Sustainability: A Systems Approach to a Successful Business Model
Kermit the Frog once sang “It’s not easy being green.” But that’s not what businesses and government agencies are learning all across America. In fact, many are discovering that while going green requires fundamental changes in business practices, it is great for the environment as well as a driving force in what is now probably the most significant factor on the bottom line.
Roger Ballentine, president of Green Strategies, Inc. (www.greenstrategies.com), has much to say about the “green factor” and is uniquely qualified to express such an opinion not only as a former energy advisor to President Bill Clinton but also as the man who is greening Wal-Mart. Ballentine built his company around “the concept that as the world becomes more attuned to issues such as clean air, clean water, energy security, climate change and resource conservation, significant business opportunities will arise from the development of products and practices consistent with these values.”
According to this green consultant, sustainability as a business approach is growing in popularity for two main reasons: First, for the most part, “companies want to do good and be good citizens.” And just in case those weren’t enough, he explained that companies are “also finding that this is a better way to run a business.”
That “better way” is through sustainability – a systems approach to a successful business model – a business model that is gaining credibility and practice as the world faces the rising costs of energy, of global climate change and of the repercussions thereof. “This whole notion of sustainability is just a window… it’s just a lens through which to look at a lot of issues that companies have traditionally looked at in different, non-environmental ways.”
The Sustainable Business Approach
Ballentine learned much from his White House days; they shaped his current role as a sustainability consultant. Although the Clinton administration’s goal to combat climate change was paramount, the administration quickly realized that this goal would not be achieved through bickering.
Seated in his Washington, D.C. company office, Ballentine explained, “We don’t always have to be in this fight between what environmentalists want and what businesses want. If we’re really going to solve a problem of this enormity, we aren’t going to do it with business and environmentalists fighting. We’re going to do it when we accept that this is good for business. It’s good for the environment.”
One way to accomplish this goal is by adopting an environmentally friendly business approach. The current greening of industry experienced by businesses and consumers alike was not always a popular trend. In fact, for generations many industry insiders have believed that a successful business model must be separate from the environment.
“In the past companies saw environmental issues as problems for the company… threats to the brand or bottom-line cost issues,” Ballentine said. “And, in kind of a defensive way, they started looking at ‘how do we as a company better deal with these types of challenges?’” As companies have attempted to face the realities of complying with environmental regulations, they have made a discovery – not only can companies and the environment coexist; they can actually be synergistic.
“Companies have gone through that process. And the best companies have begun to see that these environmental issues and, more broadly, the issues of sustainability have evolved from a business challenge to be managed to a business opportunity for increased value.” Thus, this process grew from a mechanism of coping with a hindrance into a process of acceptance and evolved into the current process of good business practice. As Ballentine stated, it was a “transition from challenge to opportunity… and that, more than anything else, marked the transformation of business sustainability.”
By adopting this new model of environmentally sound, sustainable business practice, companies made a discovery: the misuse, waste and abuse of energy consumption. Through status quo business practices and non-evolving building design and maintenance, “companies are finding that they are wasting a lot of energy. Many processes for industrial companies and general practices for administrative buildings include a tremendous amount of waste that can be squeezed out of the system,” explained Ballentine.
When these disadvantageous practices are “squeezed out,” inevitably, a company’s environmental impact is reduced. In fact, as firms aim to decrease energy costs, they begin to use fewer oil and petroleum products – a move by American business that leads to less reliance of foreign oil – a move that, Ballentine says, is welcome for a myriad of reasons. “That’s good for international security. That’s good for national security. That’s good for the environment. And, it’s damn good for the bottom line,” he relates enthusiastically.
Being sustainable and environmentally friendly, in many cases, fits a simple adage: Using less energy saves more money for the company. “Companies have figured out ‘hey, if I can use less energy, that adds to my bottom line,’” declares the former energy advisor. “It’s a classic win-win situation.”
This “win-win situation” is gaining ground on Wall Street – a positive sign for the greening of industry. “Investors and analysts are looking at these issues and seeing that they add value. And, correspondingly, they are looking with a more complimentary eye toward companies that are adopting sustainability. There’s no single, better driver for corporate behavior than what the analysts on Wall Street are saying,” explains Ballentine.
But it’s not just Wall Street and business owners that are taking note. Employees are appreciating sustainable change. “Employees get very excited about a company that they feel is looking beyond the issues of the four squares of the company… they think that the company is doing really good beyond the company itself,” he continues. Customers will seek out companies that are more environmentally friendly and as this takes place, profits increase and the environment is better for it.
“As we align those profit and value motives with larger, societal sustainability goals, which is what is happening right now, that’s the big promise. That’s when this will click on all cylinders, and we’ll really fully align stronger economic growth with better corporate citizenship and better sustainable values and a smaller environmental footprint,” Ballentine said in a rush of excitement.
