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Advantages
How companies succeed in integrating
sustainability goals with growth strategies
A Working Paper from The Boston Consulting Group
Dr. Holger Rubel, Partner and Managing Director at The Boston Consulting Group, Frankfurt
Axel Sommer, Consultant at The Boston Consulting Group, Berlin
December 2007
Preface
The Boston Consulting Group's "working papers" provide insight into everyday consulting practice and internal discussions of strategic topics and positions. They summarize
concepts developed in the context of different individual projects on similar issues, with
the goal of providing a wider audience with the respective findings. BCG working papers
are works in progress and meant to serve as sources of inspiration for deeper specific
discussions of strategic topics.
Working Paper
Content
10
12
15
17
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Fringe
Awareness
Single department
Focus
CEO focus
Selected initiatives
Scope
Broader framework
Added cost
Impact
Compliance
Activities
Eco-advantage
Source: BCG
Working Paper
1 How will the framework conditions for the individual
businesses and activities develop?
2 How will the expectations of relevant stakeholder
groups change?
3 What are the competition's initiatives and positions
and which opportunities are there for differentiation?
5 What organizational changes are required and what
form of cooperation would help to achieve the sustainability goals?
6 What are the key "green" messages and what is the
appropriate communication strategy?
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Brand
enhancement
Political
inuence
Long-term
commitments
New business
partners
Reduced
legal risks
Greenwashing
allegations
Cost savings
New
customers
Following
temp. trends
Bigger "target"
in the public
Attractiveness
on job market
New "green"
markets
Employee
motivation
Angry non-green
customers
Higher costs
"Walk-the-talk"
problem
Low visibility,
"me too" eect
Outside-in view
1 Business context
Environmental future
scenarios
Political/legal situation
Business implications
2 Stakeholder analysis
3 Competitor/peer
benchmarking
Benchmarking scope
Positioning landscape
Dierentiation, strategic
options
Inside-out view
4 Overall direction
Vision
Mission
Strategy
5 Content development
Market opportunities and
commitments
Environmental groups
Implementation and
institutionalization
6 Communications
Key messages
Communication strategy
Communication concept
Source: BCG
Working Paper
It is extremely likely that regulatory measures will be imposed to slow down this increase. This is suggested by discussions already underway, as well as the change in public
2050
80
70
CO2
2030
+ > 100%
60
40
Buildings
Industrial processes
42
Land use
30
Non-CO2
Agriculture
Waste
Energy-related emissions
Industrial processes
All non-CO2 emissions
20
10
0
1990
Transport
Manufacturing & construction
+ ~ 50%
50
Power
2000
2010
2020
2030
2040
2050
Working Paper
400 CO2
(ppmv)
350
300
CO2
Temperature
change (C)
2
-2
-6
-10
250
200
Action
scenario 20502
20%
Temp.
400
350
300
250
200
150
100
50
Additional impacts
(e.g., amplifying
feedback,
non-market impact)
Ca.
1.5%
0.050.5%
adaptation
1% mitigation
Cost of action
5%
2050
Primary impacts
Cost of inaction
80
60
+ > 100%
40
20
0
1990
2000:
~ 42 Gt
2000
2010
2020
2030
2040
2050
states
The Global Warming Solution Act (California): reduce emissions to 1990 levels,
i.e., 25% by 2020 (goal 2050: 80% below current levels)
On city level: Climate initiative of American mayors
...
must improve
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Exhibit 7: In China, all types of pollution have become a big problem and a big market
Investment in the treatment
of industrial pollution
Yuan 100 M
180
600
Waste gas
Waste water
Solid wastes
500
Others
400
140
458
Noise pollution
+27% p.a.
308
300
200
175
188
222
120
100
100
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
In 2005, the market for treatment of industrial pollution was already more than 4B
Source: National Bureau of Statistics of China
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2. Rising expectations:
good profits with a good conscience
The differing perceptions of environmental issues in various marketse.g., in Eastern and Western Europehave
direct impacts on sales projections and marketing strategies. Investor trends, such as the growth in the number
and success of socially responsible mutual funds, are another factor that, despite being still only 10%, can be expected to play a more important role in the future.
Besides differentiating within stakeholder groups, it is important to clarify their expectations, with respect to both
the company and its various markets and regions. Sustainability applies to products, processes, value creation, and
supplier relationships, the role of the company in the public as well as its willingness (and ability) to provide environmental data on its activity, to set credible goals and
accept responsibility for the company's contribution.
