A Green and Bumpy Road for CEOs
With the increasing concern among Americans about global warming and climate change, many chief executives are making "green" an element of their company's strategy, even going as far as appointing a corporate officer to lead the company's efforts to embrace environmental principles.
While these CEOs are to be commended for tackling a serious problem, they are inadvertently setting these executives up for failure—if the appointments are not coupled with a realistic understanding of how this issue will evolve over time. I can already see some rough spots in the path ahead.
There will be no universal consensus on this issue.
First, global warming will not "arrive" one afternoon. There will be no sudden, compelling evidence that convinces everyone. There will even be "pockets" of counterevidence to which detractors can point. (For example, parts of Bulgaria just suffered through the coldest winter in over a decade). So the debates will continue for the foreseeable future, with some arguing that the change is not due to mankind, and others continuing to argue that the climate is not actually changing at all.
Many of those who do believe global warming is a problem assign the issue relatively low priority. According to several market research reports I've seen, only a small percentage of consumers in the U.S. indicate that "green" is a critical factor in their choice among competing brands for most products. Therefore, CEOs should be prepared to persevere without widespread public support for a long time.
Sinners will pose as saints.
While there will be a few spectacular successes (such as Burt's Bees selling itself for $915 million), the average company will receive only the smallest "halo effect" from sincere efforts to become more environmentally sensitive. Why? Because sincere companies will be surrounded by charlatans falsely proclaiming their own virtue.
If this sounds cynical, ask yourself this: Which food company deserves a halo for combating the obesity issue? After all, many companies offered "healthy" alternatives by substituting well-known nutritionally suspect ingredients and recipes with less well-known, but equally suspect, ingredients and/or recipes. (One such example: Nutri-Grain Pancakes, which brags that they are made with whole wheat and whole grain but contain mostly white flour and high fructose corn syrup, according to consumer watchdog Nutrition Action.) I cannot tell which companies truly deserve to be commended for making changes and which ones have simply played a nutritional shell game. Can you?
The same pretense has already begun in the environmental arena. Car companies are extolling green SUVs (an idea that surely misses the larger point). Exxon (XOM), which has been among the staunchest opponents of scientific findings on global warming, now runs ads boasting of its (relatively minor) efforts to ameliorate the problem. Research by an environmental marketing firm claims that of the 1,018 "green" advertised products it studied, all but one fudged the definition of green in some way.
The media will not always be green's friend.
True, to date the media has been quite supportive of efforts to alleviate global warming. However, high-profile media coverage of the issue has dropped off substantially since form Vice-President Al Gore's Nobel Peace Prize award in 2007. Perhaps this is because of the recession or the excitement of the Presidential election, or the importance of Britney Spears' latest travails. In any case, CEOs must accept that the media will inevitably move on to the next subject—just ask those still involved in cleaning up after Hurricane Katrina or those trying to capture indicted Serbian General Ratko Mladic.
CEOs must be prepared for the media backlash against green. The initial coverage of a subject always creates an expectation of huge breakthroughs in an unrealistic time frame. This is always followed by a period of silence, which is then always succeeded by stories of disappointments. CEOs must expect stories about how the "sacrifices" of consumers in support of green are being thwarted by business interests.
The real solutions really do require government regulation.
U.S. CEOs instinctively hate the idea of government regulation. Unfortunately, a large-scale study in 2007 by McKinsey&Co. showed that the problem can be solved only by the collective action of dozens of industries acting across most of the countries of the world. These include the obvious (e.g. nuclear power, renewable fuels) but also less obvious ones (such as airplane efficiency, water heating efficiency, avoiding deforestation, etc.). And many of those programs would place the participating companies or industries at competitive disadvantages if others did not participate (or did so to a lesser degree). Therefore, it is a true "tragedy of the commons" that can be addressed only through regulatory overlays.
CEOs must get past their anti-government instinct if they truly care about making progress. And that means allowing their environmental officers to engage in the process of crafting mutually acceptable solutions.
Does this sound bleak? It is not meant to be. The U.S. has made great progress in the past 24 months on accepting this issue and the need for change. Europe provides a model of even greater public sentiment and commitment for the U.S. to follow. But real progress depends on long-term commitment that will survive the inevitable short-run difficulties and setbacks. Realistic expectations and emotional preparedness for bumps in the road are central to maintaining that commitment—just as in the case of any other type of strategy.