New Bottom Line Volume 5.18 – The Real Eurostyle: Sustainable Development and Competitive Advantage

August 27, 1996

Europe has long been the harbinger of style. In recent years, it’s also been a source of environmental innovation, from the Dutch Green Plan to the German “take back” legislation to Sweden’s EcoCycle Commission and Natural Step.

It seemed time for a “reality check,” so several colleagues and I recently led a 16 day Executive Study Mission on Sustainable Development to Sweden and the Netherlands, to explore the role of sustainable development in some of Europe’s leading companies, with a special focus on how leading Swedish and Dutch firms are gaining competitive advantage by embedding sustainability into their core business strategy. (The trip was a collaborative effort of EKOS Partners, Gil Friend and Associates and Timothy O’Shea and Company, with the cooperation of The Natural Step and Foreningsbanken, and financial sponsorship by two major North American corporations and one federal agency.)

Specifically, we wanted to: understand how leading Swedish and Dutch companies are going beyond compliance to embed sustainability into their core business strategy to gain competitive advantage; examine the integration of sustainability and corporate responsibility into the primary operating systems of the organization; document business results–cost savings, market benefits, and organizational improvements; and examine implementation processes and requirements.

The research team visited a wide variety of outstanding organizations in manufacturing, transportation, construction, petrochemicals, energy, insurance, mutual funds and banking. Three public agencies, The Natural Step’s Sweden headquarters and Netherlands affiliate, Rotterdam Harbor’s Industrial Ecology project, and five academic and consulting institutions rounded out this whirlwind tour.

It’s impossible to condense two weeks into 750 words; but here, from the summary of our comprehensive report, are the threads that seemed to weave through most of these companies:

  • Competitive Advantage Through Sustainability — Sustainability provides a critical lever for competitive advantage, for moving the company down a path toward profitability that can be sustained despite the press of our worsening ecological conditions.
  • Mercenary Integration of Business Strategy and Sustainability — There is a strong financial and business rationale for integrating sustainability into core business strategy and practices.
  • Ripples Through-Out The Supply Chain — Increasing demand for environmental sustainability generates a ripple effect throughout the marketplace and supply chain.
  • Revolution in Design — The real revolution must occur in the design phase: these companies know that end-of-the-pipeline emission controls and cleanup are costly and inefficient, and that what is needed instead are product and process designs for environmental performance.
  • Integration With World Class Management — Companies that have successfully implemented systems for Total Quality Management, Lean Manufacturing, and Management for World Class Competitiveness have a strong foundation from which to incorporate ecologically-based Sustainable Prosperity and Profitability.
  • Sophisticated Planning and Execution For Implementation — Implementation of strategic sustainability requires planning, expertise, and execution capability. It best occurs in the context of powerful organizational systems and processes.
  • Industrial & Economic Transformation — Companies pursuing sustainability believe that they are witnessing the early stages of a new perspective of the world, and are in an accelerating process which is geared to be a far-reaching environmental adaptation of products, processes and services to the laws of nature.
  • Executives Lead The Transformation — CEOs and senior executives are the real change agents, leading the change in consciousness and action. Only the most senior management has enough power to raise fundamental questions about the nature of the business and its operations.

“In the end,” the report concludes, “none of the companies visited is dramatically outperforming some of the best current practices in North America. On the other hand, the knowledge, intensity, and focus on strategic benefit with which these companies were implementing sustainability was inspiring, and should be troubling to North American competitors.

“It was clear that the ecological funnel–the narrowing ‘opportunity space’ between declining ecosystem and resource capacity and rising human resource demand–is real to these organizations. Their customers are demanding environmentally sustainable products and production; their regulators, albeit graciously, are requiring dramatic progress, and the natural systems within which they operate are revealing the strains imposed by our linear industrial system. Thus, the ever-worsening constraints that are impinging on these organizations are experienced viscerally. The result — perhaps paradoxically, probably obviously — is that these constraints are driving tremendous innovation.

“There will, of course, be demand for most of the products and services we enjoy today as we move into a cyclical industrial system. The organizations which figure out how to provide them within the sustainability framework will accrue enormous prosperity. The leaders are the ones seizing today’s opportunities from a platform designed to carry them to a wealthier tomorrow. The faster and more intelligently our organizations move down the sustainable path, the better — for each of us and our companies as individuals, and for all of us as a global community.”

(c) 1996 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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