If you ask 100 people to name a “green company,” many would rattle off solar and other renewable energy companies, environmentally friendly non-toxic cleaning supplies manufacturers, or perhaps organic farm delivery services.
In reality, the “green economy” is far more broad. According to the World Resources Institute, a “Green Economy can be thought of as an alternative vision for growth and development; one that can generate growth and improvements in people’s lives in ways consistent with sustainable development. A Green Economy promotes a triple bottom line: sustaining and advancing economic, environmental and social well-being.”
The initial rise of “Green Economy” was fueled by tremendous interest from a rising tide of conscious consumers who pushed it into mainstream status today, pressuring companies increasingly to seek ways in which to operate responsibly and in an environmentally sensitive manner. And now we stand at the precipice of the next stage of that evolution; a broader “Impact Economy” is forming around the idea of businesses leveraging their inherent power not just to abate but to elevate the human condition and restore the environment. But business owners who seek to take their businesses from “green” to “impactful” must be prepared to do the hard work, both internally and externally, to get there.
This evolution is no small task, given that even the line between “traditional” and “green” has grown indistinct. While companies like Tesla and Whole Foods loudly broadcast their embedded values, there are a host of unlikely green heroes, such as industrial conglomerate GE, whose Ecomagination unit has invested billions into clean tech initiatives, resulting in almost $200 billion in revenues since the program’s inception. Likewise, furniture maker IKEA has made significant investments in energy efficiency, pushing low-cost LED lighting to its millions of customers worldwide, and is now preparing to sell solar panels and bicycles.
But it takes far more to participate in this new phase of the “Impact Economy.” Where it was once possible for firms to make minor incremental improvements in social and/or environmental responsibility and claim a “green” status, such actions are now likely to be regarded by the public as “greenwashing.” And yet the desire for a green halo effect is so great we see companies courting reputational disaster in efforts to seem green. The VW emissions scandal, which now threatens to spread throughout the automotive industry, has tarnished the reputation of a storied brand (VW) and a technology (diesel), but also fed into the growing skepticism of business in general. The scandal serves as a stark reminder of the catastrophic risks in looking for shortcuts to social responsibility.
The surer path to credibility in the Impact Economy is through the often uncomfortable work of engaging organizational values in a deep and meaningful way. At our Socially, Environmentally, and Ethically Responsible (SEER) Business Strategy program at the Pepperdine Graziadio School, we teach that successful businesses identify four critical macro-values – Corporate Social Responsibility, Environmental Stewardship, Financial Strength and Product/Service. Rather than operate in isolation, these values function as a system with many areas of overlap and interaction. Values-based decision-making is rarely, if ever, guided by one of the four values individually, and values can often conflict.
Every entrepreneur who has started his own business knows that it is a labor of love that reflects equal measures of vision, commitment, exhaustion, and dedication -- but they enjoy a relative luxury in being able to infuse their values into their company with little conflict. At their best, entrepreneurs create market winning solutions in full alignment with their values. However, such values-based innovation can prove more challenging as entrepreneurs scale, and can be especially difficult to initiate in mature organizations. And yet, as companies as diverse as Patagonia, Nike and IKEA demonstrate, embracing the broad set of stakeholder values - with all the inherent tensions that implies - can generate exciting engagement and creativity within the organization, and fierce loyalty and respect from external stakeholders, all leading to long-term financial success.
By all means, pursue a green agenda. But start with an honest self-assessment. While social impact and values-based innovation are harnessed together, companies of any size can practice responsible, meaningful and powerful entrepreneurism that can improve the world -- and the bottom line.