This chapter is from the book
This chapter is from the book
This chapter is from the book
Beyond Greening
Yet this personal reconciliation was by no means the end of the road. The corporate "greening" initiatives of the late 1980s and early 1990s—pollution prevention and product stewardship—were important first steps. They shattered the myth that business should treat societal issues as expensive obligations. Instead, seen through the prism of quality and stakeholder management, these issues could become important opportunities for the company to improve its societal and operating performance simultaneously. A growing body of research pointed to the potential for enhanced financial performance through well-executed pollution prevention and product stewardship strategies. Pioneers such as 3M, Dow, and Dupont realized significant cost reductions and enhanced reputations as a result of their activities. The World Business Council for Sustainable Development, with its mantra of "eco-efficiency," helped to erase the false dichotomy between business and environmental performance.
However, greening alone fell well short of what was possible—and needed: Incremental improvements to current product systems and production processes only slowed the rate of environmental damage. Sustainability means inventing a new form of "natural capitalism."20 As University of Virginia architect Bill McDonough points out, greening is akin to heading in the wrong direction, but at a slower rate of speed—being less bad. Sustainability, however, means actually turning around and heading in the right direction—being more good. It is, as McDonough and his colleague Michael Braungart point out, the difference between being eco-efficient and being eco-effective.21
Furthermore, most corporations continued to serve the needs of the wealthy exclusively while exploiting the developing world primarily for its abundant resources and cheap labor pool. A sustainable form of global enterprise would instead seek to create corporate and competitive strategies that simultaneously deliver economic, social, and environmental benefits for the entire world.22 By the mid-1990s, it was clear that the corporate agenda was much bigger than just greening—and that the business opportunity was much more substantial as well. This was the key message of my 1997 McKinsey award-winning article in the Harvard Business Review, "Beyond Greening: Strategies for a Sustainable World." It was also my primary motivation for moving to the University of North Carolina at Chapel Hill in 1998 to become the founding director of the Center for Sustainable Enterprise at the Kenan-Flagler Business School.
Corporations were being challenged to move beyond greening, first by pursuing new technologies that had the potential to be inherently clean (renewable energy, biomaterials, wireless IT), and second by reaching out to bring the benefits of capitalism to the entire human community of 6.7 billion people (rather than just the one billion at the top of the economic pyramid). In recognition of this challenge, my colleagues at UNC and I launched in 2000 The Base of the Pyramid Learning Laboratory, a consortium of large corporations, new ventures, and nongovernmental organizations (NGOs) all focused on how best to serve the needs of the four billion people at the base of the economic pyramid (BoP) in a way that is culturally appropriate, environmentally sustainable, and economically profitable.
By moving beyond greening, companies hope not only to address mounting social and environmental concerns, but also to build the foundation for innovation and growth in the coming decades. In so doing, they would outperform their competitors in today's businesses and, even more importantly, outrun them to tomorrow's technologies and markets. In short, sustainable global enterprises would create competitively superior strategies that simultaneously move us more rapidly toward a sustainable world.
In fact, over the past decade, there has been an explosion of clean technology investment—a veritable "revolution."23 Venture capitalists have pumped in excess of $20 billion into clean tech companies since 2005. The Obama administration has pledged more than $100 billion for clean technologies, and China plans to invest $200 billion.24 There are now literally thousands of new "clean tech" startups flush with investment capital, particularly in the strategically significant arenas of biofuels, renewable energy, and biomaterials.
Alongside the "clean tech" revolution, commercial strategies for serving the bottom (or base) of the income pyramid have also emerged over the past decade. Dozens of global corporations and hundreds of smaller social enterprises around the world have now initiated or deepened commercial experiments to serve the four billion poor who have been largely bypassed by economic globalization to date. These early initiatives may hold the keys to a new, more inclusive form of capitalism.25
Exhibit 1.1 summarizes the evolutionary path that corporations have followed over the past 50 years. Crossing the chasm from seeing societal performance as a trade-off or obligation (the left side of the figure) to a possible win-win opportunity (the lower-right side) was the major breakthrough of the 1980s. By 2000, many large corporations had internalized the capabilities and disciplines associated with greening, although some still had a long way to go. As a result, the competitive front migrated to the "beyond greening" domain (the upper-right portion).
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Exhibit 1.1 The Long and Winding Road
Rather than seeking incremental improvements to what already exists, moving beyond greening often means pursuing innovations that may make obsolete what currently constitutes the company's core business—it is an inherently disruptive act. Thus, given its focus on new technologies and markets, the "beyond greening" space is blessed with much greater opportunities, but also fraught with bigger risks. One case in particular—Monsanto's controversial entry into genetically modified seeds—illustrates the potential opportunities and pitfalls of pursuing such strategies.26