“I have been working and publishing on the topic of sustainability since the 1960s and it is always a pleasant surprise to learn some- thing new. Orsato’s book is such a surprise. It not only provides a well-grounded analysis of the rationale for more sustainable business models, but also provides fascinating stories about people and firms thathavemadetheattempt,somesuccessfully,somenot.” —RobertAyres,EmeritusProfessor,INSEAD “Itisrefreshingtofindabookwithanacademicfoundationthatiseasy toreadandprovidespracticalmanagementinsight.Thisisparticularly significant when dealing with sustainability; a topic that frequently generates more heat than light. Dr Orsato, in Sustainability Strategies, recognises the competitive marketplace, and applies rational business decisionmodelstomeetthechallengeoftranslatingsustainabilityinto successful business strategy. Using his detailed studies of businesses from around the globe he explores the successes and failures of firms embarking along green paths. Insightful questions are posed allowing managerstogettotheheartofenvironmentalstrategyandcompetitive advantage,avoidingthepitfallsofseductionbyfeel-goodfactors.” —RichardChristie,GeneralManager,StrategicDevelopment, RavensdownFertiliserCo-op,NewZealand “Inthelongterm,allbusinessesmustliveinharmonywiththeirenvi- ronments, but how to do so has long been the subject of anecdotal feel-good stories rather than real analysis. This book provides useful models, strategies and examples for charting a sustainable course into thefuture.” —FransCornelis,ManagingDirector,GroupMarketing& Communications,RandstadHolding,Holland “Does it pay to invest in IT? Yes, but only if one combines the invest- mentwithupgradingpeopleandorganizationalcapabilitiesandifone links the investment to innovation. Does it pay to be green? Yes, but again, only if this investment is linked to upgrading capabilities and to innovative business models. That is what this long overdue book shows through a set of convincing case examples put in the frame- work of value innovation. Being green pays and this book tells the readerhowtogoaboutmakinggreeninvestmentsprofitable.” —LukVanWassenhove,HenryFordProfessorofManufacturing,and AcademicDirectoroftheINSEADSocialInnovationCentre “We now know that we cannot interpret history without a bet- ter understanding of ecology. We truly do impact on a resource- constrained world and face major issues. This very worthwhile book isformanagersandacademics,businessleadersandspecialists.Itlinks keyenvironmentalissuesandchoicestohard-nosedmattersofstrategy and competitiveness. It breaks new ground with excellent, insightful examplesfromdifferentindustriesandaveryrealisticapproach.” —AnthonySimon,formerPresidentofMarketing, Unilever;memberoftheBoardofIIIEE,Lund UniversityandofINSEAD’sAlumni “These days we all profess to support sustainability, and many organi- zationswant‘todotherightthing’.Buthowcanmanagersmakedeci- sionstoguidethemthroughthemazeofoptionsforeco-investments, stayfocusedandbecomegreener?Theycanreadthistimelybook!” —StewartClegg,ProfessorofManagementandResearchDirector oftheCentreforManagementandOrganizationStudies, UniversityofTechnology,Sydney,Australia “Orsato’s global background provides a sweeping view of the many types of successful sustainability strategies firms have employed around the world. Each chapter focuses on one of Orsato’s sustain- ability strategies, and each strategy comes with a useful checklist of questionsmanagersneedtoaddressbeforepursuingit.” —CharlesJ.Corbett,ProfessorofOperationsManagementand EnvironmentalManagement,UCLAAnderson SchoolofManagement,LosAngeles,US “As we confront climate change and move toward the low-carbon economy, this book will be an invaluable guide for executives who seek to align environmental and social investments with the strategy oftheenterprise.Orsatohastakenahighlystrategicapproachandcre- ated a systematic, theoretically based but practical guide as to where to make investments for sustainability strategy which will both ben- efit the planet and enhance competitiveness. The argument is clearly laidout,logicallydevelopedandpresentedinclear,accessibleEnglish. I recommend it highly for reading by both executives and students in MBAstrategycourses.” —DexterDunphy,VisitingProfessor,UniversityofTechnology,Sydney, Australia SUSTAINABILITY STRATEGIES INSEADBusinessPressSeries J.FrankBrown THEGLOBALBUSINESSLEADER PracticalAdviceforSuccessinaTransculturalMarketplace LourdesCasanova GLOBALLATINAS LatinAmerica’sEmergingMultinationals DavidFubini,ColinPrice&MaurizioZollo; MERGERS Leadership,PerformanceandCorporateHealth ManfredKetsdeVries,KonstantinKorotov&Elizabeth Florent-Treacy COACHANDCOUCH ThePsychologyofMakingBetterLeaders RenatoJ.Orsato SUSTAINABILITYSTRATEGIES WhenDoesItPaytoBeGreen? JamesTeboul SERVICEISFRONTSTAGE PositioningServicesforValueAdvantage Jean-ClaudeThoenig&CharlesWaldman THEMARKINGENTERPRISE BusinessSuccessandSocietalEmbedding RolandoTomasini&LukVanWassenhove HUMANITARIANLOGISTICS SUSTAINABILITY STRATEGIES When Does It Pay to Be Green? Renato J. Orsato ©RenatoJ.Orsato2009 Softcover reprint of the hardcover 1st edition 2009 978-0-230-21298-5 Allrightsreserved.Noreproduction,copyortransmissionofthis publicationmaybemadewithoutwrittenpermission. Noportionofthispublicationmaybereproduced,copiedortransmitted savewithwrittenpermissionorinaccordancewiththeprovisionsofthe Copyright,DesignsandPatentsAct1988,orunderthetermsofanylicence permittinglimitedcopyingissuedbytheCopyrightLicensingAgency, SaffronHouse,6-10KirbyStreet,LondonEC1N8TS. Anypersonwhodoesanyunauthorizedactinrelationtothispublication maybeliabletocriminalprosecutionandcivilclaimsfordamages. Theauthorhasassertedhisrighttobeidentified astheauthorofthisworkinaccordancewiththeCopyright, DesignsandPatentsAct1988. Firstpublished2009by PALGRAVEMACMILLAN PalgraveMacmillanintheUKisanimprintofMacmillanPublishersLimited, registeredinEngland,companynumber785998,ofHoundmills,Basingstoke, HampshireRG216XS. PalgraveMacmillanintheUSisadivisionofStMartin’sPressLLC, 175FifthAvenue,NewYork,NY10010. PalgraveMacmillanistheglobalacademicimprintoftheabovecompanies andhascompaniesandrepresentativesthroughouttheworld. Palgrave®andMacmillan®areregisteredtrademarksintheUnitedStates, theUnitedKingdom,Europeandothercountries. ISBN 978-1-349-30334-2 ISBN 978-0-230-23685-1 (eBook) DOI 10.1057/9780230236851 Thisbookisprintedonpapersuitableforrecyclingandmadefromfully managedandsustainedforestsources.Logging,pulpingandmanufacturing processesareexpectedtoconformtotheenvironmentalregulationsofthe countryoforigin. AcataloguerecordforthisbookisavailablefromtheBritishLibrary. AcatalogrecordforthisbookisavailablefromtheLibraryofCongress. 10 9 8 7 6 5 4 3 2 1 18 17 16 15 14 13 12 11 10 09 This book is dedicated to the memory of my beloved mother, Olinda Romani Orsato (Nov. 10, 1939–Dec. 3, 2004), an unconditional supporter of all my intellectual journeys, whose ability to love and accommodate conflict inspired my optimism – that a sustainable world is indeed possible. This page intentionally left blank CONTENTS ListofFigures xi ListofAcronyms xii Preface xv Acknowledgements xxi PART I FUNDAMENTALS 1 When Does It Pay to Be Green? 3 GreeningasaCommitment 5 GreeningasaCoreCompetence 9 TheFrontiersofCorporateEnvironmentalism 13 MethodologicalChallengesinWhenItPaysToBeGreen 17 Conclusion 21 2 What Are Sustainability Strategies? 23 WhatSustainabilityStrategiesarenot 24 CompetitiveAdvantage:PositioningandCapabilities 26 CompetitiveEnvironmentalStrategies 29 BeyondCompetition:SustainableValueInnovation 36 TheSustainabilityStrategiesPortfolio 39 Conclusion 40 PART II COMPETITIVE ENVIRONMENTALISM 3 Eco-Efficiency 45 FromResourceProductivitytoEco-Efficiency 46 Eco-EfficiencyattheFirm:LeanThinking 48 Eco-EfficiencybeyondBorders:Industrial Symbiosis 51 Eco-EfficiencyintheSkies:CarbonCredits 55 WhenEco-EfficiencyPays 59 Conclusion 63 ix