By E. Freya Williams
(Amacom, 278 pages, $38.50)
Sustainability has become big business. Big as in billions. Once the territory of small health-food stores and the occasional mid-size business – with a fervent, if tiny customer base – these days it has mass appeal and is leading to big ambitions and big profits.
That's shown by the latest book on sustainable business, Green Giants, from consultant E. Freya Williams. In the past, efforts on this subject seemed wishful and proselytizing, although they usually contained solid examples of (seemingly lonely) companies making great strides by going green. Ms. Williams' book, instead, catalogues nine businesses that she calls Green Giants because they have $1-billion (U.S.) or more in annual revenues that can be directly attributed to a product, service or line of business with sustainability or social good at its core. The book's tone: Get with it, you're behind the times. Indeed, it reads like any other manual on how great companies succeed, except this time the winners happen to be thriving through their green ideals.
Among the nine are two behemoths not generally known for sustainability: General Electric and Unilever. But a lot of GE's success in recent years flows from its Ecomagination products – from diesel locomotives to electric charging stations – that are certified as delivering superior environmental and financial performance to its customers. Chief executive officer Jeffrey Immelt looked to the future and saw the many industrial customers he served as needing to go green, for financial and regulatory reasons, and has been supplying them with the opportunity.
Unilever, which was founded to mass produce a product with life-saving health benefits – soap – at an affordable price, has in a way gone back to its roots under CEO Paul Polman, who insists "there is no contradiction between sustainability and profitable growth."
The company started to grow after 10 lean years, and the brands growing the fastest are those that embrace a social mission or sustainability. Unilever aims to double its sales while halving its environmental blueprint by 2002, sourcing 100 per cent of its agricultural feedstocks from sustainable agriculture.
The other seven companies or product lines are: Chipotle Mexican Grill, which serves its meals from pork, beef and chicken raised naturally and more humanely; Whole Foods Market, which derives 30 per cent of sales from organic products, more than any other American national retailer; Natura Brasil, a Brazilian manufacturer of beauty products that aims to source one-third of its ingredients sustainably from the Amazon; Tesla Motors, which manufactures the world's first commercially successful all-electric vehicle and now is aiming at a more economically priced, mass appeal electric car; IKEA, whose products for a more sustainable life at home bring in more than $1-billion in annual revenue while trying to help customers use energy efficiently; Nike, whose Flyknit shoe manufacturing process cuts waste by up to 80 per cent; and the Toyota Prius.
She identifies six key factors or traits behind their success.
- The iconoclast leader: In each case, the sustainability journey can be traced back to a leader with an inner sense of conviction, the courage to stand up and change things, the commitment and tenacity to stick with the idea through bad times, and the willingness to be a contrarian.
- Disruptive innovation: The products and services are not green gloss on familiar products, but dramatic innovations that disrupted a category or industry, as with Chipotle, which turned the fast-food model upside down by building a chain based on more expensive, ethically and environmentally responsible ingredients or, of course, the Prius hybrid and the electric car.
- A higher purpose: The Green Giants are animated by more than just making a profit. IKEA’s mission: “To create a better everyday life for people.” Unilever: “To make sustainable living commonplace.” She writes that “purpose-driven business envisions business as a force for good, a force with the power to change the world around it and to deliver tangible improvement to human life and the environment.” It’s not about philanthropy. She stresses that they understand purpose is “not just where the company spends its money but how it earns it.”
- Built in, not bolted on: Sustainability is integrated into the six core structures of the company – strategy, organization, governance, costs, incentives and reporting. Unilever’s Sustainable Living Plan, she stresses, is not the company’s sustainability strategy – it’s the business strategy, the only one the company has.
- Mainstream appeal: What she calls the “Super Green” niche of consumers covers 16 per cent of the population and hasn’t been growing. The Green Giants also aim for the 66 per cent who have good intentions but often don’t follow through. The key is to avoid trying to guilt them into buying and make it easy and rewarding to use the product.
- A new behavioural contract: Transparency, responsibility, and collaboration are buzzwords, often ignored by companies. But the Green Giants realize their behaviour is their brand, and act responsibly.
It's a fascinating account, well-written, thoughtful, and loaded with rich anecdotes. It also forces us to overcome the mythology propagated by free-market apostle Milton Friedman and accept that for many large companies acting in the public interest can help the bottom line.
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Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter