This coming March 2, 3 and 4, Connected Organizations for a Responsible Economy (CORE) will be sponsoring its annual Sustainability Summit. This year the event moves the sustainability discussion well beyond the business case for sustainability into highlighting sustainability initiatives in both the private and public sectors.

Much progress has been made over the past few years as private sector companies move towards a low “resource footprint,” leverage sustainability to drive innovation and create “green jobs.” Global companies now recognize that the business paradigm has shifted from a viewpoint where resources are abundant to one where resources are increasingly scarce and represent a material risk (and opportunity) to business operations. Moreover, there is a new found transparency with companies. Everyone is a stakeholder and can publicly comment on a company’s environmental and social performance.

What this means is that companies are taking a hard look at their operations – both within their fence line and within their supply chain for ways to reduce energy use, carbon emissions, water use and material use. This makes perfect business sense as a classic risk management strategy. In a world where resources are increasingly scarce and supply chain disruptions can shut down an operation (for example, imagine the sudden lack of water for a beverage company), proactively reducing your reliance on these resources becomes critical.

This is not only a risk management issue. This is a business opportunity. Companies that can be innovative and bring products and services to market that use fewer resources and can better mitigate resource risk for their customers will thrive.

Companies presenting at the Summit represent the future of business. I encourage everyone to attend the Summit this March and see how sustainability is transforming the global economy. To learn more about it, visit www.corecolorado.org/summit.

In my opinion, sustainability is fueling innovation through the creation of new businesses and new products. This innovation is also driving the “creative destruction” of some industries (some of the Detroit automakers?) and creating new ones (Tesla and Better Place?).

This is obvious.

What is not so obvious is that the job creation from these new and in some cases disruptive industries is creating brand value.

In my opinion, Serious Materials is now known, not only as an innovator, but a creator of “green jobs.”

Serious Materials is a great example of the “mash up” of innovation, green job creation and increased brand value. The Serious Materials brand is now linked to not only innovation with regards to building materials but now green jobs.

I was fortunate enough to attend the Fortune Brainstorm Green event a couple of weeks ago and listen to Kevin Surace, CEO of Serious Materials, discuss the opening of their new window manufacturing plant in the Chicago area. There was some discussion of their innovative products but the message was clear ¬Serious Materials is creating jobs in the midst of the “great recession.”

An example: on February 27, 2009 Serious Materials reopened a window plant in Chicago. The former Republic Window plant was sold to Serious Materials and the new owner rehired the 250 workers who were laid off.

A shuttered plant is brought back to life. Kevin’s story of the enthusiasm of the newly rehired workers was inspiring.

Not only was Kevin compelling in his message during the panel discussion but Serious Materials was extremely effective in broadcasting the linkage between innovation and green jobs.

The lapel pin and card below was distributed during the event. I made the leap, wore the pin and was on board with the message.

Serious Materials is not only viewed as an innovative start up, but one who will create new manufacturing jobs.
A couple of other examples of innovation and green job creation are provided below to illustrate my point.

In December 2008, the world’s largest manufacturer of wind turbines,
Vestas, opened a new plant in Windsor, Colorado. The facility will eventually
employ 600 workers. Colorado Governor Bill Ritter attended the plant’s
ceremonial opening and called it “a victory for our state.” He said Vestas will
help attract other renewable energy companies to Colorado. Ritter has set a
goal of attracting renewable energy research and manufacturing operations
to the state for what he calls the “New Energy Economy.”

In Colorado, Vestas is a welcomed new addition to our business base. We have seen
the loss of jobs in the mining and oil and gas sectors and are anxious to attract new
industries and “green jobs.”

This year during the dismal economic situation in in Detroit, Global Wind
Systems, Inc. will create 250 new employees starting in May 2009. This will
be Michigan’s first manufacturer of delivery-ready, large-scale wind turbines.
The alternative energy company, which now has about 20 employees, was
founded in September and is investing $32 million to establish the plant,
which will be an original equipment manufacturer or OEM for wind turbines.

In the current economic climate the winning brands are those that innovate fast, grow their business and create new jobs. The benefit that accrues to these firms, in the midst of the “great recession,” is brand value and loyalty.
Who will soon forget an innovative company that is creating new jobs?

Now, think creative destruction and job creation.

Tim Carey from PepsiCo (Director, Sustainability) participated on the panel and presented “Sustainability in a Recession: Keys to Performance in a Capital-Constrained Environment.”

Tim presented a very clear and concise case for aggressively pursuing a sustainability strategy in the “middle” of this economic downturn.

His key theme was that during the recession it is essential (yes, essential) to leverage sustainability to drive innovation and increase resource efficiency. Why, you ask, would this be critical during a recession? Simply put, resource costs will continue to increase over time (energy costs from hydrocarbons will increase going forward) and we will come out of the recession.

