Sustainability Strategies – When Does It Pay to Be Green?

By Amanda Coffin

Dr. Renato Orsato is a Senior Research Fellow at INSEAD, the international graduate business school based in Fontainebleu, France. With a PhD in Management crowning his academic achievements and fifteen years’ experience as a researcher, educator and consultant, his credentials are impeccable. His sterling credentials should also give the first hint that this book is unlikely to be popular summer beach reading. Having warned off those readers in search of high entertainment value, let’s look at the book’s intended audience.

The key word here is strategies. Dr. Orsato goes out of his way to define a business strategy as a conscious choice that precludes other options. A strategy in his terms is a tactic that sets one business apart from others. Attempts to operate efficiently are not strategies, since such efforts are nearly universal. So who has the vision and authority to set a company’s strategic direction? The uppermost management, the “big picture” people at the top, and they are the book’s target audience.  This is not a how-to manual for managers at the operational level; the author himself affirms that it “is not a guidebook of environmental management or CSR”. Green-at-all-costs environmentalists may find Sustainability Strategies illuminating, if only because it will provide them a glimpse of the complexities and challenges facing their corporate counterparts. Those who dwell outside the business world, however, may feel thwarted by the occasional sentence comprised of 4-5 acronyms. A list of 95 acronyms at the beginning of the book merely spells them out. The reader who doesn’t know the meaning of Blue Ocean Strategy (BOS) remains adrift on the deep blue sea.  An MBA is not prerequisite for profiting from this book, but it is an advantage.

As the subtitle indicates, Dr. Orsato’s goal is to provide managers with tools to analyze the question of what eco-strategies might pay, or – just as important – not pay? He notes that corporate environmentalism to date has been “a religion with too many priests”, and that “prescriptions to become better citizens are done as a quasi-religious dogma.”  Too many decisions are thus based upon unsound business rationale. The author’s response is to provide a framework for discussion and exploration of ways in which companies might profitably go green.

Chapters 3 – 7 discuss five broad categories of environmental strategies.  Under his heading of “Eco-Efficiency”, for example, Dr. Orsato discusses the tactic of forming synergistic pairings of businesses in which one company utilizes the waste of another.  Voluntary green clubs and environmental certifications fall into his category “Beyond Compliance Leadership”. The other three strategic categories are “Eco-Branding”, “Sustainable Value Innovation”, and “Environmental Cost Leadership.”

Within each of these general categories, the author addresses pros and cons of several potential strategies. Although they are far from detailed case studies, the examples he provides are illustrative, extending across multiple industries and countries. (Those starved for more detail will be gratified by the 28 pages of reference notes.)  True to his word, Dr. Orsato presents not answers but a treasure trove of questions. Does it make sense, for example, to pursue ISO14001 certification? If you produce parts for a larger manufacturer who requires the certificate, then yes, of course. Since a wine shop customer is not likelier to buy a bottle with an ISO14001 sticker, however, it gives the vineyard no competitive edge. Does it pay to develop an eco-branding identity? If you have identified a customer base willing to pay a premium for the greener product, yes. Is a symbiotic relationship between two disparate businesses guaranteed to be profitable? Only if the relationship can be established upon trust between the partners, and if local regulations don’t interfere.

Each of these five central chapters concludes with a list of 7-9 bullet- point questions. For every reader, some of the questions will be easily answered and skipped, e.g. “No, my company is not in a position to consider trading carbon credits.” The remaining questions, however, once tagged as relevant, will inspire vast amounts of further research, reflection and discussion. The author notes, somewhat discouragingly, “…only a few strategies and practices generate economic returns, competitive advantages, or new market spaces.” Although he never disparages good corporate citizenship for its own sake, his emphasis is clearly on helping managers find ways to go green profitably. Companies that pursue ill-advised eco-strategies and suffer subsequent losses only serve to reinforce corporate reluctance to explore greater sustainability. Dr. Orsato “would like the transformation to sustainable societies to happen faster”, and this book is his valuable offering to that end.◊