90

Towards the Sustainable

Corporation: Win-Win-Win
Business Strategies for
Sustainable Development

John Elkington

I
§§ I often wake up in the middle of the night," Pope John XXIII once
said, "and start thinking about grave problems—and decide to talk
about them with the Pope. Then I wake up completely and remem-
ber that I am the Pope." Western industrial societies have undergone a sim-
ilar awakening over the last three decades as the scale of the environmental
and natural resource problems they face has become increasingly clear. In
doing so—and before they finally accept that the responsibility for tackling
these problems is theirs, not something to be pushed onto future genera-
tions—they typically move through a number of stages. These have
included:
ignorance
awakening
denial
guilt reduction, displacement behaviour, and tokenism
conversion
integration
In the wake of the publication of Our Common Future, the 1987 report
of the World Commission on Environment and Development,' and the UN
Conference on Environment and Development (UNCED) held in Rio de
Janeiro in June 1992, the concept of sustainable development—involving
the integration of environmental thinking into every aspect of social, politi-
cal, and economic activity—has become central to the environmental
debate. This article considers some of the ways in which business is now
developing new "win-win-win" strategies in this area to simultaneously
benefit the company, its customers, and the environment.
 Towards the Sustainable Corporation 91

Sustainable Strategies?
Most countries are still some considerable way from genuine conversion to
the cause and realities of sustainable development, let alone the effective
integration of environmental sustainability as a national priority. But we
are beginning to see an early crop of strategies designed to move individual
national economies—and even the emerging Single European Market—
towards more sustainable forms of development. These have included,
among others:

• Holland's National Environmental Policy Plan, To Choose or to

and its successor, NEPP Plus;'
• the UK's White Paper This Common Inheritance and Sustainable Devel-
opment: The UK Strategy, 1994;"
• Japan's New Earth 21;^ and
• the European Commission's Fifth Environmental Action Programme—
Toward Sustainability.^

Even more ambitiously. The 2050 Project—launched by the World

Resources Institute (WRI), the Brookings Institution, and the Santa Fe
Institute—is a 4-year project designed to define the conditions under which
global society could be sustainable in 2050. The project partners have con-
cluded that "2050 is far enough in the future for critical population, energy
and global warming issues to play out and for large-scale social and eco-
nomic transitions to occur; yet it is within the life span of today's children,
giving the results a direct and personal meaning."'
We must hope that business people will be actively involved in shaping
and implementing such projects. In contrast to the anti-industry, anti-profit,
and anti-growth orientation of much early environmentalism, it has become
increasingly clear that business must play a central role in achieving the
goals of sustainable development strategies. This emerging fact of business
life is recognised in a number of recent publications, including the report
of the Business Council for Sustainable Development (BCSD), entitled
Changing Course.'^
"Sustainability," said BCSD Chairman Stephan Schmidheiny, "requires
that we pay attention to the entire life cycles of our products and to the spe-
cific and changing needs of our customers." These new demands—coupled
with disasters such as the Bhopal accident—have helped to trigger a new
trend in the business world, "corporate environmentalism."'
Public opinion has been a key driver behind all of these initiatives,
although in the case of Japan the most significant driver has probably been
international—rather than domestic—public opinion.
92 CALIFORNIA MANAGEMENT REVIEW Winter 1994

