Should Companies Use "Green" Initiatives as a Competive Weapon?

Back in February, I presented at the Green Supply Chain Forum organized by The Ryder Center for Supply Chain Management at Florida International University (FIU). In preparation for that conference, ARC and FIU developed a web survey to determine the current state of "Green" Supply Chain Management. The survey focused on answering the following questions: Are we still in the ‘early adopter’ phase or is this trend more widespread? What types of “green” initiatives are companies prioritizing? What factors are driving companies to become more "green"? Who manages these initiatives and how is success measured?

We recently published the results of this survey in a report titled "The State of Green Supply Chain Management," co-written by me and Dr. Walfried Lassar, the Director of the Ryder Center for Supply Chain Management at FIU. You can register to download the report for free by clicking here.

The survey results confirmed many of our hypotheses, but there were a few surprises. For example, we asked the respondents which external parties they are currently collaborating with on "green" initiatives, or plan to work with in the future. The chart below summarizes the results.

Not surprising, companies are working primarily with suppliers and customers on "green" initiatives today; they're also working with transportation companies and Logistics Service Providers. What is surprising, however, is that the vast majority of the people who answered this question have "no plans to engage with [competitors] on these issues." Why not? Will this attitude limit how much progress companies can make, and how quickly, in reducing the environmental impact of their supply chains?

Dr. Lassar and I hope to explore these questions further in phase two of our research, which we're kicking off this month (if you'd like to participate, please send me an email at adriang@arcweb.com). But here are my theories, based on a few conversations, as to why companies may not want to work with competitors on "green" initiatives:

• "Green" can be used as a competitive weapon, especially from a brand perspective. For example, if a company reformulates one of its leading products to be more environmentally-friendly, and it costs less and performs better than the existing version and competing products, the company could potentially take market share away from its competitors.


• "Green" can reduce a company's operating costs, thus strengthening its financial performance and shareholder value. If a retailer, for example, finds a way to reduce the amount of energy used by its stores by 30 percent, the financial benefits could be great.
  
• Working with competitors is always problematic from a regulatory perspective (e.g., risk of being charged with collusion).

It's important to note, however, that the sample size of our survey is relatively small (70 total respondents). And the respondents were primarily logistics executives. If we had surveyed 1,000 CEOs instead, I'm sure the results would have been different. But in favor of more or less collaboration?

Some early adopters of the "green" movement are certainly collaborating, at least via third-party initiatives. Dell and HP, for example, are working with the Carbon Disclosure Project, and so are P&G and Unilever. At this stage of the game, industry-level collaboration is critical for developing standard metrics and measurement methodologies, a key pre-requisite for accelerating the adoption of "green" practices. Most of the collaboration taking place today is along these lines.

But will these same companies share best practices and intellectual property that would benefit the environment greatly if widely adopted, but could also provide them with a significant market advantage if they kept the knowledge to themselves? The answer, I suppose, will depend on how broadly companies define social responsibility.

What do you think? Should companies view their "green" initiatives as a competitive weapon, or should they share their best practices and IP with other companies, including their competitors? Where do you draw the line when it comes to collaborating on "green" initiatives?

Inconvenient Truths About 'Green' Supply Chains

On December 28th, at around 2:30 in the afternoon, I was sitting at the kitchen table reading through a pile of mail when the phone rings. It’s my mom, and I can tell by the sound of her voice that something is wrong. A minute into the conversation she says:

Dad has lung cancer.

Bam! Just like that my world changed. New Year’s was just a few days away, and everything I had been planning and thinking about for the coming year, was now in disarray.

My dad has small cell lung cancer, which is the rarer and most aggressive form of the disease. He completed his first chemotherapy sessions last week, where the doctors dripped two chemicals into his body, carboplatin and etopiside, to stop the tumors from growing and spreading. I say chemicals because, in essence, that’s what today’s medicines are. In most cases, we take medicines not to cure the disease, but to treat and alleviate its symptoms—to bring the fever down, relieve the body ache, or control our blood pressure. And in cases like my dad’s, we take medicines to drive the cancer into remission and prolong our life.

