The conditions for creating eco-advantage will grow stronger in 2009, no matter what the economic situation. Here are the give forces that will continue to drive a fundamental shift in how business operates, even during a recession.
After a brutal fourth quarter of 2008, we know that even a trend as powerful as the greening of business will not survive a full-throttle recession unscathed. The downturn has slowed the Green Wave, and until credit unfreezes, environmental investments, like all others, will remain on hold. For those companies just trying to survive, innovation and competitive advantage will take a back seat to cost cutting and sales incentives. Thus the green agenda in 2009 will likely focus on the old-school environmental strategy of eco-efficiency and cost savings (see, for example, this Time Magazine cover story on the continuing importance of energy efficiency).
But when the economy recovers, companies will rediscover the strategic importance of the other pillars of green value (driving revenues, building brand value, and reducing risk). Five forces will still drive a fundamental shift in how business operates, even during a recession:
- Rising commodity prices (in the medium and long run)
- The drive for transparency
- Your business customers, greening their supply chains
- Your consumers, conflicted and searching
- Your employees, looking for more than a paycheck
High Commodity Prices
Over the long haul, rising demand from India, China, and elsewhere will drive up the price of everything. While this point was certainly more believable at $145 a barrel, don’t be fooled by the recent collapse in commodity prices. This down-cycle is stemming from reduced demand, not more supply, a critical distinction. The world has no more accessible oil, copper, or food than it did six months ago. In fact, at lower prices, marginal production stops and supply drops. When demand comes roaring back, the supply won’t be there (it’s much harder ramp up production than it is to shut it down). At some point - and it’s anybody’s guess when - prices will rise very fast. So now is the time to get lean. But even if prices don’t go up immediately, commodity markets remain incredibly volatile, placing a real strain on business planning (not to mention poor CFOs trying to predict profit margins). With the ups and downs, reducing reliance on resources and developing a smart supply chain strategy are must-haves.
Greater Transparency
Demand for openness about where products come from and what’s in everything is still growing. No recession will put the genie back in that (BPA- and phthalate-leaching) bottle. Companies are releasing more CSR reports than ever and industry organizations, such as the Consumer Electronics Association, are sharing their own data. HP put a list of all its suppliers on the web and then announced the total carbon footprint for the supply chain. How long will it be before companies share data on every company’s specific climate contribution in the value chain? Patagonia launched a website just to tell the story of some of its key products and their travels around the world. And Wal-Mart is now selling a jewelry line called “Love, Earth” with an accompanying website that lets customers see which mine the gold came from.
Transparency will become a lever to improve operations (what gets measured gets managed) and a source of competitive advantage over time. As business customers and consumers want to know more, they will trust those with data. In 2009, collect information, build systems, and get ready to be open.
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