Planter’s Peanuts as a Model of Innovation

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Environmental Quality Management / DOI 10.1002/tqem / Winter 2007 / 17

“It’s up to us to

use our platform

to be a good citi-

zen. Because not

only is it a nice

thing to do, it’s a

business impera-

tive. . . . If this

wasn’t good for

business, we probably wouldn’t do it.”

—Jeff Immelt, CEO, General Electric1

Where Profit Meets the Common Good Business leaders with a superficial under-

standing of sustainability think of it as a distrac-

tion from their main purpose, a chore they hope

can be discharged quickly and easily. “We’re re-

sponsible corporate citizens, so let’s write a check

to the United Way or allow employees to volun-

teer for the local cleanup drive or food kitchen

and get back to work.”

This approach reveals a fundamental misun-

derstanding. Sustainability is not about philan-

thropy. There’s nothing wrong with corporate

charity, but the sustainable company conducts its

business so that benefits flow naturally to all

stakeholders, including employees, customers,

business partners, the communities in which it

operates, and, of course, shareholders.

It could be said that the truly sustainable

company would have no need to write checks to

charity or “give back” to the local community,

because the company’s daily operations wouldn’t

deprive the community, but would enrich it. Sus-

tainable companies

find areas of mutual

interest and ways to

make “doing good”

and “doing well”

synonymous, thus

avoiding the im-

plied conflict be-

tween society and

shareholders.

The vision of a company that renews society

as it enriches its shareholders may seem remote,

and for most companies it is. But we propose a

way to think about your company’s current oper-

ations that might suggest an avenue for moving

in that direction.

Think about sustainability as the common

ground shared by your business interests (those

of your financial stakeholders) and the interests

of the public (your nonfinancial stakeholders).

This common ground is what we call the sustain-

ability sweet spot: the place where the pursuit of

profit blends seamlessly with the pursuit of the

common good (see Exhibit 1). The best-run companies around the world are trying to iden-

tify and move into their sweet spots. And they are

developing new ways of doing business in order

to get there and stay there.

General Electric (GE) has long been consid-

ered an environmental scofflaw. It fought the

U.S. Environmental Protection Agency (EPA) for

years, trying in vain to avoid responsibility for

Andrew W. Savitz, with Karl Weber

The Sustainability Sweet Spot

How to achieve long-term

business success

Andrew W. Savitz, with Karl Weber18 / Winter 2007 / Environmental Quality Management / DOI 10.1002/tqem

polluting the Hudson and Housatonic Rivers with

over one million pounds of toxic waste.2 Jack

Welch, GE’s CEO and chairman, personally led

the attack, which included arguing over settled

science and challenging the entire federal haz-

ardous waste cleanup program as unconstitu-

tional, tactics widely considered irresponsible.

When Welch retired, many of the flattering

reviews referred to GE’s environmental record as

Welch’s one black eye. Now Jeffrey Immelt, his

successor, appears to be plotting a new course—

not because he and the company are born-again

environmentalists, but because being pro-envi-

ronment is smart business for GE.

In 2005 GE announced an initiative called

Ecomagination. It is a powerful example of find-

ing and working toward the sweet spot. It’s “ac-

tion that goes beyond compliance to benefit both

society and the long term health of the enter-

prise,” according to Ben Heineman, GE’s senior

vice president of law and public affairs.3

Ecomagination’s main thrust is to create clean

technology to help GE’s customers reduce their

environmental impacts, primarily carbon emis-

sions. GE has announced it will double its annual

investment in clean energy technologies to $1.5

billion by 2010 and will also double its revenues

from eco-friendly products during the same time

period.4

Addressing climate change presents GE with a

huge business opportunity. GE’s wind energy

business has already quadrupled in revenues

since it was acquired in 2002 from Enron, and its

fuel-efficient jet and locomotive engines and nat-

ural gas turbines are proving to be essential to

customers needing additional ways to reduce

their emissions.5 GE has sold over $1 billion

worth of wind and natural gas turbines to China

since 2003.6

GE has found a significant overlap between its

business interests and protecting the environ-

ment. And to expand the area of overlap, the

Exhibit 1. The Sustainability Sweet Spot Exhibit 2. GE’s Sustainability Sweet Spot

THE SUSTAINABILITY

SWEET SPOT

THE SUSTAINABILITY

SWEET SPOT

Environmental Quality Management / DOI 10.1002/tqem / Winter 2007 / 19The Sustainability Sweet Spot

idea of healthy products sounds like a stretch for

a company famous for its sugary sodas and salty

snacks, think again. Having purchased Tropicana

and Quaker Oats, PepsiCo has made the healthy-

product sweet spot the fastest-growing segment

of PepsiCo’s North American product portfolio by

far, with 2004 revenue growth about twice that of

its traditional products. Social responsibility has

thus helped PepsiCo earnings per share grow at a

prodigious 13 percent in 2004 and to surpass

Coca-Cola in market cap for the first time in his-

tory.9

PepsiCo is working toward other sweet spots.

