Green and Competitive

Ending the stalemate

The Dilemma

Does going green mean companies have to be less competitive?

Opposing Views

Costly
Preventive measures Implementation cost Non compliance cost

Responsibility
Social benefits Social responsibility Sustainable growth

Traditional Views On Going Green

Stricter regulations mean higher cost required to achieve compliance. Environment concerns limit firms freedom when coming up with innovations. It raises production cost and generate no profit to the business.

The Current Situation

Are there any changes from the traditional view?

Survey Results

58%

Say green issues have become more important to their organization strategy.

*Source: KPMG Labour Market Outlook summer 2007 survey conducted on 1,000 HR professionals

Survey Results

47%

Believe that employees prefer to work for firms with a strong green stance.

*Source: KPMG Labour Market Outlook summer 2007 survey conducted on 1,000 HR professionals

Survey Results

44%

Of the companies have an environmental policy in place.

*Source: KPMG Labour Market Outlook summer 2007 survey conducted on 1,000 HR professionals

Green Energy Projected Growth

Biofuels Fuel Cells Solar Power Wind Power Total 0 20.5 1.4 15.6 17.9 55.4 50 100 150 15.6 69.3 2006 60.8 226.5 200 250 300 2016 80.9

Market growth from 2006 to 2016 (In $US Billions)

Source: Clean Edge, 2007

Change Factors: The 6 Cs

Costs Capital Competition China Consumers Climate

The Green Advantage

Generate cost savings. Promote innovation. Command premium pricing. Enhance the brand image. Differentiate from competitors.

Putting It Into Action

What strategies can firms employ to gain the green advantage?

Competitive Environmental Strategies

Competitive Advantage

Lower Costs

Eco-Efficiency

Environmental Cost Leadership

Differentiation

Beyond Compliance Leadership

Eco-Branding

Organizational Process

Products and Services

Competitive Focus

Strategy 1: Eco-Efficiency

Savings through eco-efficiency practices. This strategy generates savings in virtually every firm. It is an internal initiative as consumers will not pay for environmental protection.

Strategy 1: An Example

Over 50% in savings by changing from incandescent light bulbs to energy saving light bulbs

Strategy 2: Beyond Compliance Leadership

Acknowledgement from public and customers for their efforts. Substantial investment required for certification and publicity efforts. Beyond compliance practices can give suppliers an edge over others.

Strategy 3: Eco Branding

Consumers must be willing to pay for the ecological differentiation. Reliable information about product environmental performance must be available to consumers. Differentiation should be difficult to be imitated.

Strategy 3: An Example

Switzerland hailed Toyota Prius as the worlds greenest car. The Prius has sold over 1 million units worldwide

Strategy 4: Environmental Cost Leadership

Production of cost competitive products with environmental attributes built-in. Radical product innovation such as material substitution, packaging, etc. Better product design results in more efficient use of resources which translates to lower price.

Strategy 4: An Example

Cost savings and waste reduction through packaging design

Strategy Framework Review

Boundaries between the strategies are hypothetical. Distinction however allows better analysis and helps in finding opportunities beyond the low lying fruits.

Conclusion

Change factors have increased attention on environmental practices Being green can be a new competitive advantage. Firms can adopt different strategies to gain the green advantage.

Questions

We do not inherit the earth from our ancestors, we borrow it from our children.
Unknown

References
Ron Pernick, Clint Wilder. (2007). The clean tech revolution. New York (NY) Lucy Phillips. (2007). Go green to gain the edge over rivals. People Management, 9. Michael E.Porter, Class van der Linde. (1995). Green and competitive. Ending the stalemate. Harvard Review, 120-134. Renato J.Orsato. (2006). Competitive environmental strategies: When does it pay to be green? California Management Review, Vol 48, 127-143.