Sustainable Profits

Business and politics have been in open warfare since late July, when the insurance industry opened hostilities against the idea of health reform. Over the next several months, the conflict will escalate over another idea; cap and trade. Cap and trade is another in a long line of environmental action attempted by those crazy, tree-hugging, environmental wackos.

Environmental wackos like Linda Greer of the Natural Resource Defense Council. At a conference in 2003, Ms. Greer was disappointed to reveal that 67 firms had rejected her request to work with the NRDC after she related the results of a project at Dow Chemical. Working at one plant in Midland, Michigan, the crazies were able to cut toxic emissions by 37%…but it cost Dow….

Wait a moment…the operation saved $5.6 million per year! Hmm. Why would companies not want to save money on operations costs while making the world a better place to live in? I am afraid that I lack the intelligence to answer that question. Dow, of course, is no corporate angel. But the firm has made a point of being proactive on the environmental front, and using the green movement to generate efficiency in its operations. They got ahead of the curve on CFC’s in the seventies, and have embraced a variety of techniques since that have strengthened its corporate position while providing social benefit. They pick the low hanging fruit.

The question on the mind of the rational middle, is why don’t other firms do the same? Why do firms and individuals insist on sticking their heads in the sand? People, and companies, are afraid of change. For most of human history, the world has been so big, and we humans so small, that it was natural to see the world and its resources as infinite; and the world’s ability to absorb our waste as absolute. In more direct terms, we thought it was ok to pee in the river as long as we got our drinking water upstream!

It is time to grow up. How many times do you hear, or speak yourself, the phrase “It is a small world”? Take that phrase at face value, because it is the truth.

Most regular folks have the idea that big companies are smart enough when it comes to their own self-interest. If AIG, GM, CITI, Merril, and the rest aren’t enough to disabuse us all of that notion, then there isn’t much left to say. Big companies, like the rest of us, sometimes miss the boat. Most estimates of remaining oil reserves state that the world will run dry in this century. The absolute effects of global warming as described by Al Gore’s film have been disputed by people on the basis that there is not enough fossil fuel left in the Earth to produce enough CO2 to make the scenario happen. Despite this, BP’s chief economist Peter Davies insists that they don’t believe there is an absolute resource constraint…they are thinking or acting as if the tap will never run dry.

I mention these stories as a reminder that when you see someone on the news sagely lecturing the nation on what is in the interests of business, that they are just as full of vinegar as the rest of the world. We, as consumers, need to push sustainability on our businesses and in our lives. We need to let legislators know that the corporate world needs to be both responsible and efficient. The Japanese and Europeans have a legacy of voluntary agreements between government and industry to address environmental issues that have been very successful, but the great management thinker Michael Porter has found that corporations become better operators in the face of government regulations. Either way, by carrot or stick, our corporate world needs to embrace sustainable operations.

Materials flow accounting, total quality environmental management, and all of the elements of environmental managerial accounting can be leveraged to find environmental benefit that pays for itself. I could list hundreds of companies that have achieved successes of the same magnitude as the one enjoyed by Dow and Linda Greer, but none of them would change the basic need.

Whether it is health care delivery, energy policy, or our nation’s infrastructure, when are we going to stop running from every challenge that comes our way? When are we going to stand up and embrace the opportunity to move the country forward?

The rational middle looks forward to your thoughts….