Its business goal of cost reduction overlaps with a

series of environmental improvements to reduce

energy, waste, and packaging (Exhibit 4). Its goal of risk reduction overlaps with steps to address

long-term water supply and quality concerns for

communities in which its plants are located and

for its crucial suppliers (such as farmers who sup-

company appears to be saying that the time has

come for climate change regulations that will ul-

timately impose carbon restrictions on businesses

in the United States.7 GE is thus working to

nudge the circle representing stakeholder con-

cerns closer to the circle representing its business

interests. The bigger the overlap, the better for GE

(see Exhibit 2). GE’s Ecomagination embodies the observa-

tion by Ian Davis, managing director of the man-

agement consulting firm of McKinsey & Com-

pany, that “large companies need to build social

issues into strategy in a way that reflects their ac-

tual business importance.”8 GE has also spent

large sums of money advertising Ecomagination,

creating some suspicion that the campaign will

be more hype than strategy—but that remains to

be seen.

The overlap between winning increased mar-

ket share and supporting healthier lifestyle habits

is a sweet spot for PepsiCo (see Exhibit 3). If the

Exhibit 3. PepsiCo’s Sweet Spot (Products) Exhibit 4. PepsiCo’s Sweet Spot (Environmental Processes)

THE SUSTAINABILITY

SWEET SPOT THE

SUSTAINABILITY SWEET SPOT

Andrew W. Savitz, with Karl Weber20 / Winter 2007 / Environmental Quality Management / DOI 10.1002/tqem

ply corn for Frito-Lay brand chips) (Exhibit 5). These responsible actions will benefit the envi-

ronment and PepsiCo’s neighbors and business

partners even as they increase shareholder value

and put the company’s operations on a more

sound, sustainable footing for decades to come.

The sweet spot embodies the literal meaning

of “sustainability,” making your company viable

for the long term by managing according to princi-

ples that will strengthen rather than undermine

the company’s roots in the environment, the so-

cial fabric, and the economy. A business that oc-

cupies the sustainability sweet spot (or that

strives to fit as much of its activities into that fa-

vored zone as possible) should have real long-

term advantages over its rivals.

Imagine a company that historically earns its

profits from a finite resource whose extraction

and use degrades the environment—providing oil

or coal, for example, which exist in limited sup-

plies and generate harmful pollution. Such a busi-

ness isn’t sustainable in the long run; either the

resources or the social tolerance for pollution on

which it relies will eventually run out. Costs will

rise as supplies dwindle and as social concerns

translate into higher taxes, additional cleanup

costs, and increased liability.

If it were possible for such a company to shift

its business so as to eventually supply clean and

renewable energy (such as wind or solar power) or

conservation services while maintaining or even

increasing revenues, that would be a responsible

and profitable choice.

This is not a hypothetical case. British Petro-

leum (BP) adopted this long-term strategy when

it rebranded itself “Beyond Petroleum” in 1998.

BP has since reduced greenhouse gas emissions

from its own production processes (saving an es-

timated $650 million thanks to improved effi-

ciencies along the way) and has invested heavily

in alternative energy sources, including solar

power. BP is not yet sustainable by any means,

but it is acting responsibly as it marches toward

an ever larger sweet spot.

A Map to the Sweet Spot Every action you take in business has two

components: an impact on profits and an impact

on the world. This can be represented by a four-

celled matrix with two axes, which represent

profitability and social benefit (see Exhibit 6). The northeast corner of the map is conceptu-

ally similar to the sweet spot, where stakeholders’

interests and corporate interests overlap. Your

goal is to get as much of your business activity

into that quadrant as possible. You want every

business decision to push you north and east. The

value of the map emerges when you use it to plot

the location of various businesses or activities in

order to determine ways to move them in a

northeasterly direction, or to generate ideas for

quantum strategic change.

