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Dont let your competitors


control what sustainable
means in your industry.
Winning in the Green
Frenzy
by Gregory Unruh and Richard Ettenson

Included with this full-text Harvard Business Review article:

1 Article Summary
Idea in Briefthe core idea

2 Winning in the Green Frenzy

Reprint R1011J
Winning in the Green Frenzy

Idea in Brief
Green competition is shifting from a race to
launch ecofriendly products to a battle over
what actually constitutes a green product.
Unless youre engaged in the debate and in
shaping the rules, you risk being assessed
against sustainability standards you cant
meet.

Successful companies leverage


opportunities to become an influential or
dominant force in the green-standards
battle. That requires understanding the
standards that exist in your industry and
also your own green capabilities.

Once you have that understanding, you can


determine which of four strategies is best
for your company: (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.
COPYRIGHT 2010 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

page 1
Dont let your competitors control what sustainable means in your
industry.

Winning in the Green


Frenzy
by Gregory Unruh and Richard Ettenson

Right now somebody, somewhere, is dening ing to establish and impose their own green
what sustainability means for your industry, standards.
business, and products. Almost everywhere In the coffee industry, for example, more
COPYRIGHT 2010 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

you looktextiles, communications, agricul- than a dozen standards currently compete, af-
ture, autos, high techgreen competition is fecting everything from pesticide use to work-
shifting from a race to launch ecofriendly ers housing to bird friendliness. (Just one of
products to a battle over what constitutes a these, the Rainforest Alliance sustainable agri-
green product in the rst place. The denition culture certication for coffee production, has
can vary from one industry, business, or prod- some 100 criteria.) Each of the various stan-
uct class to the next. But whatever your busi- dards has a constituency working to dene the
ness, if youre not engaged in the debate and benchmarks for sustainable coffee. Some are
in shaping the rules, you risk being assessed backed by nonprots such as the Audubon So-
against sustainability standards you cant ciety and TransFair, others by companies such
meet. Worse, you may be left behind by a as Starbucks and Nestl.
shrewd competitor that has strategically posi- How should companies confront the green
tioned itself as a certied paragon of the new frenzy? As part of our research on green-prod-
green ideal. uct strategy (see Growing Green, HBR June
Producing sustainability standards is a multi- 2010), weve developed a framework based on
player melee we call the green frenzy, because in-depth case studies and interviews with lead-
it is like a feeding frenzy in the wilda tooth- ers in sustainability stakeholder groups. As we
and-claw competition among a growing pack explain below, how you engage depends on
of stakeholders including environmental activ- your companys capabilities, the competitive
ists, think tanks, bloggers, industry associa- landscape, and, most important, the degree of
tions, consultants, and your rivals, all clamor- sustainability standardization in your industry.

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Winning in the Green Frenzy

In our experience, executives are of two sign) certication constitutes the denitive
minds regarding sustainability standards. standard. That has important implications for
Some view them as distractions from the im- architects, designers, construction companies,
portant work of running a business and avoid suppliers of ofce-interior products, and a
the discussion altogether. But that wont host of others. Because the LEED rating sys-
make the standards go away, and simply tem offers four levels of certicationcerti-
claiming youre green when youre not de- ed, silver, gold, and platinumthat depend
stroys credibility. Other executives want to en- in part on greener building materials and fur-
gage in the standard-setting process but are nishings, suppliers are scrambling to maxi-
uncertain where or how to begin. mize their products LEED scores.
Our recommendation: Leverage opportuni- Likewise, suppliers to Wal-Mart, Tesco, Mc-
ties to position your company as an inuen- Donalds, and even the U.S. government are
tialor, better, dominantforce in the green- pressed to adapt their operations and offerings
standards battle. Before choosing a strategy to to meet the standards set by their major cus-
accomplish that, youll have to make assess- tomers. In July 2009 Wal-Mart announced
ments in two areas, one external and one inter- plans to develop a worldwide sustainable
nal. The former involves reviewing existing sus- product index for everything it sources from
tainability standards in your industry, the its more than 100,000 suppliers. The index
issues surrounding them, the forums in which measures product-related energy use and
theyre discussed, and the roles of key stake- waste and evaluates impact on natural re-
holdersincluding competitorsin driving sources and communities. Many companies
the debate. Your aim is to determine how will have no choice but to adjust their supply
much standardization exists in your industry chains and operations if they want their goods
and what opportunities you have to engage in to remain on Wal-Marts shelves.
or even reshape the sustainability discussion. Companies that adopt industry standards
For the internal assessment, evaluate your should not underestimate the strategic value
organizations green capabilities, including and marketplace advantage this option can
technical competencies; its ability to generate give them. Adhering to Wal-Marts sustainable
superior green innovations in products and op- sheries standards made The Fishin Company
erations; its credibility as a green company; a trusted partner in its customers sustainabil-
and current or potential partnerships. The cen- ity efforts. It became Wal-Marts largest sus-
tral question you need to answer is Do we tainable seafood supplier, winning unprece-
have the right resources and competencies to dented purchase orders and long-term
set the sustainability pace for our industry? contracts. And adopting industry standards
need not make you a bystander in the debate.
Four Strategies to Choose From On the contrary, adoption legitimizes your par-
Once you understand both the situation in ticipation as your industrys sustainability stan-
your industry and your companys capabili- dards evolve.
ties, you can determine which strategy is Co-opt. Green standards may be far along in
best: (1) adopt the existing standards; (2) co- the building sector, but the frenzy is just start-
opt and modify them to suit your capabilities ing in most industries. The noncorporate
and processes; (3) dene standards for your stakeholders that are engaged in standard set-
industry; or (4) break away from existing ones ting all want to see their own standards widely
and craft your own. (See the exhibit Assess adoptedwhich means they need to nd cor-
Gregory Unruh (gregoryunruh.com) Your Possibilities.) porate partners to champion the standards
is a professor and the director of the Adopt. If your industry has well-established and commercialize them. That fact gives com-
Lincoln Center at Thunderbird School standards and your sustainability capabilities panies an important but limited window in
of Global Management and the author are minimal, you should probably employ this which to co-opt the standards of a credible
of Earth, Inc. (Harvard Business Review strategy. Consider the situation in the building sponsorto negotiate modications that will
Press, 2010). Richard Ettenson sector, where the opportunity to set standards accommodate both commercial realities and
(richard.ettenson@thunderbird.edu) has largely passed because the market and social and environmental considerations.
is an associate professor and a Thelma stakeholdersincluding builders, nonprots, The banana producer Chiquita forged such a
H. Kieckhefer fellow in global brand and governmentsgenerally agree that LEED partnership with the Rainforest Alliance, an
marketing at Thunderbird. (Leadership in Energy and Environmental De- NGO that had long criticized Chiquita and its

