The Profit In Sustainability: Five Steps for Corporate Real Estate
The Dynamic
That new model of enterprise, networked and virtual, more flexible, more efficient and innovative, has the capacity to OUTPERFORM the traditional industrial organization – the hierarchical model designed so well for MATERIAL productivity, but NOT so well for a KNOWLEDGE based economy.
But the Networked Virtual Organization has one other characteristic: it reflects a broader shift that speaks to the issue at hand this morning, to overcome the ACHILLES HEEL of the industrial economy – our dependence on fossil fuels and finite resources – and to shift our economy to a NEW CORE RESOURCE, one through which we can CONTINUE to grow, SUSTAINABLY.
To understand how, let me take you from this room – so full of possibilities – to a place that is even MORE creative and productive – to the MOST DYNAMIC networked virtual enterprise on the planet: the rainforest.
Ten years ago, Mitsubishi CEO Tachi Kiuchi and I boarded a helicopter in
Looking over the miles of green that stretched out in all directions below us, it was easy to imagine the rainforest must be a place of great resource abundance. But it’s not.
The rainforest is constantly short of resources. Its soils are thin. Minerals are leached quickly by the rain. Even sunlight and water are scarce at the forest floor, blocked by the dense canopy above.
Yet despite this scarcity – or because of it – the rainforest is the MOST EFFECTIVE value creating system in the world.
- It is home to two-thirds of our biodiversity
- It is a catalyst for continuous improvement AND breakthrough innovation, for both evolutionary and revolutionary change
- And it is the kind of place that created ALL ADVANCED LIFE, even our own.
No smart business would ignore a system that had that capacity.
We had come to the rainforest because of a conflict. Protesters from the Rainforest Action Network and others were boycotting Tachi’s company, Mitsubishi Electric. They were scaling buildings, locking themselves to cars and equipment at auto and electronics shows, all to attract attention to their cause.
It wasn’t fair, in a way – but Tachi’s attitude was that this was simply a signal from the marketplace, that the company needed to learn from and respond to.
So during that first trip to the rainforest, we learned what companies could do to help save it. But we learned something more, something we hadn’t expected: We learned that the most valuable resource in the rainforest is not the trees we can extract. It is the lessons we can learn.
By taking LESSONS out of the rainforest, we can leave the TREES in the rainforest, and begin to run our companies and our economy on a more ABUNDANT resource, one that need never be in short supply: the creative capacities that we find inside ourselves and the world around us, at every moment.
Those creative capacities lie latent within every human being, every community, every company, and throughout nature, in every living system. They are the capacities that enable living systems to develop and prosper, not just for a few generations, but for HUNDREDS of generations, or longer. They are the source of what we call SUSTAINABILITY.
When we first began to hear the term sustainability, no one knew what it meant. It seemed more a philosophy, a worldview, or a set of principles, than a specific set of to-do’s.
But it was a concept that BOTH sides, in the battles between corporate and environmental interests, began to cautiously embrace. It seemed to suggest a POSITIVE path, beyond conflict, toward opportunity to make more money, more environmentally.
As a result of our first trips to the rainforest, and the discussions and debates and negotiations with stakeholders that followed, Mitsubishi Electric and Mitsubishi Motors made a decision that proved to be good for the environment, and strategically selected to give them competitive advantage: they become the first companies to adopt a policy that they would not use paper or timber products from old growth forests.
It was a controversial step. But having set the precedent, 400 other companies followed Mitsubishi’s lead.
That began to shift market demand for timber and paper. The combined buying power of 400 companies meant that timber harvesters now had a chance to capture a new market niche – to become the first major providers of sustainably harvested timber.
So not long thereafter, we received a call from top executives at one of those timber companies, MacMillan Bloedel, the largest timber company in
After that meeting, we worked to identify strategic ways that MacMillan Bloedel could gain market advantage, AND tap the movement for sustainable forestry.
Next, we brought together top executives, with a hand-selected set of stakeholders: Greenpeace, Sierra Club, Rainforest Action Network. A Boston Consulting Group representative. A forestry scientist from the
There were no formal expectations set. Yet within two days, our group outlined a plan under which the company could profitably make a commitment to a breakthrough set of standards and forest practices. Months later, the company’s board adopted the plan outlined that weekend.
MacMillan Bloedel’s announcement took its competitors by surprise. It set new standards for sustainability, and drove the competitors to make new commitments of their own. But MacMillan Bloedel was the biggest corporate winner. The value of the company increased, it became more attractive, and Weyerhaeuser ultimately bought it.
Not a single law was passed. It was all done in the free market.
Yet the CEO called it “the Future of Forestry.”
And the director of the environmental alliance called it “the biggest step forward in North American forest protection in 17 years.”
Today, the concept of sustainability is spreading quickly beyond the extractive industries like oil, mining, and forestry.
As it does, the REAL ESTATE industry is undergoing a shift that is similar to the one we saw at timber companies.
Before the past few years, environmentalists and developers were almost always in combat – one side cast as “pro-growth” and the other as “no growth.”
