A THOUSAND SHADES OF GREEN A THOUSAND SHADES OF GREEN SUSTAINABLE STRATEGIES FOR COMPETITIVE ADVANTAGE Pieter Winsemius and Ulrich Guntram Earthscan Publications Ltd, London London • Sterling, VA First published in the UK and USA in 2002 by Earthscan Publications Ltd Copyright © Pieter Winsemius, 2002 All rights reserved ISBN: 1 85383 846 2 Typesetting by PCS Mapping & DTP, Gateshead, UK Printed and bound by Creative Print and Design (Wales), Ebbw Vale Cover design by Danny Gillespie Cover illustration: A Thousand Shades of Green, Hannah Winsemius For a full list of publications please contact: Earthscan Publications Ltd 120 Pentonville Road London, N1 9JN, UK Tel: +44 (0)20 7278 0433 Fax: +44 (0)20 7278 1142 Email: [email protected] http://www.earthscan.co.uk 22883 Quicksilver Drive, Sterling, VA 20166–2012, USA A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Winsemius, Pieter. A thousand shades of green : sustainable strategies for competitive advantage / Pieter Winsemius and Ulrich Guntram. p. cm. Includes bibliographical references and index. ISBN 1-85383-846-2 (pbk.) 1. Industrial management–Environmental aspects. 2. Environmental management. I. .Guntram, Ulrich, 1954- II. Title. HD30.255.W56 2002 658.4'08–dc21 2002004805 Earthscan is an editorially independent subsidiary of Kogan Page Ltd and publishes in association with WWF-UK and the International Institute for Environment and Development This book is printed on elemental chlorine-free paper CONTENTS List of Illustrations vii About the Authors ix Acronyms and Abbreviations x Introduction xii PART I THE CHALLENGE 1 The environmental management challenge 3 Changing stakeholder needs 4 Evolving corporate responses 11 2 Towards an environmental management endgame 22 Scanning the environmental horizon 22 Selecting the preferred endgame 34 3 Understanding the environmental arena: government and NGOs 37 The policy-making process 37 The changing responses of key environmental players 41 4 Defining the path to the endgame: making value creation choices 54 Generating options 56 Assessing options for action 82 5 On the eve of change 89 Validating the endgame 89 Assessing change preparedness 91 Preparing for change 111 vi A Thousand Shades of Green PART II INTEGRATED RESPONSE 6 Implementing an integrated environmental management strategy 121 Initiate 124 Orchestrate 126 Activate 138 Motivate 143 7 Developing partnerships 149 Selecting a partnership type 150 Leading the partnering process 158 PART III PROACTIVE RESPONSE 8 Proactive environmental management: building inspired corporate communities 173 Telling a story 174 Understanding the corporate pyramid of needs 180 Tailoring the story to stakeholder needs 186 9 Developing a corporate partnership culture 201 Facilitating contract renegotiation 202 Anchoring renegotiated contract terms 208 Getting started with ABC 215 Epilogue 221 Notes 223 References 239 Index 247 LIST OF ILLUSTRATIONS FIGURES I.1 Differentation space xiv 1.1 Development stages in corporate responses 12 1.2 Determinants of environmental response 19 2.1 Defining the environmental endgame 23 2.2 Triple-focus methodology 24 2.3 Major pollution themes 26 2.4 Integrated chain management 27 2.5 Environmental profile illustration: public utility 28 2.6 Sorting environmental issues 35 3.1 Policy life cycle 38 3.2 Range of cultures 42 3.3 NGO focus 45 3.4 Development stages in environmental policy planning 49 4.1 Backcasting to medium-term strategy 55 4.2 Win–win options 58 4.3 Beat-the-alternative options 64 4.4 Jump-ahead options 76 4.5 Market share of energy sources: Shell’s scenario for dynamics-as-usual 80 4.6 Environmental profile of an option: substitute pinewood for PVC window frames 84 4.7 Option mapping: PVC window frames 85 4.8 Prioritizing options 87 5.1 McKinsey’s 7-S framework 93 5.2 Response categories and internal drivers for change 96 5.3 Functionally-oriented companies less confident about strategic skills 103 5.4 Over-estimating the environmental burden 106 5.5 Insecurity of pivotal job holders 109 6.1 Top management instruments for making changes 124 6.2 Contours of an environmental management programme 125 6.3 STE support for integrated environmental management 128 6.4 Hierarchy of environmental management skills 133 viii A Thousand Shades of Green 6.5 Activation through annual planning process 141 6.6 Steep learning curves 147 7.1 Partnership formation process 159 8.1 The corporate pyramid of needs 181 9.1 Two dimensions of thrill building 202 9.2 Contours of ABC programme 218 TABLES 4.1 Checklist for manipulating environmental management valves 57 BOXES 4.1 Profiling current risk/liability exposure 66 4.2 Weyerhauser Company and Georgia-Pacific 68 5.1 The Brent Spar 108 5.2 The origins of the concept of the personal contract 112 6.1 The instrument panel for change management 122 6.2 Don’t run before you can walk 132 6.3 Organizational learning 145 8.1 Satisfying basic needs 189 8.2 Providing social infrastructure 191 8.3 Addressing social belonging 193 8.4 Dealing with workplace diversity 194 8.5 The role of business in