Exhibit 5. PepsiCo’s Sweet Spot (Risk Management)

THE SUSTAINABILITY

SWEET SPOT

Environmental Quality Management / DOI 10.1002/tqem / Winter 2007 / 21The Sustainability Sweet Spot

Country Lanes is a tiny U.K. tour company

that offers day trips and holiday travel, by bicycle

or on foot.10 Patrons must somehow find their

way to the rendezvous point at which the tour

begins. Country Lanes recently redesigned all its

tours to begin at railway stations, with the result

that 85 percent of their customers now use rail

travel to get there. This has eliminated a million

miles of automobile travel and 328 tonnes of car-

bon dioxide emissions per year. Business is up be-

cause customers now find it easier to get to the

tours. Country Lanes also supports local business

by encouraging its customers to spend money on

snacks, drinks, and lunches from neighborhood

pubs and shops.

When Toyota revealed its intention to create a

new form of gasoline-electric car, one that would

capture and use braking energy, the company was

derided as an environmental do-gooder that

would surely lose money. “We wondered if any-

one would want one,” admitted Takehisa Yae-

gashi, the senior Toyota engineer now known as

the father of the hybrid.11 Today Toyota can’t

manufacture the Prius fast enough to meet de-

mand. The car is peppy, durable, and easy to drive,

and gets up to 52 miles per gallon of gas in city

driving. Waiting lists are 16 months long in some

parts of the United States and Japan. Over 120,000

of the hybrids were shipped to the United States

in 2005, more than doubling the previous year’s

figure, and hybrid versions of Toyota’s Highlander

and Lexus SUVs have entered the market.

Toyota now views hybrids as a central part of

its strategy to become the number-one car manu-

facturer in the world and break into the Big Three

in the United States. The company recently an-

nounced that it will focus on selling one million

hybrid vehicles a year worldwide (including

600,000 in the United States) by early in the next

decade.12

Toyota made two bets at once: that both the

price of gas and concern about air pollution

Suppose you own a business or manage part of

one that is currently located in the northwest quad-

rant (profitable but not sustainable). Is it possible to

devise ways of moving the business eastward (more

sustainable) without moving south (less prof-

itable)? DuPont has done so by moving from the

chemical business toward the soy protein business

without sacrificing revenues or profits. If you have

a business in the southwest corner (neither prof-

itable nor sustainable), can you find ways to base a

turnaround on moving both north and east?

Your goal should be to develop strategies and

change operations to move toward the northeast

corner of the map. For example, an energy com-

pany that profits from burning dirty coal could de-

vote its short-term research dollars toward clean-

coal technology and its long-term effort toward a

future in which most energy is derived from such

renewable sources as solar, wind, hydroelectric, and

geothermal power. Both initiatives embody migra-

tion toward the northeast corner of the map, where

both profitability and social benefit are high.

Both small and large companies have

changed their businesses to move further toward

the northeast corner of the sustainability map.

Exhibit 6. The Sustainability Map

Andrew W. Savitz, with Karl Weber22 / Winter 2007 / Environmental Quality Management / DOI 10.1002/tqem

would rise. Winning either bet might have made

the car a success, but Toyota appears to have won

both, making the Prius a worldwide phenome-

non. The car is both good for Toyota’s sharehold-

ers and good for the environment—a remarkable

example of finding the sweet spot.

“Prove It!” Many businesspeople find the simple logic be-

hind the sweet spot compelling, but others re-

quire proof that sustainability creates financial

benefits. They seek an

assurance that’s as

good as gold—incon-

trovertible evidence

that they can and will

make more money

practicing sustainable

management than

they will with good

old-fashioned, short-term, profit-only thinking.

Let’s start then with the testimony of those

that help companies create gold. Goldman Sachs,

Deutsche Bank, Credit Suisse, Banco do Brasil,

and 15 other multinational investment banks re-

cently reported the following:

[We] are convinced that in a more global-

ized, interconnected and competitive

world the way that environmental, social

and corporate governance issues are man-

aged is part of companies’ overall manage-

ment quality needed to compete success-

fully. Companies that perform better with

regard to these issues can increase share-

holder value by, for example, properly

managing risks, anticipating regulatory

action, or accessing new markets, while at

the same time contributing to the sustain-

able development of societies in which

they operate. Moreover, these issues can

have a strong impact on reputation and

brands, an increasingly important part of

company value.13

Empirical evidence includes the share prices

of companies listed in the Dow Jones Sustainabil-

ity Index and the FTSE4 Good Indexes, two list-

ings of sustainability companies that have out-

performed various market indexes. Companies

that belong to the World Business Council for

Sustainable Development outperformed their re-

spective national stock exchanges by 15 to 25

percent over the past three years. From 1999

through 2003, the Winslow Green Index of 100

“green-screened” companies increased in value

by over 73 percent, whereas the members of the

comparable benchmark Russell 2000 Index in-

creased by less than 17 percent.14

“Companies pursuing growth in the triple

bottom line tend to display superior stock market

performance with favorable risk-return profiles,”