A Very Public Greening

So where does the average citizen stand on these issues? The answer is that
it is fairly hard to find real answers. Most surveys are still focusing on some
fairly general issues. But in its 22-country public opinion survey on envi-
ronmental attitudes, reflecting the opinions of some 22,000 world citizens
and published just before UNCED, the George H. Gallup International
Institute did report that "concern about the environment has become a
worldwide phenomenon."'"
The countries covered ranged from Canada to Uruguay, from India to
Russia. Among the key findings were the following:
• By 1992, the environment was rated as one of the three most serious
problems in half of the 22 countries surveyed—and only small percen-
tages of people in any nation dismiss environmental issues as "not
serious."
• Majorities in most countries say the environment is affecting their
health (a number up substantially from a decade ago), and even larger
majorities expect environmental problems to affect the health of their
children.
• The depth of concern over environmental threats is apparent in the fact
that majorities in 20 of the 22 countries gave priority to environmental
protection, even at the risk of slowing economic growth. In 16 nations,
including many of the poorer ones, majorities said they are willing to
pay higher prices for environmental protection.
• Consistent with the belief that individual action is worthwhile, citizens
around the world reported taking actions to protect the environment.
Most popular was "green consumerism." In 16 of the 22 countries, over
half of the respondents reported avoiding products that are harmful to
the environment. Over a quarter of the respondents in every nation said
they had acted as "green consumers" in the previous year. Particularly
high scores showed up for Canada, Chile(!), Finland, Norway, Switzer-
land, the United Kingdom, and (West) Germany.
Not surprisingly, one of the most significant environmental trends of
recent years has been the "greening" of the marketplace, often driven by the
emergence of the "green consumer." Long considered indifferent to environ-
mental issues, consumers have been acting completely out of assumed char-
acter. This is important, since the support of the public—as citizens, vot-
ers, consumers, employees, and so on—will be essential for the future of
the worldwide drive towards sustainable development. Sustain Ability's own
Green Consumer Guide" has sold over a million copies and has gone into
foreign editions around the world. "Ethical" or "global" consumers will,
we believe, help to drive demand for dramatically improved standards of
corporate citizenship.
 Towards the Sustainable Corporation 93

Figure 1. A Green Evolution

Early 1980s GREEN MINORITY

1985
I
GREEN CONCERN

1989 -
I
GREEN EVOLUTION

\
GREEN BANDWAGON

1990
i
GREEN CON

I
SOPHISTICATED GREEN

Early 1990s
i
ETHICAL CONSUMER

Source: Mintel International Group, 1991

Figure 1 illustrates some of the key trends of the last few years. In many
countries, the impact of the green consumer has been amplified by the
emergence of the "green retailer." And we are now seeing the early stages
in the rise of the "green tourist"—who will be voting in the marketplace for
sustainable tourism.'^
Anita Roddick—who wrote the Foreword for our Green Consumer
Guide—gives customers product infonnation, rather than a sales pitch, and
explains the company's social and environmental agendas. Typical Body
Shoppers are at the tail of the Baby Boom generation, distrust advertising,
demand more product information, and are loyal to companies they con-
sider responsible corporate citizens. Could such people become typical
customers as we move towards the end of the twentieth century?

An Emerging Competitive Challenge

Environmentalists have been extremely effective in picking "cascade
targets" for their campaigns, that is, companies or industries whose distress
resonates through an extended supply chain. So, for example, pressures for
recycled and chlorine-free papers have served to keep the pressure up not
only on the paper and pulp industries, but on chemical companies and the
forestry industry as well.
94 CALIFORNIA MANAGEMENT REVIEW Winter 1994

As a result, the number of industries under fire from environmentalists

has grown very rapidly (see Figure 2). "Green consumerism" has helped to
spur significant shifts in the way in which some industries view the environ-
mental challenge. As it is increasingly seen as a competitive and strategic
challenge, so growing numbers of companies are adopting such techniques
as life cycle analysis, environmental auditing, corporate environmental
reporting, and supplier challenges (see Figure 3).

Towards a Life Cycle Perspective

The 1992 Earth Summit, or UN Conference on Environment and Develop-
ment (UNCED), may have disappointed environmental campaigners, but
the agenda that emerged for business in the run-up to UNCED is likely to
keep most industry sectors under pressure for years to come.
One interesting trend is the growing business interest in integrating envi-
ronmental quality into total quality management (TQM) frameworks and
processes. In North America, for example, there is the Global Environ-
mental Management Initiative (GEMI), which draws on the experience of
TQM pioneers such as Allied Signal, AT&T, IBM, and Procter & Gamble.
Meanwhile, in the UK we see the British Standards Institution beginning
to implement its environmental standard, BS7750. The growing interest in
eco-auditing and eco-labelling in Europe is likely to accelerate this trend.

