Sustainability has become a competitive battleground. Companies like Starbucks and Darden Restaurants are building green credentials to compete for employees. Firms such as Enterprise Holdings are implementing sustainability strategies to differentiate themselves from competitors. Dell is gunning to become the “greenest technology company on the planet.” News Corp. recently crowed about becoming the first carbon-neutral media company. There is no question that many companies bring an intensely competitive spirit to the pursuit of sustainability, a point that others have also noted.
Rankings and Metrics Foster Competition
Corporate sustainability ranking schemes fan these competitive flames. Companies eagerly pour over the Newsweek Green Rankings and anxiously track their standing on the Dow Jones Sustainability Index (DJSI). Executive bonuses are sometimes tied to a company’s rank in a key index. One sustainability executive told me he’d get fired if his company slipped in the ranks of the DJSI.
To be sure, the ranking schemes have their problems. To begin with, there are too many of them. Consultancy SustainAbility identified some 108 different corporate sustainability rating schemes. And many executives complain that some of the major ratings’ methodologies are opaque, producing ratings without clear indications of what a company needs to do differently to improve its score. Pay-to-play rumors–that some ratings companies accept consulting fees to help corporations improve their standing–foster skepticism among some sustainability execs as well.
Nonetheless, all this competition helps drive innovation and encourages companies to adopt advanced methods to improve sustainability (such as life cycle assessment, to name one, the subject of the next Green Research study) and is ultimately good for people, the planet and for profits.
Competing on Goals Is a Mixed Bag
Public sustainability goals are another dimension of competition. Many companies publish operational targets such as greenhouse gas emissions reduction, landfill waste avoidance, reduction of water use, and so on. Public goals motivate employees and make them accountable. And they are messages to the marketplace that can spur competitors to match or exceed the goals announced by a rival, all positive from the point of view of the broader sustainability agenda.
But some companies refrain from publishing their goals specifically to avoid inciting a competitor to respond with a more ambitious goal. And publishing goals doesn’t suit companies with secretive corporate cultures such as Apple, which has received harsh criticism for failing to publish a sustainability report and is notably reticent about its goals. The last time it published a major set of sustainability goals was 2007.
Sustainability Motivates Collaboration, Too
Sustainability isn’t all about competition, of course. Collaboration also plays an important role in helping sustainability executives reach their objectives. Sustainability leaders recognize that collaborating with customers and suppliers can be critical. And there are numerous examples of companies collaborating with competitors to address sustainability challenges.
It’s not uncommon for competitors to come together to set standards for their mutual benefit, for instance. In organizations ranging from the Roundtable on Sustainable Palm Oil (RSPO) to StEP (“Solving the E-Waste Problem,” whose focus is electronics recycling), competitors routinely work closely together to tackle problems that are too large for any one company. I recently attended an event at Dell headquarters (at Dell’s expense) at which a Dell exec told me the company works with Hewlett-Packard “daily” on recycling standards. (More on what I learned at Dell below.)
Sustainability execs have even come to each others’ rescue. I recently heard the story of a sustainability executive at a consumer packaged goods company who was getting heat from an NGO. Knowing his competitor had had dealings with that NGO in the past, the executive called his counterpart at the other company and received some friendly advice on managing relations with the NGO.
Pragmatism Guides Choices on Competition and Collaboration
At the end of the day, companies will compete where they feel it’s in their interest to compete and collaborate when that path is more effective. Collaboration is the order of the day when the scope of the problem is too big for one company to solve on its own, or where a company sees the costs outweighing the competitive benefit. On the topic of conflict minerals, for example, Dell set out not only to work on standards with the electronics industry but with the jewelry, aerospace and other industries as well.
Even in areas that lend themselves to a collaborative approach, Dell carves out competitive advantage where possible by withholding valuable proprietary innovations. Despite its extensive collaboration on recycling standards, for example, it developed its own protocols for auditing the performance of its recycling partners and is not sharing those protocols with its competitors. It also developed its Reconnect Partnership, which allows consumers to drop off unwanted used Dell products to participating Goodwill stores, in secret, to gain maximum public relations benefit at launch and presumably to avoid interference by competitors.
Which Is More Effective for Reaching Sustainability Objectives?
Industry is adopting a mix of competitive and collaborative strategies in pursuit of greater sustainability. As we’ve seen, in areas where a company can obtain competitive advantage at a manageable cost, it tends to compete. Where costs are high and competitive advantage is elusive, companies tend to collaborate. The chart below depicts the strategic choices companies face.
But what of the class of sustainability challenges that carries great potential competitive benefits but is too costly for any one company to pursue (the upper right quadrant in this chart)? Market forces alone may not be effective at directing resources toward the solutions to those problems. Perhaps that is where government steps in. Government support for electric vehicles is a case in point.
Where do you draw the line between competition and collaboration in pursuit of your sustainability goals?
David Schatsky, principal of Green Research, is a consultant and adviser to businesses on a range of topics, from clean tech markets to corporate sustainability best practices to business strategy in the Internet and information technology markets. Having spent almost a decade as an analyst and senior executive at JupiterResearch, a leading research and advisory firm focused on Internet business, Schatsky is an expert in business strategy, industry analysis and market research.