Outgreening Delivers Sustainable Competitive Advantage
In my last column (BusinessWeek.com, 10/7/08), I discussed outbehaving as the source of sustainable competitive differentiation in the 21st century. In this column, I will discuss one of the most powerful ways of outbehaving the competition: outgreening it. And there are benefits beyond the obvious—albeit highly important—environmental ones.
Pulitzer Prize winner and New York Times columnist Thomas Friedman first published the term "outgreening" in his new book Hot, Flat and Crowded: Why We Need a Green Revolution and How it Can Renew America (Farrar, Straus & Giroux, 2008). Friedman noted that "outgreening is going to become more and more important."
This is because the old strategies for success—outmining, outdrilling, outconsuming, outperforming, outspending—no longer offer a sustainable competitive advantage in our hypertransparent, connected, and environmentally distressed world. Of course, these strategies are still used and deliver value to some, but they work less well for those who don't have access to resources.
Further, these strategies are quickly becoming exhausted, primarily because they rely on finite sources of energy that damage the air we breathe and other natural resources we need to thrive. In short, these strategies are not sustainable. As Friedman notes, "the greenest, cleanest, and most efficient manufacturers, institutions, products, countries, schools, communities, and families will thrive the most, for the longest."
Companies and countries that outgreen their competitors do so through two types of behaviors: efficiency (or conservation) and innovation.
Indeed, the push for greater energy efficiency is escalating within many organizations. A Wal-Mart (WMT) sustainability program helped the retailer reduce its use of shipping containers, saving roughly 1,000 barrels of oil and thousands of trees while generating more than $2 million in annual cost savings. Numerous manufacturers, such as Nestlé Waters (BusinessWeek.com, 11/7/08) and Nike (NKE), have decreased the amount of plastic and other waste materials used in their products and packaging, which diminishes landfill loads while simultaneously decreasing manufacturing and shipping costs. Harvard Business School's computerized irrigation system saves the institution 5 million gallons of water and $50,000 annually.
It is evident in these cases that efficiency—or conservation—efforts are delivering business value. But there is emerging evidence that behaviors related to green innovations are equally important—and will deliver greater competitive advantage. Companies can't expect to flourish in the future by only embracing discrete energy-efficiency initiatives, reducing their carbon footprint or boosting their use of alternative fuels. Instead they must be rooted in a culture that acts, thinks, and behaves according to green principles.
General Electric's (GE) ecomagination strategy (BusinessWeek.com, 3/4/08) is an example of a corporate initiative driven at the highest level by the CEO with these goals in mind. GE's success has been well-documented and is not merely a testament to CEO Jeff Immelt's vision. It lies in GE's ability to get business units to examine the growing demand for greener products, invest in research and development to create such products, and then leverage that innovation with appropriate marketing to commercialize them.
In his chapter "Outgreening al-Qaeda," Friedman calls green a strategy for winning in many different contexts. He points to the "green hawks" movement in the U.S. military, which he describes as "trying to take away al-Qaeda's advantage of being a very distributed, low-energy guerrilla force against a concentrated, high-energy-consuming conventional army, by looking for a green solution."
In 2006, U.S. fuel convoys were targets for roadside bombs in Iraq. Significant loss of U.S. life was occurring in the process of transporting fuel and water throughout Iraq. The U.S. military didn't throw more of the same—transport vehicles, fuel, and security patrols—at the problem. Instead, the military went to work greening the army. The resulting innovations have increased security, improved the well-being of our troops, and reduced the impact of al-Qaeda in the region. Other benefits of these innovations include the discovery of renewable sources of energy that have saved dollars and moved the military and the U.S. toward energy independence. "This is typical of what happens when you try to solve a problem by outgreening the competition," Freidman writes. "You buy one and get four for free."
What these examples illustrate is that outgreening can be about much more than our response to a crisis: It is an opportunity, a set of behaviors integrated into an organization's culture. By shifting their mindset to sustainability, business leaders stop their workers from thinking about accumulating more or spending more than competitors. They stop thinking about today's needs and instead think about today's needs in the context of tomorrow.
They think in a way that simultaneously stimulates innovation (and value) in the short term while preserving legacy (and value) over the long term. Individuals, business leaders, companies, and countries that adopt that definition today will outgreen the competition tomorrow by embracing a strategy of outbehaving that interprets sustainability in its broadest sense: to create a world in which we can thrive while pursuing human endeavor for generations to come. Viewed in this light, sustainability is about much more than our relationship with the environment; it's about our relationship with ourselves, our communities, and our institutions.
By framing outgreening as behaviors, business leaders can help cultivate the collaboration throughout their ranks that is necessary to become more sustainable.
Indeed, nothing is more sustainable than a self-governing culture, which can withstand the loss of a best-selling product, the departure of key leaders, and the ability to deal with crises of all sizes. Self-governing cultures are created through a dedication and examination of how they do things rather than focusing only on what they do or produce.
Unless we think of outgreening in this light, we won't be able to fix our planet's biggest problems, reap the fruits of our problem-solving efforts or create businesses that are truly sustainable—that have enduring legacies and longstanding value.