Companies are starting to notice that sustainability reaches beyond the shelves of their stores or packaging plants; it’s a cycle. In fact, sustainability as a successful business model is not just linked to cutting costs for corporations and to using less energy; it’s also about looking at the entire life of a product. “Companies are taking more of a life cycle view of their product,” continued Ballentine. “It used to be that once the product leaves the door, the company is done with it and doesn’t have any interest in taking any responsibility in that product going forward. I think they now understand that their products are still their products after they’re sold, even after they’re put into commerce.”
As an example, he described the “life cycle” of a Coca-Cola bottle: “Coca-Cola sells their bottle of Coke, and they’re done with it. But that used to be the old, non-sustainable approach to business. Well, they’re not done with it because (when people litter) it’s lying on the side of the road, and it still has their name on it. And, if it’s sitting in a landfill, it still has their name on it. So I think a lot of companies are beginning to understand this end-of-life notion of their products. Those products are always going to be their products; therefore, taking responsibility for that product throughout its life is important.”
To coexist with this “life cycle” of products, companies are leaning toward innovation by designing products that are made of more recyclable and/or biodegradable materials. “Taking responsibility in a sustainable fashion for products beyond their useful life works its way back into the way that products are designed in the first place,” Ballentine said. “And many of the products are then designed in a way that tends to be less energy-intensive, using fewer petroleum-based products. That reduces the environmental impact of the company A-to-Z, and it also has larger societal benefits. Fewer landfills are better than more landfills; less dependence on petroleum-based products is better for the country, and it’s better for communities.”
Wal-Mart, the U.S. Air Force and the Carpet and Rug Institute –Three Unique Approaches to Sustainability
According to Ballentine, Wal-Mart and its CEO were originally weary to shift its practices toward a greener future. In fact, Ballentine said that, like many corporations, Wal-Mart viewed environmental actions on its behalf as “purely defensive” – just trying to thwart off any problems.
But then a light bulb went off. “What quickly became clear was that sustainability wasn’t about fending off problems; it was about seizing opportunities and adding bottom-line value. Now Wal-Mart has completely re-oriented and built its corporate vision around sustainability – because they think it’s good business.”
Some sustainable practices involve smaller packaging of items such as laundry detergent. Ultimately, this leads to less waste and to smaller forms of shipment and transportation – less CO2. That’s better for the environment, better for the bottom line.
Unlike other companies, though, Wal-Mart doesn’t wear its “green” on its sleeve. “A lot of their customers don’t even know about it,” Ballentine said. “If you go into a Wal-Mart store, you may not even notice that the lighting in that store is 30 percent more efficient than the store’s next door. You may not notice that they are harvesting daylight and that they have sensors on their lighting systems so when the sun breaks through the clouds, the lighting automatically goes down and when the cloud passes back over, the lighting automatically goes back up.”
Through such sustainable practices, Wal-Mart is saving energy, but it’s also saving something else – something that serves as a direct benefit to the corporation. “What else are they saving?” asks Ballentine. “They’re saving money. And that’s a good thing.”
Ultimately, Wal-Mart has the goal of creating zero waste – a goal for which there is no current plan. However, to Ballentine that’s what the sustainable business approach is all about because “that’s what innovation is all about.”
The “sustainability approach” to business isn’t just practiced in the private sector. In fact, the United States Air Force has found that such business practices are vital in the public sector as well.
According to Major General (Maj Gen) Del Eulberg, The Air Force Civil Engineer, “Sustainability has many different definitions; but, from my point of view, sustainability is our ability to be able to maintain our mission capability both now and in the future. This, in essence, means we have to make sure that we conserve and maximize the limited resources that we have as a nation for future generations.”
As an engineer, Maj Gen Eulberg looks at all aspects of sustainability with a particular focus on the synergy between the built environment and the natural environment. “Sustainability is a great concept when we look at our natural, as well as our built environment. How do we sustain both because that’s what you’re trying to achieve… the harmony between the built environment and the natural environment. Focus on one or the other can sub-optimize the potential solution set,” he explains.
Maj Gen Eulberg has new policies in place that reinforce “green” planning and building “throughout the entire project life cycle that now embeds sustainability” from development of the concept through design and construction, as well as the operation of the facility itself thus ensuring a smaller footprint on energy (as much as a 39 percent savings on some projects). LEED Silver (the U.S. Green Building Council’s Leadership in Energy and Environmental Design ratings) is the minimum requirement for all major construction projects in FY09 and beyond. In addition, Maj Gen Eulberg has established a Center of Excellence for Energy at the Air Force Civil Engineering Support Agency at Tyndall Air Force Base in Florida.
Lately, however, the Air Force Civil Engineer believes that the current emphasis on sustainability has increased for both the public and private sectors for a number of reasons, most notably due to the economic impact of energy. The Major General continues to explain, “The price of energy has had an impact on companies’ bottom lines as well as the Air Force’s ability to conduct operations world-wide. The increased price we pay for aviation fuel has limited our ability to accomplish other objectives because we have a relatively fixed budget. Increased fuel costs drive trade-offs in other areas such as training, research and development, recapitalizing our weapon systems or maintaining our aging infrastructure.
