exactly when Honda decided to completely retool their earlier Insight model, how long after the early 2000s recession could it possibly have been?

[See the rest here]