GREEN TO GOLD STRATEGIES

Raghu Ram Tata, XLRI Jamshedpur

Drivers of Corporate Sustainability
Sustainability
SSM = Sustainable Strategic Management
Eco and social efficiency are directly tied to the short-run economic
sustainability of the firm
Eco- and socio-effectiveness have posterity as the planning horizon in the
value-creation process.
The essence of eco- and socio-effectiveness lies in viewing the firm as an
agent of social change with a higher-level purpose
Beyond Eco- and
Socio-Efficiency
Revenues
Intangibles
Costs Risks
Strategy Framework
Costs
1. Eco-efficiency: Improve resource
productivity
2. Eco-expense reduction: cut
sustainability costs & regulatory
burden
3. Value chain eco-efficiency: lower
costs upstream & downstream
4. Eco-risk control:
Manage sustainability
driven business risk
5. Eco-design: Meet customers
sustainability needs
6. Eco-sales & marketing: Build
product loyalty & position on
sustainability attributes
7. Eco-defined new market
space: Promote value
innovation & develop
breakthrough products
8. Build corporate reputation &
trusted brands
Revenues
Intangibles
Costs Risks
Strategy Framework
1. LCA, DfE, DfS
2. Green supply chains
3. Industrial ecology
4. EIA/SIA
5. ISO 14001 / 26000
6. Green buildings
7. ECOLOGICAL FOOT PRINT
Reduce, Reuse, Recycle
1. Product Responsibility
LCA, green supply chains,
Industrial ecology
2. CESR
3. Equator Principles
4. SRI/PRI
5. IFC due diligence frameworks
1. Product/process innovation
Green technology
BOP opportunities
2. Eco-labels / ISO certifications
3. Product differentiation
4. Government push
Energy star etc.
Sustainability in Public Procurement
1. GRI Sustainability reporting
2. Carbon Disclosure Project
3. DJSI / India ESG 50
4. E P&L accounts
Influence govt. policy
Attract/retain talent
Higher access to credit
Tata Nano Tried to do a Maruti?
Key Differentiators
1. Touted as New Peoples Car re-
defining markets Social acceptance
2. Price competitiveness
3. Reshaping the bottom of the pyramid
4. Better mileage better environmental
performance
5. Euro IV compliant creating barriers
to new entrants
6. Influencing policy through
demonstration
7. Proximity of suppliers to cut costs
last mile advantage
8. Knock-down re-assemble modal to
save transport costs lower ecological
footprint
9. Low switching costs for customer
1. Eco efficiency: Improve resource
productivity
DuPont: in last 15 years
Cut its GHG emissions by 72%
50% of reductions came from only 1 process change
Production of Adapic Acid that eliminated NOx emissions
Vowed to hold flat its energy use
Found many ways to get leaner & meet its energy
targets
In last 10 years, saved $ 2 billion
LEADERS GET THE SAME OUTPUT WITH LOWER
INPUTS
Improving productivity: classic win-win SD strategy
Water:
In 2006, the Coca-Cola India saved more than 100,000
kilolitres of water through water conservation efforts within
its bottling plants.





Material:
Timberland redesigned its shoe boxes to eliminate 15% of
the material (25 million boxes / year)
Energy:
IBM overshot its 5 year GHG reduction targets
Redesigned heating / cooling systems
Saved $115 million through energy efficiency initiatives
Big initiatives
Dow chemicals: Waste Reduction Always Pays
(WRAP) Yielding results for over 20 years
Small Initiatives
Adobe: Computerized water sprinkler system

ECO-EFFICIENCY IS A BASELINE ELEMENT OF
SMART BUSINESS low hanging fruit
Pollution Prevention Pays (3Ps)
1970s: companies struggled to comply with
new environmental regulations
Scrubbers for air pollution
ETPs for water pollution
SW segregation for incineration
3Ms started Pollution Prevention Pays
Any idea that reduced pollution should also
save money
Anything not in a product is considered a cost
. It is a sign of poor quality
Everything coming out of a plant is either
A product
By-product (which can be reused or sold), or
Waste
Why should there be any waste?
Anything that increases a companys footprint
emissions, solid waste, energy, water use
.sign of inefficiency
Employees encouraged to rethink products
and processes small or big
Initially, 20 waste cutting, money saving ideas
Saved many a tons of pollution & $ 11 million
Cumulative total of @ 8100 projects > $1.2 b
Environmental savings of 4 billion pounds of
pollutants
VOC emissions dropped from 70,000 tons
(1988) to < 6000 tons now
Remarkable financial impact
Achieved $1 billion in 1
st
year project savings
3M calculates only the 1
st
year savings from an
eco-efficiency project
3M sets new 3P goals but no monetary or
environmental goals
Look at work through environmental lens
- leads to innovation
- leads to eco-advantage
Go beyond waste reduction & efficiency
Find markets for by-products (Industrial ecology)
Retrofit & Automation
LCA & DfE bring environmental thinking into
practice
Without them also, one can improve eco-
efficiency
Computers shut down when not in use
Centralized controls for lighting, heat, cooling
Staples saved $ 6 million in 2 years across its 1500 stores
Energy efficient lighting, motion sensors
FedEx spent $3000 10000 / centre
Pay back period 12 18 months
How important are cost savings?
3Ms net & operating margins roughly same as 30 years
ago
$ 1 billion eco-efficiency savings not reflected in the
companys margins
3M operates in highly competitive businesses with
eroding margins
ECO-EFFICIENCY SAVINGS KEPT 3M COMPETITIVE AND
ALLOWED THEM TO STAY IN BUSINESS
Interface saved $300 million in cost reductions
from waste management & eco-efficiency
IT SURVIVED EARLY Y2K RECESSION

