Green Growth: Not motherhood, but to make more money

It is my belief that performance improvement is about, among other things, improving the long-term and sustainable value generated by an enterprise. Waste is inherently value-destroying. Sometimes the costs of waste are visible, sometimes invisible. Sometimes they directly affect the company, but other times the costs are passed onto the Commons (the air, the oceans) where they affect everyone.

In a recent study by the World Economic Forum and Boston Consulting Group, they identified emerging-market firms that are turning green thinking into a source of competitive advantage. What is striking about what these firms are doing is not so much that they are reducing their impact on the environment, but that what they are doing is driven by limitations and scarcities of energy, water, people etc. In other words, regardless of the rhetoric of acting green, these firms are acting green in ways that makes sense purely from a long-term profit perspective.

Some examples:

Shree Cement

India’s Shree Cement (http://www.shreecement.in/index.html, which suffers from water shortages, developed the world’s most water-efficient method for making cement, in part by using air-cooling rather than water-cooling.

Manilla Water

Manila Water (http://www.manilawater.com/, a utility in the Philippines, reduced the amount of water it was losing, through wastage and illegal tapping, from 63% in 1997 to 12% in 2010 by making water affordable for the poor.

Broad Group (http://www.broad.com:8089/english/, a Chinese maker of air conditioners, taps the waste heat from buildings to power its machines.

Zhangzidao Fishery Group (http://www.zhangzidao.com/doce/aboutus.asp, a Chinese aquaculture company, recycles uneaten fish feed to fertilise crops.

Sekem (http://www.sekem.com/english/default.aspx), an Egyptian food producer, set itself the task of reclaiming desert land through organic farming.

Florida Ice & Farm (http://www.florida.co.cr/), a Costa Rican food and drink company, has adopted exacting standards for the amount of water it can consume in producing drinks. They also link 60% of the boss’s pay to the triple bottom line of “people, planet and profit”. The sustainability champions also encourage their workers to come up with green ideas.

Natura (http://www.naturabrasil.fr/default.aspx?CultureInfo=en-US), a Brazilian cosmetics company, gives bonuses to staff who find ways to reduce the firm’s impact on the environment.

Masisa (http://www.masisa.com/usa/), a Chilean forestry company, organises local carpenters into networks and connects them to low-income furniture buyers.

In emerging markets it is hard for companies to stick to one specialism, because they have to worry about so many wider problems, from lousy infrastructure to unreliable supply chains. So the sustainability champions seek to shape the business environment in which they operate.

They also lobby regulators:

Grupo Balbo (http://www.nativealimentos.com.br/en/organizacao_balbo/index.html), a Brazilian organic-sugar producer, is working with the Brazilian government to establish a certification system for organic products. They form partnerships with governments and NGOs.

Kenya’s Equity Bank (http://www.equitybank.co.ke/) has formed an alliance with groups such as The International Fund for Agricultural Development to reduce its risks when lending to small landholders.

The firms also work hard to reach and educate poor consumers, often sacrificing short-term profits to create future markets. Masisa Broad Group has developed a miniature device for measuring air pollution that can fit into mobile phones. Jain Irrigation (http://www.jains.com/), an Indian maker of irrigation systems, uses dance and song to explain the benefits of drip irrigation to farmers who can’t read.