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The Seven Pillars of a Green Corporate Strategy

Corporate leaders across all industries now face growing pressures to become more sensitive to their companies energy consumption and environmental impact. While environmental concerns may start with the CEO, they quickly filter down to other Csuite executives and line-of-business leaders, who are being asked to quantify and reduce corporate energy use and environmental footprints, streamline supply chains, meet regulatory requirements and modify IT departments to drive more energy-efficient operations. These activities are not merely environmentally responsible: they can also drive cost savingsanother universal corporate mandate. For example, according to IBMs projections, $1 in energy savings can often drive an additional $6 to $8 in operational savings. In addition, green policies can provide competitive differentiation. To develop policies that are both good for the planet and good for business, corporate leaders must consider questions such as: Are all aspects of our business, including operations, IT and product lifecycle management, efficient and protective of the environment? As part of our overall strategy to increase business efficiency, are we considering that environmental stewardship and energy consumption are new business barometers? Does our organization maintain a public commitment to meaningful and achievable goals, with transparency in reporting progress in meeting those goals? Are we taking a leadership position in driving energy conservation and environmental stewardship through the value chain and across our industry? Do we have a strategy that supports reducing costs, lowering complexity, and increasing operating and energy efficiency? Are we looking for ways to improve IT operations to generate more computing performance without increasing power consumption? Are we experiencing social and regulatory pressure and responding with verifiable energy conservation initiatives that proactively address energy and climate challenges? Are we pursuing the development of energy and environmental strategies and policies to improve business and brand position? Each of these issues can seem complicated when considered individually and perhaps overwhelming when viewed as an interrelated group. They require a framework that helps identify and prioritize environmental efforts by illustrating how problems and

opportunities can be broken down into distinct areas and then segmented into manageable projects to be addressed. These projects can be joined to form a cross-organizational program managing energy and environmental issues. Building a framework This framework must address the needs of various executives in developing and implementing energy and environment strategies: the CEOs need to respond to customer, government and employee expectations; the CFOs need to deal with changing cost dynamics for energy; COOs and line-of-business needs to design and implement new processes; and, the CIOs need to increase computing power while managing energy consumption. Overall, this framework must cover seven business components: strategy, people, information, product, IT, property and business operations. These components are common to virtually any enterprise or organization dealing with energy and environment issues. Strategy The creation of an enterprise-wide energy and environment strategy as part of an overarching corporate social responsibility plan can help companies address green issues, resulting in improved financial and environmental outcomes. Issues to be considered include the alignment of a companys environmental strategy into an overall business strategy and how environmental values may be translated into an improved brand image. People The impact of employee behaviors and policies on the environment is significant. Commute time and business travel form a large part of an individuals carbon footprint. The use of online collaboration tools and policies that support reduction in commuting and traveling can also have an impact on costs. Companies also are discovering that their environmental policies and practices can impact their ability to attract and retain top talent. Information With data compounding between 35 percent and 70 percent annually in some industries, its critical for companies to better manage their data infrastructures. Optimized collection, analysis, tiering and storage of key information helps companies comply with reporting mandates while minimizing their data footprints. These same information strategies improve business operations by improving information access and system response. They help reduce storage needs through sharing, elimination of redundancies and compression. Product As companies begin to understand the environmental impact of their products or services across the entire product lifecycle, they can design products in a manner that has a lower environmental impact. Streamlining product development and manufacturing also means less material used, less waste created and less energy consumed. Concurrently, an examination of the product or service lifecycle often helps businesses find and exploit