A few innovative developers took chances, and tried to design more sustainable buildings and communities. Some succeeded, but many failed. In 1990, I first worked with a commercial developer who wanted to build a model sustainable industrial park in
That didn’t exactly INSPIRE other developers to follow. But nevertheless, some did. And eventually, BOTH sides began to change. They stopped asking WHETHER sustainability could be profitable. They started asking HOW it can be profitable.
From those first pioneers, SYSTEMS began to emerge – whole system approaches that could lead to BETTER buildings, and better communities, that provide MORE of what people want, and cost LESS, economically, socially, and envtally.
To make those systems PRACTICAL, new acronyms began to be heard. Here are FIVE acronyms for you to remember:
The LEED standards – leadership in energy and environmental design – a smarter way to design buildings.
Smart Growth – an alternative to the pro-growth/no-growth battles – a smarter way to design whole communities, so there is the right mix of housing, jobs, retail, and transit.
The Dow Jones Sustainability Index and FTSE4 Good – indexes that rate the sustainability and social responsibility of companies.
And the GRI – Global Reporting Initiative – a standardized global system for measuring and reporting the so-called “triple bottom line:” the economic, social, and environmental impacts of a company.
These are among the TANGIBLE and PRAGMATIC forms that this INTANGIBLE and blurry concept of sustainability takes, as it moves from theory to practice.
But what, practically, can we in this room do, to take advantage of the sustainability opportunity, to tap the profit in sustainability?
How can you find out if your CEO, and the C-suite, support the concept?
How can you find the sustainability champions in your company?
How can you avoid mistakes, and make sure sustainability is a path that will benefit the company, and your role within it?
To understand, let me give you a short Sustainability Primer – the case both For and Against sustainability.
SEE POWERPOINT SLIDESHOW: SUSTAINABILITY PRIMER
To understand the LARGER business case for sustainability, consider how sustainability is aligned with LARGER global changes.
Because – as the CoreNet study concluded – we stand at an Inflection Point in History
Three forces are converging to drive change in every sector of industry. Those three forces are:
- The decline of petroleum
- The rise of information
- Globalization – the emergence of a single global economy, a vast NETWORKED VIRTUAL ECONOMY that draws together EVERY community, company, nation, religion, ethnicity – sometimes peacefully, sometimes not.
Let’s consider the first of these forces: the decline of petroleum.
For more than a century, petroleum has been the fundamental resource driving the industrial world, the resource we used to achieve a 40-fold improvement in labor productivity in the past century.
But this is the last century of petroleum. By that I mean this is the last century that petroleum will be our fundamental growth driver. No matter whose studies you believe, the optimists or the pessimists, this is it. There WILL BE A TRANSITION – to a different fundamental resource – THIS CENTURY.
Think about what that means. To each of our companies. Today we serve the richest 600 million on earth. Tomorrow, 6 BILLION MORE, in
We won’t do it with petroleum. The opportunities lie elsewhere.
GLOBALIZATION means that they are now acutely aware of the differences in conditions that divide the developed and developing world.
That will force this shift – we WILL convert to a new fundamental resource. There is no physical way to avoid it.
That sounds ominous – and it could be. But it doesn’t HAVE to be.
Now last century, as I said, we did what seems impossible: we increased LABOR productivity by a factor of 40.
In the next century, to support 9 billion people, we need to achieve a Factor 10 improvement in RESOURCE productivity. That means getting 10 times as much value from every drop of oil we use.
What resource will we use? That question brings us to the THIRD force: Information Technology.
The fundamental resource that powers IT isn’t petroleum. It is knowledge.
Consider the microchip. It’s made of silica – sand – the most abundant material on earth. But that isn’t where it gets its value.
The value of a microchip is its design, the unseen artistry. It is the pattern we inscribe on the silica – an intelligent design, embedded knowledge, from which we gain the power to create, record, and transfer MORE intelligent designs.
So KNOWLEDGE is the new fundamental resource.
Now, you can’t eat knowledge, or plug your computer into a book. We still need food, energy, and materials, just like always.
But KNOWLEDGE gives us the capacity to stretch those resources, MUCH further than we ever have before.
The reason lies in the nature of knowledge.
Knowledge resources differ from material resources. If I give you this glass, you have it, and I don’t. But if I give you knowledge, then you have, and so do I. Further, you can take that knowledge, combine it with your own to create even more, and give it back to me.
So knowledge – the information conveyed in design – is a REGENERATIVE resource. The more you use, the more you have.
THIS INTERPLAY between knowledge resources and physical resources is the KEY to sustainability. Material resources decline with use. But knowledge resources expand. The trick is to harness knowledge to drive EFFICIENCIES and INNOVATIONS.
Think about it: If we have a 100 year supply of petroleum left, and we increase our energy efficiency 1% per year, then in 10 years, we will still have a 100 year supply. In 100 years, still a 100 year supply. In 1000 years, still 100 year supply.
That efficiency reflects the flow of INFORMATION into the economy, continuously making petroleum less and less central, less and less important.
That is where ideas like the LEED standards, Smart Growth, Dow Jones Sustainability, FTSE4Good, and the Global Reporting Initiative come in.
