Thursday, March 26, 2009

Climate change: new regulation, business model and competitive advantage

Although I intended to post this live from the Summit, my laptop refused to cooperate for some mysterious reason. So, with a little delay, here are my main observations from the Summit:

1. Logistic-wise: superior organization, perfect time management and a brilliant interactive survey technology (which allowed participants to answer questions in 10 seconds and aggregated all answers in 1 second)

2. Content-wise: the speakers brought up interesting, relevant and inspiring points regarding three major aspects of corporate sustainability: regulation, business model and bottom line. Below are the most powerful points pertaining to each of these aspects.

Businesses welcome climate change regulation and prepare to innovate

1. 81% of businesses represented at the Summit were in favor of more environmental regulation. Leo Abruzzese, Chairman of the Summit and Editorial Director for North America of the Economist Intelligence Unit suggested that might be due to a great desire for certainty.

2. A cap-and-trade system and higher taxes on fossil fuels are the two most preferred regulatory approaches by businesses.

3. The government should take leadership by creating the infrastructure needed to enable businesses to continue reducing their carbon footprint. While businesses are responsible for as much as 40% of total emissions, the remaining 60% needs to be tackled as well.

4. Companies - in their pursuit of growth - should figure out ways - innovation is highly recommended - not to exacerbate the existing climate problems.

Businesses adapt business models to reduce carbon intensity

1. Any company in any industry should find ways to reduce its carbon footprint. Even such soft-impact industries as professional services or IT can do a great deal both throughout their own operations as well as by enabling their customers to follow suit.

2. The vast majority of customers (70%) while demanding more sustainable products and services will not accept higher prices or lower performance(e.g. customers will not buy an ugly but recycled carpet). Innovation is the only way to remain appealing to these customers.

3. Doing YOUR laundry with cold water will have a huge positive impact on environment! So use cold-wash detergents!

4. Not embracing sustainability is more expensive - over time - than doing it well today.

Businesses can achieve competitive advantage and profitability through sustainability

1. Top-down commitment (top: chairman, CEO, board; down: all executives and employees) and strong value proposition are key drivers of sustainability processes within companies.

2. Executives have to lead by example and model their behavior. (e.g. leave the BMW at home and eat in company cafeteria)

3. Companies need not put out completely new products. They could just clean up existing products.

4. Sustainability benefits are increasingly valued even vis-a-vis the required rate of return. This enables setting more aggressive environmental goals, achieving of which leads to great new opportunities. Today is the time to prepare for the future.


Tim Albinson said...

Thanks for the recap. I think companies today are particularly eager to hear how sustainability initiatives can contribute to competitive advantage and profitability, but for many, the process as a whole can seem more than a little daunting. That’s why it’s nice to see your third point in this section: “…just clean up existing products.” Sometimes a tweak here or there can be the push-start a company needs to get moving in the direction towards sustainability.