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Winning in the Green Frenzy

competitors, including Dole and Del Monte,


for the environmental and social problems as-
Assess Your Possibilities sociated with banana production. In the early
Your responses to the two sets of questions below the gure will help you choose a 1990s RA developed sustainability standards
strategy for winning in the green frenzy. The more times you answer yes in column for rain forest banana farms and shopped them
one, the farther to the right you are on the gures horizontal axis. The more times to the major banana companies. Only Chiquita
you answer yes in column two, the higher you are on the vertical axis. agreed to pilot the standards, and thus began a
long collaboration to bring its farms into ac-
cord with them. RA representatives worked
with Chiquita to nd innovative ways of
HIGH achieving the standards goals while meeting
the companys commercial needs. The process
of boosting its green credentials helped Chiq-
COMPANY CAPABILITIES

uita in other ways as well. By incorporating op-


DEFINE BREAK AWAY
erating discipline and other business criteria,
Chiquitas implementation of the standards in-
creased farm productivity by 27% and reduced
costs by 12%. The company also improved em-
ployee satisfactionand in 2004 it received
the OAS Corporate Citizen of the Americas
Award.
CO-O PT ADOPT Starbucks has pursued several green-stan-
dards strategies, including co-option. Looking
to green its retail stores, the company recog-
LOW HIGH nized that although LEED standards domi-
INDUSTRY STANDARDS nated the green frenzy for new buildings, they
were less well developed for existing structures
and failed to account for the unique challenges
THE CURRENT STATE OF YOUR COMPANYS ABILITY of greening them. So Starbucks partnered with
INDUSTRY STANDARDS TO CREATE STANDARDS LEED to develop and implement a certication
Do standard-setting Do we have the techni- protocol for green retrotting. The adaptations
forums exist in our indus- cal expertise needed brought Starbucks recognition for its greening
Y/N to develop credible efforts while advancing LEED standards in a
new market segment.
Y/N
If competing standards Dene. Some companies nd that their in-
exist, is there agree- Do we have the R&D and dustry has either no established standards or
ment on the issues they product-development no consensus across competing standards. If it
Y/N assets for sustainability has the necessary capabilities and clout, a
innovation? Y/N company may set out to create industry stan-
Have our competitors dards. Success requires specialized knowledge,
adopted existing Can we influence competency in dealing with sustainability is-
Y/N members of our supply sues, credibility among savvy stakeholders, ef-
Have governments chain to become more fective communication, and willing partners.

proposed or supported sustainable? Y/N Indeed, partnership with an NGO, a univer-


sity, or some other reputable authority is often
Y/N Do we have good rela- fundamental to an effective strategy.
Have the marketplace and tionships with credible There are compelling reasons to try setting
customers accepted spe- third-party sustainability your own standards. For example, certication
Y/N
organizations? Y/N protocols are often written by activists who
have particular concerns. In the coffee industry,
Do we have buy-in from
Fair Trade certication focuses on establishing
customers and other a minimum price for growers, whereas the Au-
stakeholders? Y/N dubon Society aims to protect migratory-bird
sanctuaries. From a business perspective, of

