Making any prediction is a fool's errand, especially in print. But 'tis the season for both reminiscing about what we learned last year - when gas prices are high, people want smaller cars and when banks stop lending, people want no cars - and for making bold predictions (that we hope nobody remembers) about what will happen this year.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).
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- 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
~Andrew Winston, Founder, Winston Eco-Strategies, Co-author, Green to Gold (Read his "Eco-Advantage" blog here.)
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.
Greener Supply Chains
Of the forces chugging along, this one I'm most sure of. Wal-Mart has not slowed down its pressure on suppliers, which the retail giant proved with a historic meeting in China I attended. Tech companies like Verizon are setting standards and demanding eco-efficiency improvements. And leaders like Nike are helping their suppliers and working with them to reduce footprint (no pun intended). The evolution will be toward more partnering and less demanding, as companies increasingly realize the benefits of working together across the value chain. Let's be honest here: When times are tight it's much easier to force a green agenda, and the costs, onto someone else. So I predict, without going out on too much of a limb, that this pressure will continue.Growing Market for Smarter Green Products
The recession slows the green consumer movement that was brewing. Throughout 2008, consumers indicated a real interest in greener products (note here, here, and here). And while tight wallets will cause some retreating on this front, a fundamental shift is underway. While 2009 may not be the time to sell premium-priced green products, the demands of "conflicted" or "conscious" consumers who want more sustainable options, but at the same price and quality, will continue. To satisfy these demanding customers, smart companies will create products with, as one of my clients puts it, "no tradeoffs." But perhaps we can we go even further and produce negative tradeoffs, meaning actual benefits? How about greener products that save customers money over their lifetime, such as CFL bulbs or Procter & Gamble's Tide Coldwater (savings come when you stop washing clothes in hot water). Beyond developing new products, companies can win over confused customers by helping them navigate all the green claims out there. Retailers like Tesco are looking to make decisions easier for customers. As Tesco CEO Sir Terry Leahy put it, "consumers will reward the businesses that produce" lower-carbon products and services. Those companies will weather the downturn much better than others.
Employee Engagement - Looking for More out of Life
Recessions shift priorities - people are happy to be working at all. But the rising quest for meaning in work and life will only slow, not stop. The younger generations coming into the workforce care a great deal about green and surveys show that employees want more training on sustainability. In many companies, employees are forming their own "green teams" (see stories from tech companies such as Wipro and Yahoo and eBay. While these self-directed groups may not always focus on the most strategic issues (eliminating bottled water is often the first priority), they do lay the groundwork for larger conversations about greening the operations, products, and services of the company. Some companies, such as Alcoa to Wal-Mart, are also helping employees understand their personal connections to sustainability and the planet.So the critical story during this downturn may be the role of green engagement in keeping morale up (which so many companies are desperate to do). Greening the business, and employees' own lives, will keep everyone from top management to entry level employees interested and excited. With employees on board, the proverbial "flywheel" from Jim Collins' Good to Great will start spinning toward a greener enterprise. Engaged employees will innovate around operations, products, and supply chains, creating stronger companies that will not only survive this economic climate, but also thrive.
