Daniel Esty and Andrew Winston’s Green To Gold is a detailed look at the link between environmental strategy and competitive advantage. It is an ambitious book, seeking to reframe green issues as a way for businesses to drive success. This contrasts with green choices being things that are done out of a sense of duty. I appreciate this overall framing. It isn’t always possible to do well by doing good, but let’s point out when this happens to encourage more of it.
Leveraging Big Firm’s Power For Good
Big firms have the potential to do some bad things on a massive scale. It isn’t hard to think of examples of big firms with negative impacts (see below). Still, the power of companies can also be used to make the world better. The authors note that large firms can move their supply chains. A big firm buying more environmentally friendly items can change a market. Their suppliers have to get on board, this shows it is possible, and so the whole industry can change for the better. This certainly doesn’t always happen but Esty and Winston are glass-half-full sort of people. They want more of the good things and think the best way to get this is to note that good things do already happen in the world.
Environmental Regulation And Better Business
Smart companies do not see regulators as enemies. Instead, they work with governmental officials to shape incentives and create successful environmental programs.
Esty and Winston, 2009, Page 78
It is important to note that working with regulators need not be about self-sacrifice on the part of the “smart companies”.
Stricter laws impose costs on the less-prepared competitors and potentially could keep them out of a market space for years on end.
Esty and Winston, 2009, Page 119
Regulation can set up barriers to competition. If you are the only firm that can meet strict new environmental standards life is pretty good. The authors mean it when they say that there is significant potential competitive advantage in being green. Going green can be a good business.
Environmental Strategy And Competitive Advantage
A thing that is really noticeable about the book is the wealth of details. There are checklists here, an eco-advantage toolkit there, and numbered items at all points in between. For example, they give 20 critical stakeholder groups. This is business advice from serious consultants, not just business press fluff. (Although making lists a bundle of laughs can be tricky and the authors don’t always succeed. I admit some fluff books are more fun to read).
Excellent points crop up regularly in the book. They note the power of reputation and why it is so important to be consistently committed. Like Humpty-Dumpty once a reputation is lost it is almost impossible to put it back together.
Practical Advice
Still, they are practical — no one can expect perfection.
One thing companies shouldn’t do is only look at the savings from environmental policies. These savings do occur but there is much more than, for example, less water usage and lower water bills from green policies. You must ensure everyone in the company knows the benefits of going green. This might be the higher-quality staff who were hired, the discerning customers gained, and the regulatory ire avoided, because of the environmentally friendly policies.
Budgeting matters, and the authors suggest sometimes it helps to pair projects when looking for budgetary approval. The idea is to ask for an overall green strategy (which might be profitable across the board), rather than a bunch of smaller initiatives some of which might be very profitable and others not and so only some approved. Looking at it as a holistic strategy allows more green projects to be embraced than would be embraced by looking at each element individually.
Time Gets Us All
A book written at a point in time, particularly one that is largely positive, runs big risks from the passage of time. This is a perfect example of that. The authors are positive about big companies that are embracing green topics. The best of these ‘waveriders’ is BP. This may have made a lot of sense in 2009 when they wrote it. BP was actively trying to rebrand and move away from oil. Had it made progress? Even in 2009, many observers would have said not enough, but the authors wanted to applaud BP’s successes rather than note the problems that remain. They were very glass half-full. Then came the Deepwater Horizon oil spill in 2010. After this, saying anything nice about BP’s environmental policies looks very dated. Knowing about that disaster makes the authors’ positive view a bit jarring.
To be fair, the disaster did reinforce a few of the authors’ key points. Reputation once destroyed is really hard to get back. In 2024 it would still be hard to be quite so positive about BP’s environmentalism. Also, their point about big firms having to take a lead still holds. There were other firms involved in the Deepwater Horizon disaster but these weren’t as well known as BP. If you are a well-known firm, you need to make sure everyone associated with you does the right thing. BP might not be responsible for 100% of the blame but as the biggest player, they were the ones who consumers, and politicians, largely associated the disaster with.
I don’t want to leave on a negative note. Esty and Winston’s thesis and ideas are important and useful. Do read the book while understanding that time eventually makes us all look a bit worse for wear.
Read: Daniel C. Esty, Andrew Winston (2009) Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, Wiley