Supplier Challenges
An indication of the way in which business-to-business pressures may well
build is provided by recent developments at Scott Paper, one of the first
companies to carry out a systematic review of their suppliers—and to act
on their findings. Having carried out an LCA, Scott realized that many of
its environmental problems were being "imported" through the supply
chain. The company set about the task of eliminating the worst performers
by producing an inventory of the suppliers' impacts in various areas—
initially focusing on their pulp suppliers. The suppliers were sent question-
naires asking for figures on air, water, and land releases, energy consump-
tion, and energy sources. Scott was astounded at the wide variation it
found—for example, carbon dioxide emissions varied by a factor of 17
between suppliers of kraft pulp. An important infiuence here was not only
energy efficiency, but also how much energy came from renewable sources.
Suppliers were ranked according to their responses in each area. Then,
using a weighting system developed with the help of environmental opinion-
formers, an overall score was reached. As a result, Scott dropped the worst
10% of their suppliers—and notified all suppliers that the best environ-
mental performers will be actively preferred when the company makes its
purchasing decisions.
 Towards the Sustainable Corporation 95

Figure 2: Industries in the Firing Line

Aerosols
Agriculture
Air conditioning
Airlines & airports
Animal testing
Armaments
Automobiles (fuels,
cars)
Banking
Biotechnology
Catering
Chemicals
Coal
Computers
Crematoria
Deep sea fishing
Detergents
Dry cleaning
Electricity supply
Aerosols Electrical equipment
Agriculture Fashion
Airports Fertilisers
Animal testing Fish farming
Automobiles exhaust Fishing
emissions eg. lead) Forestry
Biotechnology Incineration
(deliberate release) Insurance
Aerosols Chemicals (eg dioxins, Investment
Airports PBBs, PCBs) Landfill
Asbestos Coal Meat industry
Automobile fuel Computers Mining
efficiency Deep sea fishing Motorways
Biotechnology Detergents Nuclear power
(accidental release) Fertilisers Office supplies
Chemicals (eg dioxins, Forestry Oil tankers
PBBs, PCBs) Incineration Onshore oil and gas
Coal (mining and Insurance Packaging
air pollution) Landfill Paints
Deep sea fishing Motorways Paper
Detergents Nuclear power Pesticides/herbicides
Heavy lorries Oil tankers Plastics
Metals Onshore oil and gas Property
Motorways Packaging Pulp and paper
Nuclear power Paints Refrigeration
Oil tankers Pesticides/herbicides Schools
Packaging (eg Piastics Shipping
glass bottles Pulp and paper Supermarkets
Passenger jets Refrigeration Textiles
Pesticides/herbicides Supermarkets Tobacco
Coal (mining and Pulp mills Tobacco Tourism
air pollution) Tobacco Toxic waste Toxic waste
Detergents Toxic waste Tropical hardwoods Transport
Mining and quarrying Transport Tuna fishing Tropical hardwoods
Pesticides (eg DDT) Water Water Tyres
Water (dams) Whaling Whaling Water

1960s 1970s 1980s 1990s

Source: SustainAbility, 1992

96 CALIFORNIA MANAGEMENT REVIEW Winter 1994

Figure 3. Industry's Environmental Responses

1970s Environmental impacts assessments (ElAs)

Early policy statements
Legal advisers
1980s Second generation health, safety and environment (HSE) policies
In-house HSE units
Limited number of post-EIA audits
Embryonic pollution control markets
Early green consumer pressure
Early green and ethical investment screening of corporations

1990s Environmental strategies

Environmental audits
Product life-cycle analysis
Supplier challenges
Mature green consumer markets and marketing
Corporate environmental accounting and reporting
Communication and training programmes
Mature green and ethical screening of corporations
Corporate environmentalism
Corporate inputs to debates on e.g. environmental economics
and indicators of sustainability

Source; SustainAbility, 1992

The next stage could be more difficult. As with all processes of improve-
ment, discriminating between the remaining suppliers will become more
and more demanding. In addition, most of the dropped 10% performed
badly in all environmental areas, making the weighting system relatively
insignificant in the first stage. But the trade-offs between environmental
impacts will become increasingly crucial as the project develops, and a
more rigorous approach will be needed to allocating those weightings.
A report on the company's activities can be found in ENDS Report num-
ber 214."
Nonetheless, Scott is continuing to "close in" on its suppliers—and Scott
is not the only company. British Telecommunications (BT), for example,
has a well-established environmental purchasing policy. A thorough review
of the current status of LCA in Europe can be found in The LCA Source-
book: A European Business Guide to Life-Cycle Assessment.^'^

