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Can a commitment to green practices save money? Why, yes.

Wednesday, March 25th, 2009

In yet another example of the power of constraints to create innovation, there’s a fascinating article in the recent Wall Street Journal Business Insight section entitled “Greener and Cheaper.” In it, authors Alan Robinson and Dean Schroeder describe the decade-long effort by the managers and workers at the Subaru of Indiana plant to reduce their use of energy and decrease waste. One accomplishment: the plant has not shipped any waste to a landfill in nearly five years.

The findings of the authors is that sustainable practices can go along with cost reduction and efficiency improvements. But it’s a long process and requires constant focus, attention, and executive support. For example, the Subaru plant has had the objective to be environmentally sensitive since its construction 20 years ago.

It’s not all easy money–many of the projects required process redesigns and/or upfront investments that ate up savings for a while. But there are numerous stories in the Subaru experience where the objective to reduce waste led to sustained creative thinking:

In another case, a series of process redesigns that first increased costs ultimately produced lower costs, less waste — and better quality work. The plant used to weld its steel auto frames in a way that produced lots of sparks, which, in turn, left lots of a waste-metal byproduct known as slag on the floor. Subaru started looking for a company that might want the slag for the base metals it contained. It found a company in Spain that wanted to recover copper from the slag. So, Subaru started shipping the slag to Spain — and paying the Spanish company to take the material. Thus, for a while, Subaru was reducing its environmental impact, but at increased cost.

This led it to consider a previously unrecognized waste: excess sparks. The plant devised a new welding process that produced fewer sparks and less slag, lowering electricity and materials costs. Its consumption of copper welding tips plunged 75%. Subaru still ships some slag to Spain, but not as much. The new welding process also shows how attention to the minutest environmental details can lead to savings that a purely cost-driven organization might miss.

Customers are talking, every day, about their concern for the environment and “reducing the footprint.” With thinking like Subaru’s, we learn that environmental sensitivity does not have to be a premium product. It can, in fact, be cheaper.

Tags: automobiles, cost, efficiency, environment, recycling
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Marketing for good–and for ill

Wednesday, November 14th, 2007

I can’t wait for the upcoming book by Harvard Business School marketing professor John Quelch (his blog is here) and Katherine Jocz called “Greater Good“–because I am fully expecting to disagree with it.

I read the abstract last month and have been stewing over it since then. Here it is in full:

Marketing has a greater purpose, and marketers, a higher calling, than simply selling more widgets, according to John Quelch and Katherine Jocz. In “Greater Good”, the authors contend that marketing performs an essential societal function–and does so democratically. They maintain that people would benefit if the realms of politics and marketing were informed by one another’s best principles and practices. Quelch and Jocz lay out the six fundamental characteristics that marketing and democracy share: (1) exchange of value, such as goods, services, and promises, (2) consumption of goods and services, (3) choice in all decisions, (4) free flow of information, (5) active engagement of a majority of individuals, and (6) inclusion of as many people as possible. Without these six traits, both marketing and democracy would fail, and with them, society. Drawing on current and historical examples from economies around the world, this landmark work illuminates marketing’s critical role in the development, growth, and governance of societies. It reveals how good marketing practices improve the political process and–in turn–the practice of democracy itself.

The ennobling of marketing–connecting it with vital societal interests–got my attention. I am a marketing professional, and I like to feel good about myself and my profession, and as such I liked the book’s idea–for about five minutes, after which it lost its flavor faster than a free after-dinner mint.

What lingered was this thought: there’s an awful lot of bad marketing out there (not ineffective marketing, but “marketing-for-ill”), and I’d wonder whether Quelch and Jocz would do more for society by writing about that.

Here are some fundamental principles of marketing-for-ill that I bet won’t appear in Quelch’s and Jocz’s book: (1) bombard people with buy messages for commodity products such as credit cards, (2) use selective language to play up one’s product while disparaging the competitors’–as with any Oracle ad, (3) craft deceptive messages to get people to buy something that is not in their best interests–exhibit A: low-introductory rate mortgages, (4) create multilevel marketing networks to make revenues primarily via self-consumption of the networks, (5) use complex pricing schemes to make it difficult to assess total costs before buying–e.g., “my cellphone plan.”

It’s unfair, of course, to judge the book without reading it. So I promise I’ll read it when it comes out, and I’m pretty sure it will be a good book and unworthy of my scorn.

At minimum, it has caused me to confront a lot of what I don’t like about my profession, and reflect on what I can do not to promote those ideas.

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How globalization can help the environment

Wednesday, October 10th, 2007

I argued in a post yesterday that Lloyd Field’s condemnation of globalization in his book “Business and the Buddha” was erroneous. Here’s one area where I think globalization is a big help: reducing business’s harm to the environment.