market opportunities. Finally, the need to reduce energy consumption is driving an increase in the energy-management intelligence built into certain products. Information technology Information technology is putting increasing levels of stress on power and cooling infrastructures. According to IBM estimates, IT kilowatt-hour usage has increased fivefold in the past five years. This IT-related energy use contributes to the establishments greenhouse gas emissions. CIOs and IT managers view this situation as an economic and environmental crisis. Corporations need IT energy efficiency strategies designed to help them focus their efforts. A thorough understanding of IT energy consumption, operations and constraints is the foundation for improvement. From this foundation, companies can devise strategies to help them improve IT efficiency and resiliency, address emissions, reduce energy costs and measure their success against business goals. Property Companies need to reduce the cost and greenhouse gas emissions of their physical assetsfrom office buildings to truck fleets. The process starts with determining and managing the environmental impact of physical assets and properly maintaining all property for energyefficient operations and reduced environmental impact. Through improved maintenance and through improved tracking, deployment, location, and management of facilities and properties, reductions in environmental impact can be achieved. Business operations Corporations need to transform business processes to reduce environmental impact for operations end-to-end. Consider energy or water consumption, as a start. Understanding and controlling these costs can be achieved only once a company measures its existing use and compares it against conservation benchmarks. Through the use of smart systems, dramatic efficiency improvement can take place. Any transformation plan put into place must be communicated to key stakeholders. Addressing any of those seven key components of a business can tangibly lower a companys energy usage and reduce its environmental impact. Addressing them in combination, however, can dramatically amplify those effects in making a company more competitive, successful and social responsible.

Wal-Mart's Green Strategy Raises Serious Issues


Wal-Mart move to eliminate 20 million metric tons of greenhouse gases from its supply chain in the next five years is impressive. It's also an example of the world's largest retailer exerting a blunt form of regulatory vigilantism. Please don't get me wrong. Wal-Mart's program clearly makes a positive difference for a company which would emit a whole lot more carbon without this program. The company reports this effort will have dramatic impact: the equivalent of removing 3.8 million cars from the world's roads for one year. The company notes that its efforts will cut costs for consumers who buy its products, while making its suppliers more energy efficient in their use of raw materials, manufacturing processes, transportation, and waste disposal. And Wal-Mart's collaboration with the Environmental Defense Fund on the program stands as a model for corporations engaging with influential nongovernmental organizations to make progress for the planet. It is difficult to argue with such benefits. That said, let's take a moment to consider how Wal-Mart's move affects businesses that now have no choice but to react to this mandate. Here are some of the implications:

1.

No one outside of Wal-Mart gets a vote. Wal-Mart is setting standards in advance of any government action or regulation. Yes, the House has approved the Waxman-Markey bill for carbon caps, but President Obama hasn't signed a bill yet. If a supplier wants to play in Wal-Mart's world, it has to play by Wal-Mart's rules. Not the U.S. government's rules, set through a tortuous but generally open process. Wal-Mart's rules.

2.

Wal-Mart shareholders win while everyone else pays. Over the past several years, Wal-Mart has carefully crafted an impressive environmental record, including investments in wind power, fuel-efficient fleets, and energy-efficient buildings. Unlike those internally focused programs, Wal-Mart is outsourcing the work of further carbon reductions to other companies. Suppose that you supply an essential product or service for which carbon-reducing technology isn't yet available and may not be by 2015? What are you to do? Wal-Mart promises to work with suppliers, but will that be enough? Some suppliers will comply and succeed. Some will go out of business. Some will move operations overseas to wring more costs and carbon out of their processes.

3.

It's not clear consumers want this action. Wal-Mart made its name and fortune as the low-cost option for consumers seeking goods at great prices. This carbon reduction plan goes well beyond costs. We know some goods, such as energy efficient light bulbs, cost more to produce and carry a higher price. Wal-Mart has done a good job communicating the benefits of

these light bulbs. Are they ready to do this on hundreds of other products? It's also true that Wal-Mart is the dominant retailer in many towns. Is restricting choice this way right? Regulation on the scale and scope Wal-Mart is pursuing usually carried out by governments often carries with it unintended consequences. In the 1970s, environmental rules passed to restrict sulfur dioxide emissions at power plants actually caused pollution to increase for a number of years because grandfather clauses allowed pre-existing plants to continue operating without scrubbers, or with less effective cleanup. Power companies did the natural thing and kept those older (less energy efficient) plants open longer. Another unintended consequence was the boom in coal mining in Wyoming. It turned out that instead of installing and operating scrubbers, a far cheaper (and more reliable) way of meeting EPA rules was to strip mine low-sulfur coal in the Powder River Basin, then ship it across the country on mile-long trains. In Wal-Mart's case, I expect we will discover unintended consequences for suppliers and the broader economy, long after the fact. Wal-Mart's policy an admirable effort to assert environmental sustainability and corporate responsibility represents a whole-scale industrial policy that will have real consequences.