according to John Prestbo, president of Dow

Jones Indexes. “Thus sustainability becomes a

proxy for enlightened and disciplined manage-

ment—which just happens to be the most impor-

tant factor that investors do and should consider

in deciding where to buy a stock.”15

Exemplary environmental performance, long

considered a proxy for good management, is now

being touted by investment advisers as a measure

of value—perhaps of hidden value, the savvy in-

vestor’s favorite kind. UBS, the Swiss-based in-

vestment bank, recently opined, “Environmental

performance indicators appear to be a possible in-

dicator of strong operational performance. Strong

environmental indicators in the presence of

below-average profitability may signal an invest-

ment opportunity, in our view.”16

It cannot be proved that sustainability is the

reason behind the strong market performance of

the companies that have embraced it, but when

similar results continue year after year, the correla-

tion implies causation. (As Henry David Thoreau,

Exemplary environmental performance, long considered a proxy for good management, is now being touted by investment advisers as a measure of value.

Environmental Quality Management / DOI 10.1002/tqem / Winter 2007 / 23The Sustainability Sweet Spot

now labeled “sustainability” into the one more

simply known as “good business.”

Three Ways Sustainability Enhances Your Business

Whether you find or even look for the sweet

spot, the principles of sustainability can improve

the management of your business in three funda-

mental ways—by helping you protect it, run it,

and grow it.17

Protecting the Business Protecting the business includes reducing risk

of harm to customers, employees, and communi-

ties; identifying emerging risks and management

failures early; limiting regulatory interventions;

and retaining the explicit or implicit license to

operate granted by government or by the com-

munity at large.

Biotechnology giant Monsanto made a con-

certed push into the

field of bioengineering

crops in the mid- to

late 1990s. Monsanto’s

genetically modified

(GM) seeds were sup-

posed to offer farmers

enormous competitive

benefits—corn con-

taining natural insecti-

cides, and soybeans able to withstand potent weed

killers. Monsanto had a powerful sweet spot

proposition: that its pioneering efforts would give

the company a leading position in a major new

marketplace and provide a powerful new weapon

in the battle against world hunger. “Monsanto is in

a unique position to contribute to the global fu-

ture,” declared biodiversity advocate Peter Raven.18

But Monsanto executives failed to work with

stakeholders in their development of the new ini-

tiative—a core principle of sustainable business.

Monsanto dismissed early critics of GM products

the American essayist and philosopher, famously

remarked, “Some circumstantial evidence is very

strong, as when you find a trout in the milk.”)

Those seeking the gold standard should recall

that the cases for such strategic initiatives as Total

Quality Management, Six Sigma, and reengineer-

ing were not proved before thousands of busi-

nesses invested billions of dollars in them. These

concepts won widespread support because of case

studies that illustrated their effectiveness, en-

dorsements from well-known business leaders,

their resonance with the zeitgeist of their times,

and eventually (in some cases) because of finan-

cial results. The initial evidence supporting those

programs was largely anecdotal, but, as Travis

Engen, recently retired CEO of Alcan, once ob-

served, the plural of anecdote is data.

Like most business strategies, sustainability is

not a guarantee of financial success. It requires

commitment, resources, and a change of direction,

which entail costs and risks. The real question, as

with all important business decisions, is this: Is

sustainability a good bet for me and my company?

Sustainability is quickly becoming main-

stream. Socially responsible initiatives, from the

Prius to natural foods, from green buildings to

eco-friendly clothes and cosmetics, from wind

power to the beneficial reuse of industrial waste,

have migrated from being considered heretical, to

impractical, to visionary, and finally to common

sense—usually as soon as they begin to turn a

profit. Eventually they become part of business as

usual, their controversial origins all but forgotten.

When Ralph Nader first began to argue that

cars could be made much safer, he was dismissed

by Detroit and most of the public as an agitator

and a nutcase. Now all car companies strive for

increased safety, and some, such as Volvo, have

made it the centerpiece of their marketing.

Can a sustainable business strategy enhance

profitability? Of course, but when it does, it usu-

ally travels on our mental maps from the space

Whether you find or even look for the sweet spot, the principles of

sustainability can improve the management of your business in

three fundamental ways—by helping you protect it, run it, and grow it.