Tata Sponge Iron Ltd , Keonjhar district, Orissa.

Production capacity of 2,40,000 TPA
Annual turnover of @Rs. 1.65 billion
Power shortages, excessive emissions, and waste disposal
problems since inception - 1982
Commissioned a waste heat recovery boiler - used waste gases
from its kilns to produce 7.5 MW of electricity - independence
from endemic power shortages; improved operational efficiency.
Set up a brick-manufacturing plant for producing fly ash bricks
that are cost-effective, stronger, and more resilient than normal
clay-burnt bricks
reduced air pollution and conserved resources
Annual savings of Rs. 70 million in power consumption and
additional profits @ Rs.1.3 million from fly ash bricks




2. Eco-expense reduction
Cut sustainability costs & regulatory burden
Late 1980s public disclosure of
environmental info was on the rise
DuPont
Discovered that it was among worlds largest
polluters
Spending over $ 1 billion / year on waste
treatment & pollution control
Money going up the stack
CEO set tough targets
Slash emissions
Cut costs
The goal is Zero became DuPonts mantra
Now
Waste treatment & pollution control expenses down
to $ 400 million
Otherwise, expenses would have grown to $ 2 billion
A swing of $ 1.6 billion in annual costs for a
company netting @ $ 1.8 billion/year
DuPont would roughly break-even without its
environmental efforts
Time & money consumed by pollution
control & environmental management
Money spent on waste disposal, pollution control
equipment
Managerial time & money spent on filling forms
Some times- fines & legal expenses
Business slow down / closure due to non-
compliance
Anything a company can do to avoid
regulatory delays
Will lower operational costs
Increase speed to market
Green field projects countless permits
Environmental / SIA clearances time consuming
To avoid further delays
Avoid using certain chemicals / materials
Be below emission thresholds
Stakeholder engagement & shared value creation


Leaders watch regulations closely
Do everything to stay below limits
If necessary redesign processes / products

SEEING BUSINESS THROUGH THE LENS OF
ENVIRONMENTAL EXPENSES CAN HELP TO
FIND NEW, LOWER COST AND FASTER WAYS
OF DOING BUSINESS
3. Value chain eco-efficiency
Lower costs upstream & downstream
PUMA Environmental P&L
1
st
in the industry to commit to Zero hazardous
waste across supply chains by 2020
NIKE followed

Not taking care of value chain eco-efficiency can
cost a fortune
Sony PlayStation Christmas time 2001
1.3 million PS-II were held in warehouses in
Europe
Toxic element Cadmium was found in cables of
game controls small but legally unacceptable
levels
Sony inspected 6000 factories to track down the
source
The Cadmium Crisis or the cost of little
environmental problem 18 months & $130
million

Sony learned the hard way evolved a new
supplier management system
Even the best companies can be surprised by
environmental issues
The environment is a not a fringe issue it can
cost real money
Real benefits come if you see things through
environmental lens
Child labour big social / ethical issue
Nike sweat shop disaster
Carpet manufacturers child labour issues
Lower value chain costs
Cut environmental expenses
Cut financial expenses
IKEA fix it yourself furniture boxes
Squeeze millimeters out of every box
50% increase in fill rate
Saves 15% fuel per item
Less trucks / trains to transport
4. ECO-RISK CONTROL
MANAGE ENVIRONMENTALLY DRIVEN BUSINESS RISK
Cross promotions
Spiderman toys with Kellogs products
Small battery contained toxic mercury
17 million call-backs
Kellogs committed never to use such batteries
McDonalds toys with happy meals
Identified button batteries as a problem and
eliminated mercury completely
How did McDonalds do it?
Issues of litter / packaging / mad cow disease
Decided to get ahead of the curve
Process of Anticipatory issues management
Studies environmental / social trends to identify
potential dangers to business
They identified mercury in batteries as a risk &
eliminated it much before legally required
Influenced suppliers to find alternatives
Find the risk before it finds you
Business risk comes in strangest forms
Market influencers actors / sports icons /
talk-show hosts/news papers/NGOs/TV etc..
CSE pesticide expose
Sharukhs cigarette smoking Anti smoking laws
Dhonis hair-style
Oprah Winfreys talk shows
NDTVs save the tiger campaign 4.7 lakh
responses