4 keys to building a green strategy for your company


One important consideration in building a green strategy is for enterprises to create a common culture of awareness and action to support environmental responsibility. One company, for example, recently identified the need to develop employee training that would help people understand the connection between their professional roles and the strategic objective of improving environmental sustainability. Training such as this can address everything from the simplest recycling programs in and out of the workplace to the importance of reducing all kinds of waste in every area of the business. Of course, training is only one possible element to achieve cultural transformation. Providing tools that enable a workforce and build competencies, measuring and reporting performance to communicate success, and leading by example to make sustainability everyones responsibility are also important. Ultimately, managing cultural change and the risk that accompanies are key considerations. A second major consideration is to develop a green strategy that complements and strengthens existing strategies within the enterprise. For example, GEs Ecomagination and IBMs Big Green Innovations initiatives were both launched to help those companies make important environmental improvements, but also complement the existing business strategy by taking advantage of a well established and proven portfolio of products to enhance revenue growth opportunities.

A green strategy that complements and strengthens the existing strategies can improve business performance with respect to market growth, brand positioning, product and service development, and partnerships and alliances. It can also improve operations strategy with less wasteful processes, greener supply and lifecycle chains, and efficient facilities. Supporting infrastructure can also be improved with more efficient technology systems and other equipment. A third major consideration for green strategy is that it must drive operational decisions and initiatives that improve environmental impact. In order to accomplish this, enterprises of all sizes and across industries are developing and proving-out approaches to drive decisions and achieve tangible benefits. Government agencies have developed methods and tools to support sustainability objectives, including the Office of the Federal Environmental Executive (OFEE) the Environmental Protection Agency (EPA) and the Federal Highway Administration (FHWA). Private industry also applies methodologies to support environmental stewardship. A few of these companies include PepsiCo, Burts Bees, Ricoh, and IBM with its Green SigmaTM methodology. Some companies, such as Walmart, have adopted strategies that drive them to look for improvements beyond the four walls of the company. As with any strategy, managing its implementation with a clear roadmap and vision of the future is important. Finally, green strategy must support actions that have attractive value propositions.Although very few corporate sustainability reports are independently audited and scrutinized like financial reports are today, most of them describe a wide variety of accomplishments, such as eliminating many tons of greenhouse gas emissions from business operations that have corresponding monetary savings from reduced energy waste. Not surprisingly, value propositions should include environmental stewardship factors in prioritizing all initiatives, and include qualitative benefits along with quantified ones. New legislation should be anticipated, compliance requirements should be met, and special incentives should be opportunistically pursued as they arise. In some cases, more time to break even on some investments should be allowed, and brand differentiation should not be ignored.

Coca-Cola's "green" strategy working for its business


SINGAPORE: While governments worldwide are moving to combat global warming, businesses like Coca-Cola Singapore are also pushing towards being green. Coca-Cola Singapore has pledged to live positively by implementing sustainable initiatives across its business - a move which has helped the company cut costs among other things. While the company did not disclose how much savings it receives from such initiatives, it added that the strategy is good for business. Antonio Del Rosario, general manager of Coca-Cola Singapore, said: "For example, (at) our manufacturing plant we continue to light weight our cans so that we use less raw material. "From a marketplace standpoint... we roll out coolers into the market and every cooler that we send out has an energy management system that actually uses 35 per cent less energy, and all our bottles and cans are 100 per cent recyclable. "We (also) have community programs to make sure that recycling is done more and more in Singapore," he added. Not only has Coca-Cola cut down on packaging materials, it has also increased water efficiency in its Singapore bottling plant by 13 per cent since 2004, and it's looking to bring that number up to 20 per cent by 2012. Coca-Cola is just one of many manufacturers unbottling its sustainability secrets to appeal to a growing trend of consumers seeking more sustainable alternatives. Mr Del Rosario said: "What we have realised is that employees want to work for a company that shares their values. Our customers want to work with companies that also have a sustainability agenda, and consumers are also more inclined to buy a product from the company that's behind it so we actually see that it's very important and good for business." Coca-Cola Singapore said it has reduced the amount of energy used in its manufacturing processes by 41 per cent, and aims to decrease it by a further 9 per cent by 2015, to achieve a total of 50 per cent reduction in its energy.