Corporate Environmental Reporting

Companies are under pressure to disclose more and more about their
environmental goals and performance, but a new report on corporate
 Towards the Sustainable Corporation 97

environmental reporting—Coming Clean'^—concludes that they are often ill-

prepared to handle the growing number of questions on green issues from
regulators, lenders, insurers, accountants, lawyers, trade and industry cus-
tomers, consumers, and, usually leading the pack, environmentalists. Even
in the heart of a major international recession, business leaders expressed
concern that current environmental pressures will intensify, broaden in
scope, and have an impact on industries well beyond the firing line.
Certainly the voluntary environmental reporting initiatives undertaken by
some of the companies discussed in Coming Clean are profoundly changing
(and raising) society's expectations on corporate disclosure. And those
companies aiming to tap into the huge new markets for environmental prod-
ucts and services—forecast to reach $300 billion by 2000—will have little
option but to come clean themselves.
Business leaders must now get actively involved in defining and man-
aging the process of environmental communications. Failure to do so will
increasingly pose the risk of their company's real present (and potential
future) value being challenged; their position as a responsible corporate
citizen being undermined; and competitive advantage draining away as cus-
tomers and consumers turn to others who are—or are seen to be—more
environmentally responsible. The growing range of involuntary, mandatory,
and voluntary forms of corporate environmental disclosure is highlighted in
Figure 4.
Among the best current performers in the field of environmental
reporting is Dow Europe, whose first environment report provided bench-
marked performance data for all the company's manufacturing sites across
Europe. The company's second report also provides emissions data as a
percentage of throughput of key substances. Other pioneers include Norsk
Hydro, BSO/Origin, Danish Steel Works, Monsanto, and 3M. BSO/
Origin's reports are particularly interesting because they begin to explore
the logical next step in this area, corporate environmental accounting.
Dow Chemical also broke new ground in 1992 when Frank Popoff, the
company's chairman, called on U.S. business to adopt full cost accounting.
This would mean that the price of a product would reflect its full environ-
mental cost. The implications for energy prices, for example, could be
profound. An up-to-date review of the area of corporate environmental
reporting was published in 1994 by the United Nations Environment
Program (UNEP).'«

Turning Stakeholders Into Customers

A key challenge for business in the 1990s will be convert some of its most
critical stakeholders, such as campaigning environmentalists, into a new
form of "customer." One of the most interesting examples of this process in
action has been developed by the Danish health care and enzymes company
98 CALIFORNIA MANAGEMENT REVIEW Winter 1994

Figure 4. Forms of Environmental Disciosure

Involuntary Mandatory Voluntary

Environmentaiist campaigns Existing: Confidential:

Press and media exposes Annual reports Disclosure required by:
and accounts • banks
Whistiebiowing
• insurers
• Stock exchange
Court investigations • customers
requirements
• joint venture partners
"Dirty tricks" campaigns (e.g. Securities &
by competitors Exchange Commission
Non-confidential:
reports, USA)
Social reporting aspects of
• Toxic Release
annual reports
Inventory (USA)
One-off or annual free-standing
• Pollution registers
corporate environmental
(France and UK)
performance reports
Impending: Eco-audits (EC)
• Disclosure of Eco-labelling
environmental
Answering ethical or green
information (EC)
benchmarking questionnaires
Industry federation initiatives
(e.g. Responsible Care)
Staff newsletters
Press releases and media
briefings
Open-house days, on-site
visitor facilities
Briefings of e.g. analysts,
employees, environmentalists
Advertised availability of
eco-information
Provision of toll-free numbers
for those requiring information

Source: SustainAbilitylDTTI/IISD, 1993

Novo Nordisk. Following an early environmental review of its management

systems, the company has opened itself up to extemal challenge by a series
of invited groups of environmentalists, regulators, and other opinion-for-
mers from around Europe.
The process has shown some of the very real benefits to be had in this
area. Novo Nordisk's reputation as a company committed to understanding
the implications of sustainable development for its businesses has been con-
siderably enhanced. The horizons of many of its staff have been consider-
ably expanded. And new market opportunities have been explored. But the
 Towards the Sustainable Corporation 99

process has also shown that companies getting involved in this way must be
prepared to develop a broad-based environmental communications program
in support. In the case of Novo Nordisk, for example, information released
during an early environmentalists' visit was distorted and used in support
of an environmentalist campaign against enzymes in Switzerland.

