Green is in, read on

  • Business
  • Saturday, 30 May 2009

Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage

Authors: Daniel C. Esty and Andrew S. Winston

Publisher: John Wiley & Sons

Billion Dollar Green: Profit from the Eco Revolution

Author: Tobin Smith, with Jim Woods

Publisher: John Wiley & Sons

GREEN is in, and so is the idea of companies and investors gaining an advantage over competitors and making money by responding to the rising interest in all things environmental.

Given the deepening concerns over issues such as climate change, pollution and depleting natural resources, it is a mistake to dismiss the so-called green wave as a fad. This means businesses have to change how they do things because increasingly, their stakeholders expect them to do their part to save the planet.

So what can companies do to come out on top amid this focus on the environment? And what should investors know in order to spot the likely winners in this “eco revolution”? Green to Gold is packed with answers to the first question, while Billion Dollar Green attempts to address the second.

First published in 2006, Green to Gold is available from January this year in a revised and updated paperback edition. The fresh material – a new preface, a section with frequently asked questions, and updated stories – captures the latest developments, but even without this, the book is still relevant and comprehensive.

It is no accident that Esty, a Yale professor who specialises in environmental law and policy, and Winston, a consultant on green business, have chosen a title that echoes Jim Collins’ business classic, Good to Great.

The two books are similar in that they examine companies that are on the right track and explain what differentiates them from the rest. They offer examples for other companies to emulate, and pointers on how to go about doing that.

Good to Great relies on certain statistical yardsticks to identify the top-notch companies, whereas Green to Gold’s approach is less quantitative because it is harder to measure the impact of environmental strategies across the board.

But that does not diminish the value of Green to Gold. If you need help in figuring out how your company can go green, the book is a fine start. For that matter, it is essential reading if you need to be convinced that it is important for businesses to care about the fate of the world.

In the first three chapters, covering the green wave’s various forces and drivers, the authors present a compelling business case for environmental thinking.

They argue: “Environmental missteps can create public relations nightmares, destroy markets and careers, and knock billions off the value of a company. Companies that do not add environmental thinking to their strategy arsenal risk missing upside opportunities in markets that are increasingly shaped by environmental factors.”

Esty and Winston tell us that companies that act upon this will be one step ahead of their competition.

“Environmental leaders see their businesses through environmental lens, finding opportunities to cut costs, reduce risk, drive revenues, and enhance intangible value,” they wrote.

“They build deeper connections with customers, employees, and other stakeholders. Their strategies reveal a new kind of sustained competitive advantage that we call Eco-Advantage.” The rest of the book is largely devoted to ways and means to build Eco-Advantage, And there is a lot to draw from.

Green to Gold is generous with lessons, principles, strategies and tools. Based on interviews with key executives, it distils the learning and experiences of multinational corporations such as Ikea, Wal-Mart, BP, 3M, Chiquita and General Electric.

Some points are obvious and well-known, but many others are truly enlightening. For example, the chapters on inspiring an Eco-Advantage culture and on why environmental initiative fail, are filled with insightful and useful observations and conclusions.

Because it is a realistic, thorough and thoughtful primer on a weighty subject, Green to Gold should be on the must-read list of every corporate leader. The greening of business is a delicate yet critical area; a sturdy playbook can make all the difference.

Billion Dollar Green is written for investors who are looking for opportunities that come with the green wave. To do that, they must first understand the transformations that are taking place in business because of the spreading awareness about environmental issues.

As with Green to Gold, Billion Dollar Green starts by outlining the catalysts of the green wave and the growth potential of the green market.

Smith, the founder of an investment research outfit called ChangeWave Research, then splits up the book according to 11 green sectors (such as transportation, solar and wind power, energy infrastructure and cleaner water) to look at their respective possibilities, problems and key players.

Not surprisingly, he quotes liberally from the findings of the surveys done by his firm to back up his assertions on future demand and trends.

As an introduction to the business hotspots in the “eco revolution”, Billion Dollar Green is adequate. Even so, the author is not particularly persuasive when elaborating on the promise of the green sectors. He frequently argues that the small market share of green businesses means there is huge potential.

Is it really that simple? What about the possibility that some green technologies may never take off commercially because they are too expensive and impractical?

The other goal of the book – to help readers find “the best green investing opportunities available” – does not get sufficient attention either.

This is definitely not a step-by-step guide. The six-page final chapter provides some advice on the construction of a green portfolio and Smith names public companies (and some private ones) that are involved in green business. And that is about it.

There is little specialised knowledge on how to pick stocks that ride the green wave. Or can it be that there is no such thing? After all, good stocks have similar investment attributes, no matter what their business. If that is so, Billion Dollar Green is not really much of an investment guide, is it?

Furthermore, because it only talks about American businesses, its value to Malaysian investors is awfully limited.

For instance, the biggest environmental play in the Malaysian stock market centres on plantation companies because of the potential of palm-based diesel. Yet, the chapter on biofuels is principally about the ethanol market.

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