Most multinational companies can’t/won’t choose to do business only in countries with lax environmental standards. Doing so removes large swaths of the marketplace from their reach. And in selling or producing in many countries, they also submit themselves to multiple forums of regulation and oversight. And typically, since it’s difficult to change fundamental product makeup for different markets, products are architected to surmount the highest bar and then sold everywhere with surface modifications.

(Frankly, a bigger danger to the environment are smaller local or regional companies. Operating under the radar and having local political power insulates them from national or global standards.)

In the US, California frequently serves as the most difficult regulator. Thus California’s environmental mandates, immediately or later, become national norms of doing business. Similarly the EU is more willing to be first with environmental standard-setting. And very, very few companies will pull out of doing business with the EU, especially since they know that their standards will migrate to Asia and the US sooner or later.

The change in the corporate dialogue about carbon emissions illustrates this. In the October Harvard Business Review, Alyson Slater of the Global Reporting Initiative talks about how publicizing carbon emissions is good for business (free link). Such an article in a business publication would have been unthinkable even five years ago. Yet it shows how rapidly corporate thinking has changed.

And we have to give globalization at least part of the credit for that.

(Photo from triffo via stock.xchng)

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The business world needs more wisdom, ethical conduct and compassion

Tuesday, October 9th, 2007

“Business and the Buddha” is a book I expect will be widely ignored. And that’s a bad thing, because it is one of the most thought-provoking books I’ve read in many years. It gets to the heart of many issues that trouble me about the business world, and how our societies have managed the free enterprise system. I suspect many others, were they to read it, would at least feel a mild unease at the base of their stomachs.

The author, Lloyd Field, uses the lessons of Gautama Siddhartha, the Buddha, to critique and recommend changes to business and free enterprise to increase its humanity and concern for the welfare of the planet and its inhabitants. Its focus is on three groups of guiding principles: wisdom, ethical conduct, and compassion.

Who could argue that we have enough of any of these in the business world?

It’s a daunting analysis and prescription, however. Not because it’s complex, but because it’s so simple: Why do we work in companies that load us down with soulless tasks, enmesh us in petty politics, and treat us as disposable? Why are leaders drawn into ethical gray areas and beyond? Why is it acceptable to threaten and act in bad faith in the world of corporate bankruptcies?

“Business and the Buddha” is brief–180 pages including appendices. And it’s an exceptionally well-written book, with sentences that are well-constructed and easy to read and free of errors that I could find.

It’s not without flaws. The blanket condemnation of globalization didn’t work for me–while it’s a mixed bag, in the long run factories opening in a country will do good for a country’s citizens, and keeping them out won’t do good. I also disagree with his condemnation of competition as wrong behavior. While competition among firms can certainly go overboard and negative, competition is essential to much of the good that free enterprise offers. Better products, environmental breakthroughs, innovations, new ways of looking at the world come about by competition. And lack of competition nurtures bureaucracy and stasis–like the old Soviet Union, an ostensibly fair society that couldn’t get a lot of the basics done. (Remember the photos of the empty food stores in the 1970’s?)

But these criticisms are minor compared to the overall strength, coherence and simple good sense of the book. Especially from page eighty-five on, I was hooked. Notable quotes:

Too often, the good intentions underpinning corporate values and guiding pricniples are thrown to the wind when unexpected opportunities present themselves or when profitability is in question. (p. 125)

When push comes to shove, a profit-and-loss statement will almost always outrank a values statement. This betrayal…is usually accompanied by a good dose of rationalization, thereby reshaping the company’s ethical reality. (p. 130)

“Business and the Buddha” also includes the best illustration of the union-management problem that I’ve read anywhere:

As long as corporations treat their employees as disposable, unions will have no incentive to seek out alternative value systems. Likewise, as long as unions, in the supposed best interests of their members, cause suffering for corporations, employees have no incentive to seek out other values systems. (p. 139)

Perhaps most challenging, Dr. Field urges companies to adopt a “Cause No Harm” values statement, including in part: “We will not acquire any raw materials, or design, manufacture or sell any products or services, the doing of which will be harmful to beings or to the environment.”

It sounds impossible, even crazy, but think about this: so did “Zero Defects” forty years ago. (Sounds like a BHAG, an echo of an earlier, slicker business book.) You can also see the beginning of progress toward this goal, as companies take more accountability for their subcontractors and pledge carbon neutrality.

It’s important to note: this is not a religious book. It doesn’t preach, urge you to convert, or cite more than the barest bones of the Buddha’s story to make its points. The focus is on the ideas, and putting them to use. And like a lot of Christian teaching, with which I’m familiar, the lessons are simple, but following them is hard, hard, hard.

(If you’re interested in more business-related ideas inspired by the Buddha, check out “The Art of Happiness at Work” by the Dalai Lama. It’s a very pleasurable read, and gives lots of practical advice to those who want their work to be more meaningful and their work lives more contented.)

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