Anticipatory issues management
Shell scenario planning
IKEA exhaustive supply chain auditing

Go far beyond traditional company
boundaries to look for environmental / social
risks
Avoid Humpty-Dumpty situation: A reputation
once shattered, cant easily be put back
LEADERS FIND ISSUES BEFORE PROBLEMS FIND THEM


Go beyond compliance for competitive advantage
Tata Nano
Leaders realize that getting ahead of regulations
can:
Save money / time / reduce hassles
Puts entry level barriers for competitors
SC Johnson: Innovative cleaning products
Reformulated market leading products to eliminate
PBTs (Persistent, bio-accumulative and toxic).
Greenlist every ingredient is scored based on
environmental attributes toxicity / biodegradability
Evaluates 3000 raw materials
Nokia reviews 30,000 components removed
some from products

Future scaping companies are less effected by
new regulations
Companies that go beyond compliance
welcome stronger regulations
They also lobby for or shape the new regulations
Less prepared companies are kept out of the
market / discussion boards
New regulations create winners / losers

Leaders end up on the winning side

The eco-advantage bottom line
Look to reduce costs by:
Eliminate waste & promoting eco-efficiency
Cut disposal costs & compliance expenses
Capture the value of reduced environmental
burdens up & down the value chain
Control environmental risk by:
Anticipate environmental issues & address them
Stay ahead of new regulatory requirements
Manage government mandates to gain relative
advantage in the marketplace
5. ECO-DESIGN
MEET CUSTOMER ENVIRONMENTAL NEEDS
Jack Welch former CEO GE
Battled the government for years over GEs
responsibility to toxic Polychlorinated biphenyles
(PCBs) in Hudson & Housatonic rivers
Jeff Immelt successor to Jack Welch
declared that environmental goods and
services would be centerpiece of GEs
business strategy
Immelt launched GEs Ecomagination
campaign
A multipronged initiative
Part image advertising
Part green product marketing
Part product innovation
Over all, its about top-line growth
GE booked a $4 billion increase in sales of
environmental products in the first year
Reaping $100 billion/year revenues from
ecomagination initiative
Environmental strategy has been on a long
march for the past 40 years
Tactical focus on compliance
Tactical emphasis on costs & efficiency
More strategic view centered on growth
opportunities
More companies now see top-line potential
from artfully managing green wave pressures
LG Eco-Design Strategy

1. Improving efficiency when using resources
LG not only reduces the weight and volume of its products, but also makes more efficient use of resources by using
natural and/or recyclable materials.

2. Reducing the use of hazardous materials
LG bans any use of the six hazardous substances (lead, mercury, cadmium, hexavalent, chromium, and PBB/PBDE),
employs halogen-free flame retardants, and refrains from using any other substances that could cause harm to the
human body.

3. Improving energy efficiency
LG Electronics complies with international efforts to reduce greenhouse gas emissions by reducing power
consumption and the use of standby electricity.

4. Improving recyclability
LG Electronics chooses materials that can be easily recycled. During the production and planning stages, we focus on
making sure that a given product can be easily broken down. Later, overall recyclability is further improved by
reducing its number of individual parts.

Eco-Design Activities
LG Electronics implements its objective management system, design management system, and accomplishment
management system with the goal of developing eco-products.

Eco-Design Application
By applying the eco-design concept to all of its products, hazardous substances are banished and-by reducing energy
consumption and developing recyclable eco-products-natural resources are preserved.
Surveys have shown that customers care about
environment
First wave of Electric cars, Energy saving light
bulbs from the stable of GM, Ford, Philips
& GE
Still some of these products failed
Didnt meet the customers need at right price
Ineffective positioning or marketing

If WTP exists, how to convert it to actual
spending?

Make your customers environmental problem
your own
Eco-design: a product/item is developed in a
way that reduced Environmental impacts for
someone somewhere in its life cycle journey
supplier inputs - product end-of-life disposal
DfE helps customers lower their footprint &
costs - benefits that justify
Price premiums
Increased market share
Strengthen customer loyalty

Countless ways to help customers improve
eco-efficiency
Innovation / creativity / entrepreneurial
spirit is the key
Door-to-door waste collection in Indian cities
BigBelly trash can in US
MSW to organic manure or energy
Sun Microsystems Green Server
Dells computer take-back @ $25 / computer
Eco-design can be tricky many companies
have failed
Meet a need that actually exists
DuPont polyester recycling Petra Tech
Creates new polyester from old materials
But, polyester disposal was not a big problem for
customers
Recycled polyester costs more than virgin
polyester
No compelling customer value proposition
DONT GET CAUGHT-UP IN TECHNOLOGY AND FORGET
BUSINESS CASE
DONT SUPPOSE THAT WHAT IS GOOD FOR YOUR COMPANY IS
GOOD FOR CUSTOMERS