The price of energy continues to grow and limit options for us, as well as for businesses and for the American family. But it goes beyond just economics. There is also a growing understanding that energy has a strong environmental element as well as a national security component. The confluence of those three elements highlights the importance of sustainability regardless of whether you are in the private or public sector. All three areas of influence impact Americans’ lives everyday. I think those three things moving together are really what have taken hold across our country.”
But this attention on energy supply and demand is not new for the U.S. Air Force. Anyone familiar with this branch of the military service knows of its forward thinking and progressive, ongoing initiatives in the purchase and use of “green” energy, energy conservation and the development of renewable energy. This aggressive approach has reduced Air Force energy usage by 30 percent between 1985 and 2005, providing $2.9 billion in cost avoidance; and, they aren’t slowing down. In fact, the Air Force is the government’s No. 1 purchaser of “green power” and the No. 5 purchaser nationwide.
They are also an international leader in the development of renewable energy. “At Nellis Air Force Base we broke ground this past April on the world’s largest photovoltaic solar array system – 14.2 megawatts – and that’s a partnership with the private sector. We didn’t use any taxpayer dollars,” explains Maj Gen Eulberg proudly.
For those aware of his achievements and responsibilities, one would think the general was a CEO of a Fortune 500 company. In fact, his job is not dissimilar, given that he oversees 166 Air Force bases consisting of $243 billion in real property with 700 million square feet of facilities world-wide.
But this CEO of sorts has a national security component that most corporate leaders never have to consider in their tenure. Maj Gen Eulberg continues: “We have an aggressive program to go after renewable energy sources because it not only makes economic and environmental sense, but it also provides our installations essential energy security during times of crisis. In addition, our ability within the Department of Defense, as well as the private sector’s ability, to develop renewable energy sources will make us less dependent upon foreign sources of energy, making us more secure as a nation. And at the tactical level, the more protected our national infrastructure is, the more secure we become. The bottomline is that sustainable energy, with its national economic and environmental components, has become a key element of our national security considerations.”
The Carpet and Rug Institute (CRI), the national trade association for the carpet industry, thinks sustainability is critical too. Its leaders have created a successful sustainability business model that is working wonders in the not-for-profit sector. CRI is a pioneer in developing new business approaches to sustainability. As a result, the carpet industry has an enviable record of being a leader in sustainable approaches for its manufacturing processes and practices. It currently uses 70 percent less electricity and 46 percent less water per square yard of carpet produced than it did in 1990.
Over the past several years the carpet industry, through the Carpet America Recovery Effort, has been at the forefront of developing market-based solutions to diverting “old carpet” from landfills. According to Frank Hurd, vice president and chief operating officer of CRI, the need exists because “carpet does not biodegrade;” therefore, it does not go away.
When presented with the challenge, the carpet manufacturers “eagerly jumped into” finding ways to reclaim post-consumer carpet to keep it out of our nation’s landfills. This is a model of voluntary action by an industry to address a real sustainable and solvable issue: how to recycle carpet. Innovative ways are being developed to turn old carpet into building materials and into auto parts, to refurbish old carpet into new carpet and to completely recycle old carpet into new carpet (www.carpetrecovery.org).
“Going green makes sense,” commented Hurd. “It’s not only important; it’s imperative.” Hurd said it’s so imperative that companies that don’t start moving in that direction “will not be profitable in the future… they will not be around. Any industry you can name is moving toward sustainability.”
For the carpet industry the movement of being more eco-friendly and efficient isn’t a trend with an expiration date.
It is Ballentine’s hope that more businesses and governments continue to move in that direction. In fact, he sees the future of business, government and the environment as one. “It just so happens that sustainability is good for the planet, good for communities, good for the customers, good for their shareholders and good for their employees. That’s kind of the light-bulb moment going off throughout business. We’re really at a very exciting place right now, and this is happening before our eyes,” Ballentine commented enthusiastically.
As compact fluorescent light bulbs go off throughout businesses and within all segments of government, the future of sustainability has never been brighter. “You look at the number of companies now issuing their annual sustainability reports… it’s printed on recycled paper and it’s nice; and it uses soy ink and that’s nice. And they send it out to activists and environmental groups, and that’s wonderful. But I think we’re going to get to a point where there’s no such thing as an ‘annual sustainability report.’ There will just be an ‘annual report,’ and that annual report will be a ‘sustainability report.’ Sustainability will be fully integrated into the core and the mainstream of what it means to run a business. Everyone will be sustainable. The company will be built around sustainability.
It’s better business to be a better citizen. And it’s better business to be more sustainable,” concluded Ballentine.
Simply put, maybe Kermit’s song wasn’t accurate. In fact, “green” has never looked better – for business, for government and for the world.