sustainable development 198 9.1 From personal visions to shared visions 204 9.2 Learned behaviour 209 9.3 Organizing a party 217 ABOUT THE AUTHORS Pieter Winsemius is a former scientist, politican and environmentalist and senior partner with McKinsey & Company. As The Netherlands’ Minister of the Environment from 1982 to 1986, he developed the framework for the renowned Dutch Green Plan, which builds on the self-responsibility of business. Upon returning to McKinsey, he assumed joint leadership (with Ulrich Guntram) of its global Environmental Practice, where he worked on sustainability issues with a variety of leading corporations and government organizations. From 1988 to 1998 he also served as chairman of the Dutch Society for Nature Conservation which, with nearly 1 million members, is one of the largest non-governmental organizations in the world. Mr Winsemius is the author of numerous publications on environ- mental management and policy-making, including Guests in Our Own Home (1990) and, with Jim MacNeill and Taizo Yakushiji, Beyond Interdependence (1991). He is a board member of the World Resources Institute, a trustee of the Shell Foundation and, at the time of writing, serves on the environmental advisory councils of Dow Chemicals, Unilever and the Association of the Dutch Chemical Industry, among others. On behalf of the Sustainable Challenge Foundation he is a professor of the management of sustainable devel- opment at Tilburg University in The Netherlands. Ulrich Guntram is chief operating officer of AXA Art Insurance, the competence centre for AXA’s worldwide art insurance activities. Since joining the AXA group in 1996 he has held several board positions within the German subsidiary AXA Colonia. In early 2000, Dr Guntram was mandated by AXA’s management board to lead a pan- European initiative for building financial portals on the internet and create a new company, AXA European e-Services, based in Paris. Before moving into financial services, Dr Guntram was managing director of a medium-sized company conducting empirical research in marketing and sociology. Prior to this he spent ten years with McKinsey & Company as a management consultant in Düsseldorf, New York and Stuttgart. As a McKinsey partner he co-founded, with Pieter Winsemius, its Environmental Practice and was co-leader of the European Information Technology and Systems practice. ACRONYMS AND ABBREVIATIONS 3E effectiveness, efficiency and equity 3P Pollution Prevention Pays ABC aspirations based change CAP community advisory panel CDM clean development mechanism CEO chief executive officer CFC chlorofluorocarbon CFO chief financial officer CO2 carbon dioxide DCF discounted cash flow DFD design for disassembly DFE design for environment DFR design for recycling DFRE design for reusability DSD Duales System Deutschland EAB external advisory board EAP environmental action plan EDF Environmental Defense Fund (US) EHS environment, health and safety EMP environmental management programme EMS environmental management system EOA environmental options assessment EPA Environmental Protection Agency (US) ET emissions trading GHG greenhouse gas GMO genetically modified organism ICOLP Industry Cooperative for Ozone Layer Protection ICT information and communications technology IIMD International Institute for Management Development IRDP Integrated Rural Development Programme IUCN World Conservation Union IVA Royal Swedish Academy of Engineering Services JI joint implementation kWh kilowatt hours LCA life cycle analysis Acronyms and Abbreviations xi NGO non-governmental organization nimby not in my back yard NPV net present value NOx nitrous oxide OECD Organisation for Economic Co-operation and Development PFC perfluorocarbon PLC policy life cycle PR public relations PVC polyvinyl chloride R&D research and development RCL Real Change Leaders SERA safety, environment and regulatory affairs SMART Save Money And Reduce Toxins SO2 sulphur dioxide SOx sulphur oxide STE strategy–technology–environment TCF totally chlorine-free TQM total quality management UN United Nations UNCED United Nations Commission for Environment and Development UNEP United Nations Environment Programme VOC volatile organic compound WBCSD World Business Council for Sustainable Development WMO World Meteorological Organization WOW Wipe Out Waste WRAP Waste Reduction Always Pays WWF World Wide Fund for Nature INTRODUCTION This book is directed at today’s business leaders. Thirty or forty years ago, its subject matter – excellence in environmental management – would, at best, have meant little or nothing to their predecessors; at worst, it would have been laughed at. Today, top managers who scoff at ‘soft’ environmental issues are as rare as flat-earthers. The nature of the environmental debate as we know it in the West began to take shape during the last quarter of the 20th century, when our societies were rudely awakened to the reality of the damaging impact of human activities on our environment. Air and water pollu- tion were the issues that produced the loudest wake-up calls.