Thursday, January 22, 2015

Winning in the Green Frenzy

Right now somebody, somewhere, is defining what sustainability means for your industry, business, and products. Almost everywhere you look—textiles, communications, agriculture, autos, high tech—green competition is shifting from a race to launch ecofriendly products to a battle over what constitutes a green product in the first place. The definition can vary from one industry, business, or product class to the next. But whatever your business, if you’re not engaged in the debate and in shaping the rules, you risk being assessed against sustainability standards you can’t meet. Worse, you may be left behind by a shrewd competitor that has strategically positioned itself as a certified paragon of the new green ideal.
Producing sustainability standards is a multiplayer melee we call the green frenzy, because it is like a feeding frenzy in the wild—a tooth-and-claw competition among a growing pack of stakeholders including environmental activists, think tanks, bloggers, industry associations, consultants, and your rivals, all clamoring to establish and impose their own green standards.
Like a feeding frenzy in the wild, the green frenzy is a tooth-and-claw competition among a growing pack of stakeholders.
In the coffee industry, for example, more than a dozen standards currently compete, affecting everything from pesticide use to workers’ housing to bird friendliness. (Just one of these, the Rainforest Alliance sustainable agriculture certification for coffee production, has some 100 criteria.) Each of the various standards has a constituency working to define the benchmarks for “sustainable coffee.” Some are backed by nonprofits such as the Audubon Society and TransFair, others by companies such as Starbucks and Nestlé.
How should companies confront the green frenzy? As part of our research on green-product strategy (see “Growing Green,” HBR June 2010), we’ve developed a framework based on in-depth case studies and interviews with leaders in sustainability stakeholder groups. As we explain below, how you engage depends on your company’s capabilities, the competitive landscape, and, most important, the degree of sustainability standardization in your industry.
In our experience, executives are of two minds regarding sustainability standards. Some view them as distractions from the important work of running a business and avoid the discussion altogether. But that won’t make the standards go away, and simply claiming you’re green when you’re not destroys credibility. Other executives want to engage in the standard-setting process but are uncertain where or how to begin.
Our recommendation: Leverage opportunities to position your company as an influential—or, better, dominant—force in the green-standards battle. Before choosing a strategy to accomplish that, you’ll have to make assessments in two areas, one external and one internal. The former involves reviewing existing sustainability standards in your industry, the issues surrounding them, the forums in which they’re discussed, and the roles of key stakeholders—including competitors—in driving the debate. Your aim is to determine how much standardization exists in your industry and what opportunities you have to engage in or even reshape the sustainability discussion.
For the internal assessment, evaluate your organization’s green capabilities, including technical competencies; its ability to generate superior green innovations in products and operations; its credibility as a green company; and current or potential partnerships. The central question you need to answer is “Do we have the right resources and competencies to set the sustainability pace for our industry?”

Four Strategies to Choose From

Once you understand both the situation in your industry and your company’s capabilities, you can determine which strategy is best: (1) adopt the existing standards; (2) co-opt and modify them to suit your capabilities and processes; (3) define standards for your industry; or (4) break away from existing ones and craft your own. (See the exhibit “Assess Your Possibilities.”) ....
Authors: Gregory Unruh is professor of global business at Thunderbird School of Global Management and director of the Lincoln Center for Ethics in Global Management. He is coauthor, with &#193ngel Cabrera, of the upcoming book, Being Global: How to Think, Act, and Lead in a Transformed World.

Richard Ettenson is a professor at Thunderbird School of Global Management.

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