Dont ignore other needs of the customer
3M scientists made magnetic audiotapes using
water based coatings
Completely avoided solvents
VOC free product
But temperature range was very low
Often melted under normal use
McDonald: served coffee in reusable mugs
Customers wanted to walk out with their coffee
They are paying for mobility as much as for the
coffee
PRODUCTS FUNCTIONALITY LIES IN THE SERVICE IT
PROVIDES

6. Eco-sales & Marketing
Build product loyalty and position on sustainability attributes
Not every customer wants eco-friendly good
But, some do
this base is expanding
More people are including socio-environmental
factors in to their buying equations
Companies are vying to get a piece of this cake
Body shop
Organic foods
Herbal beauty products
Tribal crafts
When & where green marketing works
Shell Oil Thailand
Dense cities / high traffic volumes
Need for cleaner fuels that burn cleaner, produce
less emissions, protect engines
Shell converted natural gas to zero sulpher liquid
mixed it with regular diesel PURA
Charged a premium
Strong market share & sales SUCCESS



PURA launched in Netherlands on the same
pitch FAILURE
Holland is full of green customers
But, air pollution is not an issue there
Not many takers for engine protection story
Shell re-launched PURA as V-Power
Enhanced engine power
In India
3 premium petrols all green but sales pitch is
on mileage / engine power / engine protection

Green attributes cannot stand alone
Customers need other reasons to buy
Price, quality, service will remain core concerns
Green can be 2
nd
or 3
rd
sales pitch
Certification / eco-labels indirect ways of
green marketing
GOI If only buys recycled paper products?
ISO 14001 for EMS
Partner with green crusaders WWF
Greenpeace etc..
7. Eco-defined new market space
- Breakthrough products
1993: Toyota set to design 21
st
century car
The Focus: Natural resources / environment Vs.
traditional size / speed
Target: double the fuel efficiency of a small car
Electric an option but other products failed
Hybrid gas-electric engine was born
Toyota Prius a giant success
Value innovation
Product is so new
So different
So unique
Customers believe there is no substitute
Prius made competition irrelevant
Hybrid is a new category of personal transport,
separate from a car
8. Intangible value
Build reputation & trusted brands
Brands matter celebrity oriented world
BP rebranding campaign - $200 million
Beyond petroleum
$ 1 billion solar panels by 2008
Still 98% of BPs business comes from Oil & gas
Its a start
ITC
E-choupal
ITC-CII centre of excellence in SD

GE Ecomagination
Initially 17 products selected
Wind turbines / solar panels
Genx jet ingine: 15% less fuel, 30% quieter, 30% less
NOx emissions, less cost to operate
Supermodels in coal mine pushing clean coal
Elephants dancing touting technology thats
right in step with nature
Jet engine buyers are just Boeing & Airbus
Then why wider publicity? brand building
helps
Multiple explosions in a Texas refinery
267000 gallon oil spill in Alaska
Eco-advantage bottom line
Meet customer needs that actually exist
Dont ignore customers non-environmental
needs
Green attributes rarely stand alone
Market to different niches differently
Dont expect a price premium

The six sins of 'greenwashing'

Misleading the public about environmental practices or
benefits.
Hidden trade-off: A paper product that comes from a well-
managed forest but has to be transported a long way.
No proof: A claim that a product was not tested on animals, yet
no evidence is provided.
Vagueness: Terms like chemical-free or nontoxic that aren't
substantiated.
Irrelevance: A claim that is not important or that all others in
the product category can make.
Lesser of two evils: Organic tobacco. Enough said.
Fibbing: Citing bogus certifications.

it was marked as "Made in China" and therefore had
recently been shipped halfway around the world.
It was made from cotton (a crop which is estimated to
use 35% of all industrial pesticides)
Printed with thermoplastic PVC-based inks which
contain phthalates, one of the nastier toxins, and well on
it's way to being banned worldwide.

From a Bluenotes store
in Toronto A green
canvas tote bag marked
"Think Green":
The eco-advantage bottom line
Look to reduce costs by:
Eliminate waste & promoting eco-efficiency
Cut disposal costs & compliance expenses
Capture the value of reduced environmental
burdens up & down the value chain
Control environmental risk by:
Anticipate environmental issues & address them
Stay ahead of new regulatory requirements
Manage government mandates to gain relative
advantage in the marketplace
Meet customer needs that actually exist
Dont ignore customers non-environmental
needs
Green attributes rarely stand alone
Market to different niches differently
Dont expect a price premium