These are systems that can help enable companies to get FEEDBACK from the broader economy, to drive ADAPTATIONS, that result in both CONTINUOUS IMPROVEMENTS and BREAKTHROUGH INNOVATION.
They are the systems that DRIVE the creation of Networked Virtual Organizations – that is, of sustainable companies.
How can you do that? I have five steps to suggest. But before I get to them, let me tell another story from the rainforest, to help illustrate the power of these steps.
Five years ago, Tachi Kiuchi and I brought a group of corporate executives to the
Around every turn in the winding river, birds were standing, perched almost like statues, in the mangrove swamps along the edge of the water.
Mangroves are pioneers. Ecologists call them r-Strategists – r for reproduction. Their survival strategy is simple: high fertility, and fast growth.
To support that growth, the mangroves have voracious appetites. They are highly consumptive. In fact, pioneers are among the least efficient plants on earth. But they are effective – they do their job: the mangroves create a swamp.
Now, oddly enough, a
But the mangroves have served their ecological purpose. They lay down a web, an outline – they create homes, niches, secure places where myriad creatures begin to appear. Insects, fish, plants, and the birds we saw along the river that feed on them. These remain even after the mangrove move on.
The mangrove to me is a bit like today’s industrial economy. The pioneer industrial economy exploded across our landscape, consuming resources voraciously, according to the classic r-strategist system: fast growth, high fertility. Economies of scale, to replicate identical products by the billions.
Like the mangrove, industry’s pioneer phase will be short-lived. But if we learn the lesson of the mangrove swamp, we can now harness the fabric laid down by industry, and begin to cultivate a richer, more diverse and resilient human ecosystem as well.
The marketplace can do that – if we let it.
Think about the LAST global energy crisis, in the 1970s. The sudden price shocks sent signals streaming through the global economy, driving thousands of technical innovations and product refinements and lifestyle shifts that drove down our need for energy. In the two decades that followed, we improved our energy productivity by 30-40% in the developed world – we generated up to 40% more value from every unit of energy we used.
We have already begun. The emergence of LEED, Smart Growth, DJSI, FTSE4Good, and the Global Reporting Initiative are examples of TODAY’S marketplace shift. They are SIGNALS that tell us how to begin to reshape our companies and communities gradually, to take on more sustainable forms, instead of closing our eyes to feedback, and being forced later to make changes that are much more painful.
So DON’T imagine that sustainability is just a laundry list of TO DO’s, to impose on already overburdened companies. Sustainability is a FRAMEWORK that can help us evolve our companies into more profitable, resilient forms.
How can you comfortably and gradually find the profit in sustainability? The companies of
SEE POWERPOINT
I. What Do We Do? FIVE STEPS
a. Assessment
i. LEED, DJSI, FTSE4Good, Smart Growth, GRI
ii. Can be done all at once
iii. Bring in an interdisciplinary team
iv. Benefits: Objective performance, Team Commitment, Surprising Finds (GM)
b. Executive Report Card
i. Letter grades
ii. Core action steps
c. Planning
i. Align with BUSINESS strategy
ii. GM = Fuel Cells
iii. HP = E-Inclusion
iv. Guess 1/3 of combined criteria relate to Real Estate
d. Report Real Estate performance via GRI Framework
i. Ford got more credit for building – you’d think stopped SUVs
e. Most important: engage with stakeholders
i. Long term, as important a group as customers
ii. Long term, as important a function as marketing
iii. Not year-to-year, but over 3-5 year span
iv. GM: Impacting CONSIDERATION phase of buying cycle
END OF SLIDESHOW
We learned something else in the forest
The business challenge – and business opportunity – of this century is to find a way to provide for 9 billion people the quality of life that just 600 million enjoy today.
We’re not going to do it by just burning more petroleum.
But the creative capacities of PEOPLE – networked together globally – can walk us step by step from today’s CONSUMER economy, toward a more SUSTAINABLE one.
When we think of ourselves as consumers, in a world of limits, we might feel guilty, and wonder how we can DIMINISH ourselves on the earth, have LESS of an impact, leave LESS of a mark.
But when we think of ourselves as CREATORS, as growers of knowledge, we turn that around. We wonder how we can create something of lasting value – how we can innovate, improve.
When we awaken from our own OLD ECONOMY mindframe – the idea that we are just consumers – and see OURSELVES as creative living systems, we will have moved beyond the old economy, and taken our biggest step toward sustainability. The rest is just implementation.
That is why the path to the Networked Virtual Enterprise, and the Sustainable Enterprise, is the same path.
We have just begun that journey. THE MISSION OF BUSINESS today – is to continue to walk that path, toward an economy like the rainforest, that nourishes a rich array of diverse cultures, peoples, and values, one enriched by this diversity and complexity.
What we learned from the rainforest is easy to understand. As our chairman Tachi Kiuchi says, we can use less, and have more. Consume less, and be more. It is the ONLY way. For the interests of business, and the interests of environment, are not incompatible. They are east and west, north and south, Islam and Christendom, nature and nurture, economy and ecology, mind and spirit -- two halves.
Only together can we make the world whole.
