GREECEDiversey Hellas S.A.
A conversation with Dan Esty
Daniel C. Esty is among the most sought-after speakers and advisers on the business implications of sustainability. Mr. Esty is the Hillhouse Professor of Law and Policy at Yale University, Director of the Yale Center for Business and Environment, and Chairman of Esty Environmental Partners. He has published several articles and authored several books on environmental strategy, including the recently updated Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value and Build Competitive Advantage, with coauthor Andrew S. Winston.
Dan Esty spoke with Diversey about emerging trends in sustainable business practices.
On sustainability driving innovation
Companies at the cutting edge are using a sustainability lens to gear up their innovation efforts. And innovation turns out to be a key to competitive advantage. Companies that are being creative in how they think about solving environmental problems are the ones that are coming up with big breakthroughs that will position them for marketplace success.
Sustainability is emerging as a megatrend, transforming the foundation of how business gets done and what the areas of opportunity are for competitive advantage. The impact of this "green wave" goes beyond the business world and promises to transform individual lives and communities.
Corporate leaders will be those who really see the evolving world in front of them and who -- better than their peers -- are able to look over the horizon and recognise this sustainability megatrend as something that requires business to change. They are asking, "What does this mean for my company and industry? Are there core competencies that my business has that will allow me to take on more new lines of revenue that respond to the pollution control and natural resource management challenges that our customers are facing?"
On water as an emerging stewardship issue
Climate change has received a lot of attention over the past year and will continue to get a lot of attention, but the environment and sustainability agenda is much broader. Over the next several years, some of the issues that have not received as much focus -- water being the best example -- will be become much bigger issues for companies to manage.
Water stewardship now pinches a fair number of companies as they recognise that water quality and availability now have to be given more systematic attention. In many places, water may become a bigger point of stress than climate change. And, of course, climate change may shift rainfall patterns and create more droughts or floods. Water shortages are also a function of development and of population pressures, in that limited resources are being spread across more people and more production. As a result, there is a supply-demand imbalance and likely to be a premium on better management of water going forward.
On emerging business trends in environment and sustainability
The next wave for many companies is to become more quantitative in how they gauge their performance on the environment and sustainability agenda. They are developing metrics that allow them to identify where they are delivering value and to invest more in the places that are being rewarded in the marketplace.
There also is an emphasis among those who have done a sort of first pass on sustainability to sharpen their focus on execution. This requires good metrics, indicators and benchmarks to ensure that the execution of the sustainability agenda is being followed through on systematically and that real priority is being put on the things that are important.
Corporate leaders will be those who really see the evolving world in front of them and who -- better than their peers -- are able to look over the horizon and recognise this sustainability megatrend as something that requires business to change.
On engaging employees and strengthening the workforce
There are many employees who want to make sure their company is on the right side of this big trend. They want to be part of a company that is doing good things for the environment, not despoiling the neighborhood or the community. But the logic of bringing an environmental focus to strategy goes beyond any sort of feel-good agenda and has very fundamental business elements around risk and cost and creating value for customers.
In many businesses, a critical element of competitive advantage is the workforce. So the environment and sustainability agenda is seen in part as a human resources issue. It is about attracting that very best talent.
On climate change controversies and business engagement
There have been some stumbles on the part of climate scientists in explaining their research, but the underlying scientific reality has not changed. Companies must address the scientific reality and need to be more analytically rigorous in doing so. Companies that are doing very well with this agenda are those that are thinking carefully, doing their homework, and looking for real payoffs, not just for something that has a "green" label.
There is a second wave of environment and sustainability focus that is much more concrete and has direct lines of payoff in the business context. That is helping to broaden the base of companies that recognise this as an important agenda that they need to have folded into strategy.
Among bigger companies, about 10% are really deeply engaged in this and another 30% or 40% now have begun to recognise the real opportunities. The other half of the business world is still just getting themselves focused on the sustainability imperative.
On sustainability in tough economic conditions
Current economic conditions put into high profile some elements of sustainability more than others. A lot of companies are bearing down hard on the eco-efficiency opportunities to reduce costs because there is a promise of quick paybacks. Some companies also see this as a good moment for employee engagement around sustainability. Particularly if times are tough and raises are small, it is a good time to ensure you’ve got a positive story to talk about. It's also a great time for companies to explore the environmental performance of their supply chain.
On key opportunities from a sustainability agenda
Companies looking for new foundations for comparative advantage and competitive position are recognising that there is an opportunity to build out their game plan around the environment and sustainability. There are four areas of opportunity.
(1) Risk management: This is a good opportunity make sure your business clearly understands the risks related to environment and sustainability issues and how they are being managed -- such as the risk of accidents or spills, the risk that comes from handling hazardous materials, the risk of regulatory changes that would unfavorably affect a company.
(2) Cost savings: This is a great moment to work on eco-efficiency and to really ensure that the company has squeezed out inefficiency and waste from production processes. That creates cost savings that drop straight to the bottom line and are highly valued.
(3) Creating solutions: Companies are positioning themselves now to be part of the world of solutions to environmental challenges. Companies are recognising that we are headed toward a more carbon-constrained future and are looking at ways they can produce energy efficiency for their customers. There are also lots of companies thinking about whether they can solve any of a number of other environmental problems their customers face: using less in the way of toxic materials, being more careful about how things are made and how expensive they are and being able to provide energy efficiency to their customers.
(4) Building your brand: Companies that recognise sustainability as a megatrend are seeing it as an opportunity to brand around the environment. Obviously this is Diversey's core vision, to really build into the image of the company and the corporate culture and the way people think about the company, a recognition that Diversey is attending to environmental issues very carefully so that their customers have confidence that these issues are being taken care of properly.