Virtually all medicines, however, have side effects. The drugs that will hopefully prolong my dad’s life will also cause his hair to fall out; they will lower his white blood cell count, making him more susceptible to sickness and infections; and they will make him feel nauseous and lose his appetite.

Traditional medicine is about tradeoffs, it’s about accepting some negatives in exchange for a greater benefit.

So, what does this have to do with ‘Green’ Supply Chains?

If you go back a year or two ago, just about every magazine and newspaper had an article about the environment, how we’re in the midst of a “green” revolution that even corporate giants, like Wal-Mart, were not only supporting, but actually leading the charge. “’Green’ is good for business” was the battle cry, a logical extension of Total Quality Management, Six Sigma, Lean, and other business practices.

But the headlines are starting to change. “Little Green Lies” was the cover story in last October’s Business Week. “The Dark Side of ‘Green’ Bulbs” in the Wall Street Journal. “The Truth About Recycling” in The Economist. “The Six Sins of Greenwashing” and so on.


So, what’s going on here?

This brings me to the first inconvenient truth about green supply chains: many ‘green’ initiatives are like today’s pharmaceutical drugs—they have negative side effects that are finally getting recognized and talked about.

For example, compact fluorescent lights consume a lot less energy than incandescent bulbs, but they also contain mercury. So, on the one hand, power plants will emit a lot less CO2 and mercury, but on the other hand we could end up with a huge environmental problem if millions of these bulbs are tossed in the garbage and end up in landfills.

Using more bio-fuels will reduce our dependence on oil, but the trade-off is higher food prices and increased deforestation, as farmers race to create new feedstock plantations.

Recycling keeps materials out of our landfills, but only temporarily. And chemicals often have to be added to recycled materials like plastics to restore their properties and make them useful again. As the authors of the book Cradle-to-Cradle state: “Just because a material is recycled does not automatically make it ecologically benign, especially if it was not designed specifically for recycling”.

And just like pharmaceutical drugs, there’s a limit to what can be accomplished with current ‘green’ initiatives because today’s products, manufacturing processes, and supply chains were not designed with sustainability in mind. I started my career as a product development engineer, and the first thing you’re taught is that fixing problems during the design phase takes exponentially less time, money, and resources than trying to fix problems after a product is already in volume production.

And that’s essentially what we’re trying to do today: we’re trying to fix the environment while keeping the production lines of a fast-growing, global economy running. We’re treating the symptoms, the negative side-effects, of supply chains that were not designed with sustainability as a criterion.

Now, don’t get me wrong. I’m not saying that companies shouldn’t optimize their transportation operations, or reduce the amount of packaging in their products, or look for ways to conserve energy and eliminate hazardous materials from their products and processes. These and many other ‘green’ initiatives are making a difference. Just look at what companies like Stonyfield Farm, HP, SC Johnson, Wal-Mart, and others are accomplishing.

What I’m saying, however, is that there’s a limit to what these initiatives can accomplish compared to the size of the environmental problem and how much time we have to fix it or drive it into remission.

And this brings me to the second inconvenient truth: creating “green” supply chains that are truly sustainable will be costly and messy, and we’re all going to have to pay for it, one way or another.

Yes, it’s true: ‘Green’ is good for business. But this is true because, for the most part, only “green” projects that are good for business (or required by law or Wal-Mart) get done.

Now, I don't have an argument with this. Companies are in business to make money, not lose it. I certainly don’t want to work for a company that drives itself into bankruptcy and leaves me jobless by undertaking “green” projects without any fiscal discipline. But we must also recognize that there’s a limit to how much progress we can make, and how quickly, if “good for business” is the only litmus test we use. Eventually, the law of diminishing returns will kick in, and then what will we do?

