What Really Matters in Business Happens at the Edges- Take the Lean and Green Challenge!

Is the economic downtown turning a corner? Well, yes it is…just which corner it’s turning no one really knows…yet. In the meantime, most companies are sitting tight, private capital is hanging on the sidelines, and the “green” natives are getting restless. So it was with great interest that this week an article was published in the MIT Sloan Management Review which echoed the sentiment that I have carried forward with my clients for years. Recalling Michael Douglas’ “Wall Street” character’s statement that “Greed is Good”, MIT Sloan’s basic message is… “Green is Good”.

MIT presents two ways of thinking:

–Old Thinking: Companies have long mistakenly thought that adopting environmentally friendly processes adds costs.

–New Thinking: Green practices like recycling, reusing and reducing waste can cut costs because they make a company more efficient.

Using an example set by Subaru of Indiana, there are many proofs to the axiom that prevention of pollution and continually improving efficiencies …one idea that focuses on environmental improvement, and the other on business economics, works even in lean times. Subaru found that:

1.Profits come by increasing efficiency and reducing waste—but they don’t always come immediately.

2.Management’s leadership is vital in setting goals and getting departments to cooperate.

3.The front line workers have to be engaged to spot opportunities to reduce, reuse, recycle, and find other ways to create efficiencies.

4.Sustainability initiatives achieve maximum benefit from involvement of their supply chain.

5.All waste by-products are potentially new products

6.Green initiatives foster creativity and can enhance competitive advantage.

Let’s all be honest…that last point…competitive advantage is what really motivates business. So company sustainability initiatives cannot and should not be viewed through strictly an environmental lens, but through the balanced “sweet” spot of the Triple Bottom Line.

To paraphrase Guy Kawasaki in his book, Rules for Revolutionaries, what really matters happens at the edges. The action is not in the centers or areas of sameness. Organizations must challenge conventions and change the way products and processes are thought of and delivered.

So take the Lean and Green challenge…do what Subaru has done and get to work innovating and creating.

Climate Change, the Clean Air Act and the Political Sandbox

Yesterday, climate change experts from throughout the world wrapped up three day conference on climate change in Copenhagen.  At the conference British economist Nicholas Stern (who authored a major British government report detailing the cost of climate change) told hose assembled that the global recession presents an opportunity to build a more energy-efficient economy.

“Coming out of this we have got to lay the foundations for a low-carbon growth, which is going to be like the railways, like the electricity, like the motorcars, this is going to be over the next two, three decades the big driver in investment,” Stern said.

What’s our tattered economy to do?  In this same week, the U.S. Environmental Protection Agency proposed the first comprehensive national system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources in the United States.  EPA is developing this rule under the authority of the Clean Air Act (CAA).  Draconian perhaps?  Yes indeed, as I will opine in a moment.  It is my humble view that decades of economics based incentives to reduce air emissions appear to be about to be thrown under the bus.  And while the focus of the attention is on more energy intensive sectors such as cement production, iron and steel production, and electricity generation, the net is being cast much wider and may inadvertently capture less polluting industries and small businesses, impacting a wider sector of the economy which may be unnecessarily burdened.

So what’s the problem?  Congress appears to be the problem. While a number of states and regional initiatives are preparing their patchwork of GHG cap and trade frameworks and legislation (some like in Oregon and Washington appearing to be in a death spiral), Congress is sitting on its hands and all too slowly is slogging away at bringing meaningful and balanced cap and trade legislation to the floors of Congress.  Further, President Obama’s appears to be burdening climate change legislation with extra baggage, and this is not making the situation any better. The 2010 budget plan calls for using a carbon cap-and-trade system to raise as much as $646 billion in new revenue for the government between 2012 and 2020.  Much of the funds would go to subsidize clean technology research.  All good it seems.  Until one digs into the details.  According to the budget plan, most of the money raised would go toward a refundable tax credit of up to $400 for working individuals and $800 for working families, subject to income limits.  While I am all for social reinvestment, this makes reaching consensus on climate change more politically charged.

The President may be entering dangerous waters by putting economic renewal too heavily on the back of cap and trade legislation and in mixing social agenda issues in as well.  In fact, it’s the Democrats that are now putting up such a big fuss.  As noted in the Wall Street Journal (blog) http://blogs.wsj.com/environmentalcapital/2009/03/12/cap-and-horse-trade-obamas-uphill-battle-for-climate-bill/, the so called “Blue Dog” Democrats worry that the Presidents blueprint for tackling climate change will unduly burden Rust Belt states by raising energy costs for consumers and manufacturers. Many Democrats are upset that the revenue will be used for generic tax cuts and to help fund other programs, rather than for specific help to cushion the blow of increased climate regulation.

Indeed, what I hear in the great Northwest among business leaders appears to echo those in the beltway, who are concerned about the impact of federal or state cap and trade legislation on local economies.  But consider the alternative…the EPA way.

Many argue that the U.S. Supreme Court’s 2007 decision, Massachusetts v. EPA (which affirmed that carbon dioxide emissions are a pollutant as defined by the CAA) is the leverage needed to allow for carbon emissions to be regulated by the EPA.  That is true, because the EPA was essentially forced by the Massachusetts v. EPA decision to proceed with developing greenhouse gas regulations under the Clean Air Act unless or until Congress acted.  Many argue that the EPA is in the best position to manage a federal cap and trade program and integrate seamlessly all of the many regional and state initiatives currently in process.  But one can only imagine the years of litigation that will result from imposing new, wide reaching rules.  Despite the relative success of the CAA over the past 30 years, it’s a relatively rigid framework, whereas market-based systems like Cap and Trade may be more successful in the long run at controlling costs and spurring innovation through incentives and regulatory flexibility. But now the President appears to have convoluted the political process by padding the legislation with social agenda items.

Scientists assembled at this week’s climate conference have restated clearly that the urgency of the current situation cannot be overemphasized.  Climate change appears to be accelerating at a rate beyond previous Intergovernmental Panel on Climate Change (IPCC) expectations, and that the window for a timely response is closing quickly. The dire direction in which our world appears to headed requires a dual pronged strategy that provides a policy pathway that will begin to reduce emissions immediately, and a political pathway that avoids continued gridlock, as is being witnessed in Washington this week.

Is everyone able to play in the same sandbox? Do it for our planets sake.