So, how do you want your company to come out of this recession? Will you be tied to a costly supply chain lulled into thinking that current cheap fuel costs excuse inefficiencies, high material use in packaging, still tied to high carbon energy sources such as coal and the wasteful use of water (while water is relatively cheap, take note of increasing stakeholder interest in how companies use water)?

Now is the time to “dematerialize” packaging, increase energy and water efficiencies and move towards a low carbon footprint on an enterprise-wide and product basis.

The bottom line is that you want to be the low cost producer (low Cost of Goods Sold (COGS)) compared to your competitors when the costs of resources increase (which they will going forward).

So, what is PepsiCo doing now? Some recent public announcements:

Bottles – The new “Eco-Fina” water bottle uses 50 percent less plastic than traditional designs with a half-liter bottle that weighs in at just 10.9 grams. 
 “Eco-Fina” will save 75 million pounds of plastic a year according to estimates by PepsiCo. In addition, the company has eliminated the cardboard base pads from its Aquafina 24-packs which will result in a savings of 20 million pounds of corrugate by 2010.

Another clever move is that PepsiCo is manufacturing the water bottles at the purification centers where they are filled in an effort to reduce fuel consumption and greenhouse gas (GHG) emissions from transport.

Shipping – Quaker, Gatorade and Tropicana will be shipped exclusively on lightweight, recyclable plastic pallets as a way to reduce fuel costs. In addition, the pallets are tagged with bar codes to enable tracking throughout the supply chain.
Vending machines – PepsiCo launched a pilot program in the Washington, D.C.-area to test “green” or “climate-friendly” vending machines. The Pepsi Bottling Group (PBG) is placing 30 energy-efficient Pepsi-Cola vending machines in high-consumer traffic areas with machines comprised of all-natural refrigeration systems. The machines apparently use less energy and generate 12 percent less GHG emissions than current vending machines.

Water - PepsiCo India is changing all of the labels on Aquafina, its bottle water brand, to announce that by next year, PepsiCo India will be a “positive water balance company.” Apparently the labels will urge consumers to partner with the company to “use water wisely so it could be enjoyed by future generations.” In addition, water usage in its manufacturing plants has been reduced by over 60 percent, and that has saved 2 billion liters of water in the process.

Late last year, I was repeatedly asked if sustainability initiatives would continue during an economic downturn or would they be viewed as expendable.

PepsiCo and other companies such as GE, Wal-Mart and Coca Cola are answering this question.

Recent taglines regarding the “new colors of green” include:
“Blue is the New Green”, The New York Times. November 20, 2008
“Yellow is the New Green”, The New York Times. February 27, 2009
“Black is the New Green”, Financial Times. February 28, 2009

I will go further and recommend we jettison the words “green” and “eco” as more than ever we need to move ahead and embed sustainability into private and public sector enterprises as quickly as possible. We do not have time to waste.

We need to describe sustainability in terms of the value it creates not by adding a tag line. This is the only way that consumers, customers and businesses will understand the benefits sustainability can bring. Sustainability adds business value by increasing revenue, increasing brand value, managing risk and reducing operating costs. Simple business concepts in the language of business.

Sustainability programs are alive and well during the recession. Examples include the GE’s ecomagination and Wal-Mart initiatives. Both of these companies are realizing value from embedding sustainability practices into operations and through new products. Neither of these companies have confused consumers or businesses by calling their programs “blue” or “green.”
Consumers are confused enough by green claims and wary of greenwashing – what will we have now, perhaps “blue washing?”
We need to ensure that sustainability goes mainstream as quickly as possible and is embedded into businesses and public policy. It will never be embedded if it is viewed as something extra. It will always be viewed as something extra if it is tagged as green, blue or another color ginned up as a marketing exercise.

We need to reach the point where sustainability performance is built into all products, all business models and services.
Let’s get on with the work at hand and lose the cute taglines.

I agree with Hart and Millstein. A lot of people think that the current destruction we’re seeing is exclusively the result of the financial meltdown, but I believe creative destruction was in play well before the financial meltdown. The meltdown is accelerating this destruction, but innovation is alive and well, and for those who can survive this unprecedented economic environment, they will thrive.

Innovative companies are better positioned to survive beyond the recession. Constraints on carbon, water, materials, etc. will require companies to do more with fewer resources. More importantly they will have the opportunity to create the new products and services that will thrive in this new business environment.

Most large corporations developed in an era of abundant raw materials, cheap energy, and limitless sinks for waste disposal. This is no longer the world we live in. Hart and Milstein argue that “the emerging challenge of global sustainability will catalyze a new round of ‘creative destruction’ that innovators and entrepreneurs will view as one of the biggest business opportunities in the history of commerce.”