Conclusion
In the end, successful companies will have little option but to get involved
in this rapidly emerging area. The opportunities to do so are also opening
up very rapidly, with both existing and new organizations offering forums
in which the relevant thinking and discussion can take place. Internation-
ally, there are such organizations as the Business Council for Sustainable
Development (BCSD) and the World Industry Council for the Environment
(WICE). Nationally, there is a plethora of different organizations and "green
business networks," as we found in our 1992 Green World Survey of 50
countries."
The challenge facing individual companies will be to work out new ways
of co-operating with their suppliers, customers, and other stakeholders—
including competitors—in this key area of business activity, while ensuring
that they benefit not only in corporate citizenship terms, but also in terms
of competitive advantage. The short case studies presented here, which
represent the tip of a growing green business iceberg, suggest that emerging
win-win-win strategies will be a major feature of the business environment
as we move towards the 21st century.

References
1. The World Commission on Environment and Development, Our Common Future
(Oxford University Press, 1987).
2. To Choose or to Lose, National Environmental Policy Plan, Netherlands Second
Chamber of the States General, 1989.
3. National Environmental Policy Plan Plus, 1991.
4. This Common Inheritance: Britain's Environmental Strategy, (London: HMSO, 1990);
Sustainable Development: The UK Strategy, (London: HMSO, 1994).
5. Ministry of International Trade and Industry, New Earth 21, Japan, 1990.
6. Commission of the European Communities, Towards Sustainability: A European Com-
munity Programme of Policy and Action in Relation to the Environment and Sustainable
Development, March 1992.
7. Details on The 2050 Project from Rob Coppock, Director, 2050 Project, World
Resources Institute, 1709 New York Avenue, NW, Washington, D.C. 20006, USA.
Tel: 1 (202) 638-6300. Fax: 1 (202) 638-0036.
8. Stephan Schmidheiny with the Business Council for Sustainable Development,
Changing Course: A Global Business Perspective on Development and the Environment
(Cambridge, MA: The MIT Press, 1992). See also John Elkington, Peter Knight, and
Julia Hailes, The Green Business Guide: How to Take up—and Profit from—the Envi-
ronmental Challenge (London: Gollancz, 1992).
100 CALIFORNIA MANAGEMENT REVIEW Winter 1994

9. John Elkington and Anne Dimmock, The Corporate Environmentalists: Selling Sustain-
able Development, But Can They Deliver?. SustainAbility Ltd. and British Gas, 1992.
10. Riley E. Dunlap, George H. Gallup, and Alec M. Gallup, The Health of the Planet
Survey: A Preliminary Report on Attitudes to the Environment and Economic Growth
Measured by Surveys of Citizens in 22 Nations (Princeton, NJ: The George H. Gallup
International Institute, May 1992).
11. John Elkington and Julia Hailes, The Green Consumer Guide (London: Victor GoUancz,
1988).
12. John Elkington and Julia Hailes, Holidays that Don't Cost the Earth (London: Victor
Gollancz, 1992).
13. ENDS Report 214. November 1992, pp 16-19. Address given under above.
14. The LCA Sourcebook: A European Business Guide to Life-Cycle Assessment. Sustain-
Ability Ltd./Business in the Environment/Society for the Promotion of LCA Develop-
ment, 1993. Available from: SustainAbility Ltd., The People's Hall, 91-97 Freston
Road, London Wll 4BD, UK.
15. Coming Clean: Corporate Environmental Reporting—Opening Up for Sustainable
Development, Deloitte Touche Tohmatsu International (DTTI), the International Insti-
tute for Sustainable Development (USD), and SustainAbility Ltd., 1993. Copies avail-
able from SustainAbility Ltd., contact details as above.
16. John Elkington and Nick Robins, Environmental Reports: A Tool to Measure Industry's
Progress Towards Sustainable Development (Pan?,: UNEP, 1994).
17. Elkington and Dimmock, op.cit.