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Winning in the Green Frenzy

course, sustainability lies in nding a strategic standards requires investing in partnerships,


balance among social, environmental, and developing trust, exerting political inuence,
commercial goals. Activists may assert that and managing conict, among other leader-
commercial success is part of the equation, but ship challenges. But Starbucks and Nestl are
for them it usually takes a back seat. And many seeking to establish the benchmarks against
activists have little understanding of particular which their brandsand potentially their
companies business issues and capabilities. competitors as wellwill be judged.
Starbucks initially chose to establish its own To date, sustainability has not been a rele-
standards for sustainable coffee. The company vant differentiator in the pay-TV industry, but
felt that coffee quality, which is essential to the DISH Network is attempting to change that.
brand, was poorly addressed by the existing As the number three brand in the category, fac-
standards. So in 2004 it created the Coffee and ing brutal competition from market leaders
Farmer Equity (C.A.F.E.) Practices, which sup- Comcast and DIRECTV, the company hopes to
port both coffee quality and equitable sourcing generate competitive advantage by dening
goals. To enhance C.A.F.E.s credibility, Star- the green standards for its sector. To this end, it
bucks enlisted Scientic Certication Systems, is seeking ways to leverage the environmental
a respected third-party standards consultancy, friendliness of its satellite network relative to
as its global partner. cable and telecom infrastructures and is look-
At about the same time, Nestl partnered ing into alliances with and endorsements from
with the Rainforest Alliance to launch the credible sustainability partners.
AAA Sustainable Quality Program for its high- Break away. What can a company do if its
end Nespresso brand coffees. Like Starbucks, confronted with established standards that
Nestl wanted both high-quality coffee and dont play to its strengths, are inconsistent
greater sustainability. Both companies are with its strategy, or actively undermine its
working with external stakeholder groups to competitiveness? We know of only a few orga-
build critical mass around their own standards. nizations that have gone on the offense when
Nestls Coffee Forum, for example, has ex- faced by such a challenge, but we suspect that
panded to include the International Finance more will do so as bystander companies are in-
Corporation, INCAE Business School in Costa creasingly blindsided by new standards. Apple,
Rica, several sustainability consultancies, and for example, confronted this problem in its
more than half a dozen coffee suppliers. typically iconoclastic way.
Cutting through a clutter of proliferating Although it had positioned itself as the revo-
lutionary leader in its industry, in 2006 Apple
found itself glaringly out of step with the sus-
tainability movement. In August of that year

The Hazards of Charting Your Own Course Greenpeace released its sustainability rank-
ings of computer manufacturers, and Apple
Companies that create their own sus- and fertilizers and conserving water. In was conspicuously near the bottom of the list.
tainability standards risk accusations of 1996 the CEO, Robert Shapiro, an- At rst the company dismissed the rankings,
greenwashingpositioning dirty nounced that its genetically engineered saying, We disagree with Greenpeaces rating
products or policies as environmentally crops would help immensely in closing and the criteria they chose. Analysts initially
friendly. Thus they should not try to the gap between hungry people and ade- viewed that reaction as simple defensiveness.
break away from standards or dene quate food supplies. But following the But a deeper strategic move was under way.
new ones unless theyre sure they can announcement, the company faced pro- Apple subsequently turned the tables on
credibly demonstrate their commit- tests by activists worldwide who were Greenpeace by calling its criteria not green
ment and capability. concerned about the environmental and enough and pledging to set a new and higher
Monsanto learned this the hard way in health impacts of gene splicing. Mon- standard for green computing. In short, it out-
the 1990s, when it claimed that its inno- santo had to back down from its claims, greened the greens.
vations would fuel sustainable agricul- and its biotech business has since taken a Apple contends that Greenpeace and, more
ture by reducing reliance on pesticides far lower prole. important, its own high-tech competitors are
ignoring the most blatant environmental im-

Monsanto had to back down from its pact of computers: the energy they consume
and the carbon emissions they generate. In
sustainability claims. classic style, CEO Steve Jobs said the rankings

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Winning in the Green Frenzy

Apple turned the tables were like asking a cigarette company how to shift the debate about sustainability criteria
green their ofce is. By expanding the deni- to its advantage. Whether it will succeed in the
on Greenpeace by calling tion of sustainability to include product use, long run remains to be seen.
Apple aims to break away from the existing
its criteria not green
standards and highlight a dimensionpower The race to shape sustainability standards will
enough. conservationon which it can excel. The ini- transform the competitive landscape and the
tial results of its efforts can be seen in the per- social and environmental practices of compa-
formance of the iPad, which is so energy ef- nies in every industry. The risk that your busi-
cient that one T. Rowe Price analyst compared ness will be left behind or marginalized in the
its battery life to black magic. growing green marketplace should serve as a
A gambit like Apples will work only if the wake-up call. Tackling the standards challenge
proposed new standards are measurable, rele- head on provides an opportunity to differenti-
vant to customers, and demonstrably superior ate your offerings, bolster your reputation as a
to the existing criteria. And the old standards responsible enterprise, and inuence sustain-
will probably not disappear; companies trying ability standards well into the future. Is your
to break away will have to address them as organization poised to seize that opportunity?
well as their own. Despite its criticism of
Greenpeaces rankings, Apple has climbed Reprint R1011J
from the bottom of the list to the middle, To order, call 800-988-0886 or 617-783-7500
which shows that it has responded to the issues or go to www.hbr.org
Greenpeace raised. But Apple clearly intends

harvard business review november 2010 page 6