Businesses that view sustainability as an opportunity will drive the creative destruction process and build the foundation to compete in the twenty-first century.

Of course the business rationale for sustainability such as increasing brand value, new products and services, risk management and reduced operating costs compelled business such as GE and Wal-Mart to “be green.” However, why has sustainability and living green “suddenly” taken hold in the U.S.?

According to the Fifth Annual Global 100 ranking, the U.S. has overtaken the UK as home to the greatest number of the worlds “most sustainable companies.”  The Global 100 research is performed by Innovest and examines all sectors of 15 countries. Companies are evaluated on the management of environmental, social and governance risks and opportunities, relative to their industry peers.

The U.S. now has 20 Global 100 companies (up from 16 in 2008), followed by the U.K. with 19 (down from 24).

A remarkable transformation!

So what is this “other factor” presented by John Tirman? In essence, it is the American drive to take on the challenges of new frontiers. Tirman’s thesis is that the American psyche is ingrained by a passion to reach out into new geographic frontiers and intellectual challenges.

The American geographic frontier, the American West, was declared closed in 1891 by the U.S. Census Bureau. Since then Americans have searched for other geographic frontiers including the exploration of space and the oceans.

John F. Kennedy expanded this notion of a geographic frontier to conquer with “the mastery of the sky…, the far side of space, and the inside of men’s minds,” the new frontier was applied knowledge and human relations.

So what does this have to do with sustainability? Tirman maintains, and I agree, that our “new frontier” is the reinvention of our industries – using sustainability to drive innovation and create new businesses, products and services. Doing more with fewer resources and solving some of the great global challenges such as access to clean water, low cost/reliable/low carbon energy can and will be met as we recognize that we are only limited by our imagination.

A recent survey of investors by Allianz Global Investors (January 2009) supports the belief that sustainability and innovation is a major factor in global businesses. The survey indicates that nearly eight in 10 U.S. investors (78%) say environmental technology has the potential to be the “next great American industry.”

“Better than nine in 10 survey respondents (91%) believe that finding solutions to environmental problems will be a major issue for years to come, and nearly seven in 10 (69%) say it is important to look at investments in companies that are capitalizing on addressing environmental problems.”

So, this is the next great frontier for U.S. businesses (and global businesses), and to paraphrase John Doerr from Kleiner Perkins, sustainability is the greatest business opportunity of the 21st century.

I have been as objective as I can be in my responses in order to provide the most thoughtful advice and perspective.

My answer is…it depends. Companies who understand the business case for sustainability are not backing off using sustainability to drive revenue and reduce operating costs. Those that do not are letting go as they view ‘green” as discretionary.

In essence, I personally don’t see a slowdown for the companies that “get it.” Getting it means companies have recognized the value in reducing resource use (energy, water and materials) and their carbon footprint. The truly successful companies are at the forefront of deploying products and services that will thrive in a global economy where these resources are constrained.

Several companies in the information technology, chemicals and manufacturing sectors for example are well positioned to reduce their footprint (taking waste out of operations) and to develop product portfolios that help their customers reduce their operating costs.

The IT sector is well positioned to deploy technologies that reduce travel, real estate, energy use (and carbon emissions) for their customers. Suddenly the choice between travel (a cost and carbon issue) and online collaboration seems relatively easy to make.

Products that drive energy and water efficiency are also well positioned with a customer base looking to reduce overall operational costs. Companies such as GE with their ecomagination portfolio of products is well positioned to meet increasing global demand for a move to leaner and more efficient operations.

Finally, the chemical sector has led the movement to increase their own operating efficiency and position products that are more energy efficient (such as home insulation) and more durable over time (requiring less frequent replacement). Companies such as BASF, DOW and DuPont immediately come to mind as leaders.

I believe the choice becomes, do you believe there is business value in sustainability as a business strategy or is it window dressing?

If sustainability is window dressing then this is a good time to jettison your green marketing and communications efforts and hunker down. However, the world will look very differently in the next few years. Carbon will be regulated, and those companies that are more efficient can create innovative disruptive products, and see this as an opportunity will do well.

Don’t be fooled by the recent fall of the price of a barrel of oil to under $40 or so. Remember, the renewable energy investment and production tax credits were renewed as part of the Emergency Economic Recovery Act of 2008 (a.k.a. the “bailout”). Companies are poised to take advantage of these incentives creating new jobs and new markets.

So yes, there will be a slowdown in work for those companies that never really understood the business case and the value to their business with respect to reduced operating costs and increased revenue.

Sustainability has moved from “the right thing to do” to the “right business thing to do.”