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3. Competitive sustainability:
clarity about position and direction
"Green intermediates"
"Environmentalists"
7
5
4
8
9
"Environmental
evaders"
Low
Positioning impact2
High
10
Low
11
High
1 Competitor/peer
10
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124
11
100
13
6
29
Other renewables,
incl. hydro
14
Nuclear
81
Fossil fuels
113
83
2005
Climate prot.
scenario 2030
11
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4. Values management:
corporate integration of "green" goals
al-Mart saves the Planet" was the Fortune magazine teaser for a story about
how an initially "green" PR campaign
by the U.S. retail giant turned into a
commitment reaching ever deeper
into its business processes and became a new strategy. In
an interview, CEO Lee Scott confirmed that what had been
a defensive response to changing consumer expectations
(and recurring complaints) turned into its exact opposite:
the active inclusion of sustainability goals at all levels of
the company and the insight that "there need not be any
conflict between the environment and the economy."
Despite the skepticism with which many react to this transformation from "Saul to Paul," Wal-Mart is nevertheless
serious about its "green campaign." It extends from new
product lines (i.e., the "Baby George" collection made of
organic cotton) to converting its truck fleet and achieving
drastic energy savings of up to 30% in the operation of store
business. The size of the companyWal-Mart is the single
largest user of electricity in the U.S.and the visible implementation of its "green" strategy impose standards that
extend well beyond its industry. They illustrate that as a
corporate goal, sustainability ( just like the ability to innovate) cannot be restricted to a single aspect such as energy
Climate change
Waste
Social/political stability
Population growth
Air pollution
Sustainability of cities
12
Water/soil pollution
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Production/operations
...
Will an environmental
trend signicantly
inuence demand?
...
Source: BCG
Mission
Who are we and what are we going to do over the next 5 years to
make our vision come true?
What can I contribute to success and what is expected from me?
Strategy
Competitive
positioning
Brand
Values
Source: BCG
13
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Thus, every company faces the task of finding specific answers to the question of what levers can be used and where
they can be found. This involves first anchoring sustainability goals in existing business processes and introducing
changes. But beyond that, there is the issue of company
development: What new products or offerings can be developed to promote sustainability activelyand profitably?
Exhibit 13 shows four basic questions to help guide a company's "green transformation."
Exhibit 13: "Four S" approach proposed for the setup of a corporate green transformation
Scope
Scale
Structure
Sequence
Source: BCG
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High
The Global
Compact
Overall inuence
(leadership in
environmental
business)
World Resource
Institute ( WRI)
Combat
Climate
Change
(3C)
US Climate Action
Partnership
(USCAP )
Low
Low
Overall t
(example: focus on climate change)
High
15
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spectrum of other ways how companies can actively approach the challenges.
There is the option of considering a relationship with noncommercial environmental protection organizations (e.g.,
WWO Climate Savers) and deciding whether voluntary
membership or more extended partnership would be
worth taking into account and what consequencesand
what costswould result from it (see exhibit 14). Independent environmental organizations enjoy good reputations
Exhibit 15: If it fits into your strategy, try to profit from the positive image of
environmental NGOs through partnerships
Survey of the New York Times and CBS News
Question: "From the following list, who do you trust most when it comes to environmental issues?"
Environmental protection associations
(Greenpeace, World Wildlife Fund, etc.)
42%
32%
Scientists
Television
27%
18%
Newspapers
15%
13%
Regional/local government
12%
European Union
12%
11%
National government
Teachers at school or university
8%
"Family/neighbors/friends/colleagues"
8%
The radio
Trade unions
Companies
7%
3%
2%
Source: European Commission: Special Eurobarometer "The attitudes of European citizens towards environment," 2005
16
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6. Conveying changes:
communication paths and key
messages
Todayand even more in the years to comesustainability and "green" topics are no longer sideshows at which
citizen initiatives, environmental leaders and disaster-obExhibit 16: Environmental issues can be
sessed media make noisy destructured along five dimensions
mands. No longer treating
sustainability reactively but instead actively promoting it as
Role in public
part of a corporate strategy is
increasingly a precondition for
growth that is healthyin its
dual meaning of offering good
Production/
Products
Suppliers
operations
living and economic conditions
and allowing sound profitmakingand able to maintain
Business fundamentals, environmental reporting,
influential, globally respected
and management systems
and responsible corporate citizens (see exhibit 18).
17
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Examples
Green
image
campaign
GE:
Green
product
promotion
Philips:
Vattenfall:
Topic
leadership,
public
contribution
BP:
Total:
Exhibit 18: Being "green" takes more than good corporate citizenship
How far do you want to go?
Society
Who benets
directly from
change?
Green innovator
Good
corporate citizen
Customer
Planet destroyer
Company
Perceived as threat
Perceived as issue
Perceived as opportunity
18
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