Sustainable development becoming integral part of business strategy.

"Sustainability is moving to the core of the business agenda," Bjorn Stigson, president of the World Business Council for Sustainable Development (WBCSD), told the Conference Board's annual sustainable development conference in June. The truth of his statement was reflected in other conference

For example, Randall Overbey, president of primary metals development at Alcoa, Inc. and the conference closing speaker, laid out an ambitious sustainable development agenda for Alcoa over the next few years. Some of the goals were to be expected, centering around the environment and safety, and emphasizing the "triple bottom line" so fashionable in sustainable development today: financial, environmental and societal performance of a sustainable enterprise.

But Alcoa's achievements to date are also impressive. The company has already achieved one of its most ambitious goals set in 1998: to reduce the greenhouse gas effect of its manufacturing by 25 percent by 2010. The company achieved that goal in 2003--seven years ahead of schedule--repeated it in 2004 and expects to continue meeting it in 2005.

A "Climate-Neutral" Strategy

In addition, Alcoa's Overbey reported the aluminum industry's overall commitment to a "climate neutral" business strategy. More specifically, the aluminum industry expects to become greenhouse-gas-neutral in the transportation industry by 2017 through the continued use of aluminum in that market (automobiles, trucking, aerospace, etc.).

Pie in the sky? Alcoa--and the rest of the aluminum industry--doesn't think so. Its expectations are based on detailed modeling of current trends.

Other speakers at the conference interviewed for this article reinforced the observation that the concept of sustainable development has moved to a new level, from its environmental and Corporate Social Responsibility (CSR) roots of the last decade through and including the "triple bottom line" to where it becomes an integral part of business strategy--bringing in business profits in and of itself, not just as part of cost reductions for the bottom line.

This trend has been visible in Europe over the past few years, where the term sustainable development is better understood. Some European companies actually print annual sustainable development reports. But in the U.S., sustainable development has faltered. It has suffered from the failure of the Green Movement to produce any lasting business profits and success, except through smaller Ben & Jerry's-size companies. That stigma, plus the spotlight which American environmental groups constantly focus on U.S. companies' environmental efforts, has caused American corporations to shy away from touting their achievements in this area or even Social Corporate Responsibility (SCR).

At the conference, it was clear this is changing. A number of speakers spoke about "transparent" reporting on sustainability issues, and powerful alliance organizations (such as the Cement Sustainability Initiative and the Sustainability Mobility Project) are springing up to help industries formulate and meet sustainability standards. In addition, there are industry coalitions forming such as the Sustainable Forestry Initiative.

Forest Certification Program

In an illustration of this trend, David J. Refkin, director of sustainable development for Time Inc., and Patrick McGowan, commissioner of the Maine Department of Conservation, talked about their successful eco-alliance. Time has partnered with Maine to encourage the state to participate in a certification program to ensure that its forests are harvested in an environmentally-sound manner. By 2007, it is expected that 60 percent of Maine's harvest volume will be certified to standards that ensure this environmentally-sound harvesting. And Time has meanwhile increased its purchase of paper made from Maine-grown lumber.

But companies at the conference were also talking about how sustainability is seeping into the product life cycle itself, as well as product development. One panel, in fact, was actually labeled the "Greening of the Supply Chain." In it, Robert Accarino, director of environmental affairs at Abbott, described his company's survey of 100 key suppliers, asking questions about those companies' Supplier Codes of Conduct; environmental and safety standards; and other concerns that fall under the sustainability umbrella. The company plans to use the results to create new standards for suppliers which will be part of the selection process.

Toyota is already including certain sustainability standards in its evaluation of suppliers. Five years ago, the company asked its then-500 North American-based suppliers to adopt environmental standards specified in its "Green Supplier Guidelines."

Sustainable Innovation Model

During the same session, Demetria Giannisis, president and CEO of the Chicago Manufacturing Center, talked about "sustainable innovation," which she defined as meaning the development of sustainable new markets and/or products, some of these being by-products of the supply chain.

Clearly, sustainability is shifting away from the 1987 United Nations description of it as "... the ability of humanity to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs ..." to simpler definitions such as the one Procter & Gamble came up with in 1991, saying that "Sustainable development is ... about a better quality of life for everyone, now and for future generations to come." (1) At the time, P&G said in a report that, "We are still early in our efforts to prove the hypothesis that a sustainability mindset can bring true business value."

GE and Eco-imagination

Fourteen years later, GE has based a new business strategy on this concept. In May 2005, under the leadership of chairman and CEO Jeffrey Immelt, the company announced plans to double research and development spending on clean technologies for its customers and cut its own emissions by 1 percent in the next seven years.

GE intends to invest $1.5 billion annually on research for these environmentally-friendly technologies by 2010, up from $700 million in 2004. Most important from an R&D point of view, GE says it expects the revenues from its eco-friendly products to double from $10 billion in 2004 to $20 billion in 2010.

Clearly, GE is publicly moving in the direction Procter & Gamble started talking about several years ago and others like DuPont are moving in right now (see "Building Business Value Through Sustainable Growth," pp. 28-32, this issue). And GE is being watched to see if its promises will materialize.

Observers of this initiative such as Timothy Mohin, director of sustainable development for Intel, are optimistic. "This is an early stage movement," Mohin says. "GE's eco-imagination initiative is a business strategy about the wise use of resources. The company is even changing their R&D resources to meet this mandate," he adds.

Intel's Track Record

Mohin, one of the speakers at the conference, explained in an interview later, that his own company has a solid track record in this area. For instance, Business Ethics magazine recently ranked the chip-maker third among the 100 most ethical companies, and for the fourth year in a row, Intel Corporation was named the technology sector leader in the Dec. 2004 edition of the Dow Jones Sustainability Index.

However, Mohin believes that it is in the use of products "that we make and sell to the public," where sustainability holds the most promise. "Technology has a lot of benefits for society," he says, pointing to new services like e-learning. "If you are a futurist, you'll see a lot of forces lining up behind sustainability. These forces are moving corporations toward efficiency rather than just excess production. It is a huge paradigm change."

Those forces may benefit the developing world as well. Cornell University professor Stuart L. Hart, a recognized expert in this field, explains why: "The leading companies are beginning to integrate the broader ideas of clean technology development and serving underserved markets at the base of the economic pyramid as a part of their core strategy." (See "Innovation, Creative Destruction and Sustainability," pp. 21-27, this issue)

If what Intel's Mohin says is true, that "environmental improvements in technology can make good business sense," then the developing world, not just the industrialized world, may be one of the big winners from this reenergized sustainable development movement.

TechTalk

"The key question for U.S. firms should be: How are we going to leverage the talent and markets in China and India to enhance our competitive advantage world-wide?"--University of Michigan business professor C.K. Prahalad, writing on "The Art of Outsourcing" in The Wall Street Journal, June 8, 2005, p. A 14.

Reference

(1.) Whiting, Meredith Armstrong and Charles J. Bennett. The Road to Sustainability: Business' First Steps. The Conference Board (2001).

April Klimley, from Red Bank, N.J.

aklimley@aol.com; www.klimley.com