Thomas Friedman, the New York Times columnist, gave a speech at the Aspen Ideas Festival last July where he questioned the notion that we’re in the midst of a “green” revolution. “Have you ever seen a revolution in history,” he asked, “where nobody got hurt?” “We’re having a green party, not a green revolution,” was Friedman’s conclusion, and I agree.

At some point, the party must end if a “green” revolution is to occur, and it will be costly and messy. There will be winners and there will be losers. Some jobs and industries will suffer or disappear, while others will develop, grow, and prosper. Some countries will emerge as leaders, while others will fall behind. And each of us will have to pay more, either via higher taxes or prices, for energy, food, transportation, clothing, and other consumer goods.

No pain, no gain—that’s what my dad used to tell me growing up, and it’s what he tells himself today as he battles cancer. No pain, no gain is also true when it comes to reducing the environmental impact of supply chains.

As we reach the limits of what traditional medicines can accomplish, the pharmaceutical industry is investing heavily in biotechnology and stem cell research, revolutionary new ways to treat diseases. It’s not about ingesting chemicals to treat symptoms; it’s about deciphering the inner workings of our DNA, understanding how a group of cells turn into a lung, or a heart, or a liver, so that when our organs are afflicted with disease, we can generate new ones. This is the future of medicine, and it’s quickly approaching.

And as we reach the limits of what current ‘green’ initiatives can accomplish, we need to transform the DNA of our supply chains. We must change the way we design products and supply chain networks; we must create completely new business models and redefine supplier and customer relationships; and we must reshape our expectations as consumers.

The sooner we stop the party and start the revolution, the better off we’ll be.

WSJ Article on "Green" Bulbs

In my "Green Asbestos" posting, I mentioned that I had yet to come across any articles in the trade or business press that highlighted how compact fluorescent lights (CFLs) contain mercury, how consumers shouldn't throw them away in the garbage, or what to do if you break one at home. Well, today the Wall Street Journal ran an excellent article by Sara Schaefer Munoz titled "The Dark Side Of 'Green' Bulbs" (subscription required).

The article discusses how leading retailers like Best Buy, Wal-Mart, and Office Depot, as well as manufacturers like Apple and Dell, are helping consumers recycle their used electronics. It also highlights the fact that many consumers are not aware that CFLs contain mercury or know what to do with them when they burn out. Paul Abernathy, the executive director of the Association of Lighting and Mercury Recyclers, states that only about 25% of all mercury-containing bulbs are recycled. "Everywhere we go," Mr. Abernathy says in the article, "we are being encouraged to use [compact fluorescent bulbs], but there's really a lack of reasonably accessible drop-off spots [when they burn out]." There are only about two dozen licensed facilities in the U.S. for processing mercury waste.

The article also quotes Ellen Silbergeld, a professor of environmental health sciences at Johns Hopkins University. Ms. Silbergeld is concerned about the environmental impact if millions of CFLs end up in landfills or incinerators. "I don't think anybody has really grappled with this," she says.

On a related matter, my kids came home from school earlier this month with a packet of information promoting a new fundraiser. The students are selling CFLs provided by NSTAR (our local utility) and the school gets to keep the profits. Great idea, so we committed to buy a few bulbs. But the letter accompanying the packet, like most articles you read about CFLs, only highlighted the environmental and cost benefits of these lights; nowhere in the letter, nor in the 4-page color brochure produced by NSTAR, was mercury mentioned or any information provided about responsible handling and disposal of CFLs. Not even in fine print!

A few days later, we received an email from the principal addressing the mercury issue, presumably in response to other parents who noticed the omission and contacted the school. The basic message of the email: Yes, these bulbs contain mercury and they need to be recycled, but the amount of mercury in each bulb is minuscule and the energy-saving benefits greatly outweigh this negative. There's an underlying assumption, however, that when a CFL burns out, we'll all get in our cars and drive a few miles to the recycling center on the other side of town, instead of walking a few feet to the garbage can in the kitchen. After all, the amount of mercury in a bulb is so minuscule, how much harm can it do?