Andrew W. Savitz, with Karl Weber24 / Winter 2007 / Environmental Quality Management / DOI 10.1002/tqem

as antitechnology fanatics and failed to mount a

concerted effort to educate consumers about the

science behind genetic engineering.

Monsanto consequently found itself beset by

a variety of attacks. A British scientist claimed

that rats eating GM potatoes failed to grow prop-

erly, and a Cornell University study published in

1999 appeared to show that Monarch butterfly

caterpillars died after ingesting pollen from bio-

engineered corn. The accuracy of both claims was

quickly challenged, but public fears about

“Frankenfoods” now seemed to be bolstered by

science.

Several European supermarket chains, as well

as American natural-food retailers, announced

that they would re-

move GM foods from

their shelves, and

major food companies,

such as baby-food

maker Gerber, vowed

to keep their products

free of GM ingredients.

Embarrassingly, even

the staff canteen at Monsanto’s own U.K. head-

quarters announced it would ban GM food from

its menu “in response to concern raised by our

customers.”19

Nonengineered soybeans began to sell at a

premium over their modified counterparts—a

sign that the market was rejecting GM foods. By

the end of 2000, the stock market valued Mon-

santo’s $5 billion-a-year agricultural business unit

at less than zero, despite billions the company

had invested in highly advanced science over the

previous decade.20

Today the entire biotech industry is still strug-

gling to win acceptance for bioengineered prod-

ucts in Europe and around the world—largely be-

cause of Monsanto’s early failure to consider the

demands of sustainability before launching this

major business initiative.

Running the Business Running the business includes reducing costs,

improving productivity, eliminating needless

waste, and obtaining access to capital at lower

cost.

Eco-efficiency is a basic component of sus-

tainability that applies to running your business.

It means reducing the amount of resources used

to produce goods and services, which increases a

company’s profitability while decreasing its envi-

ronmental impact. The underlying theme is sim-

ple: pollution is waste, and waste is anathema be-

cause it means that your company is paying for

something it didn’t use. Given the clarity of this

logic, it’s amazing how few companies have dili-

gently pursued eco-efficiency.

Consider the financial benefits from eco-effi-

ciency enjoyed by STMicroelectronics (ST), the

Swiss-based firm that is one of the world’s largest

manufacturers of semiconductors, with 2003 rev-

enues of $7.2 billion and close to 46,000 employ-

ees worldwide. ST earmarks 2 percent of its an-

nual capital investments for environmental

improvements. The resulting efficiencies have

trimmed the company’s electricity use by 28 per-

cent and its water use by 45 percent, with cost

savings of $56 million in 2001, $100 million in

2002, and $133 million in 2003. Energy conser-

vation projects pay for themselves within 2.5

years on average—an extraordinary return on in-

vestment. CEO Pasquale Pistorio notes, “This

proves the validity of the stance we have taken

for years: ecology is free.”21

Growing the Business Growing the business includes opening new

markets, launching new products and services,

increasing the pace of innovation, improving

customer satisfaction and loyalty, growing mar-

ket share by attracting customers for whom sus-

tainability is a personal or business value, form-

ing new alliances with business partners and

Running the business includes reducing costs, improving productivity, eliminating needless waste, and obtaining access to capital at lower cost.

Environmental Quality Management / DOI 10.1002/tqem / Winter 2007 / 25The Sustainability Sweet Spot

largest soap producer in India, which has

achieved sales of over $2.5 billion through inno-

vative production, packaging, and marketing

techniques that reach into many of the smallest

and poorest villages in the subcontinent. This is

pure sweet spot, creating profit while providing

access to needed and affordable consumer goods,

thereby stimulating economic growth and im-

proving the quality of life.

It takes ingenuity and creativity to find ways

to reach customers at the bottom of the pyramid.

But the effort is worthwhile, not just because of

the sizeable profits to

be earned in the short

run but because of

even greater long-term

benefits to companies

that win the patronage

and loyalty of this

huge group of con-

sumers at the start of

their march toward

middle-class status—a transition that bottom-of-

the-pyramid programs will help accelerate.

Additional Business Benefits of Sustainability

So far we’ve focused on the hard side of the

case for sustainability—the direct and measurable

costs, primarily financial, of ignoring your stake-

holders and their concerns, and the economic

benefits that companies are enjoying by manag-

ing themselves or producing goods and services

to assist others in the pursuit of the principles of

sustainability.

There’s also a soft side, one that turns on op-

portunities and risks that may be harder to quan-

tify: company reputation, employee satisfaction,

customer goodwill, and the value of being con-

sidered a leader in your industry.

Wegmans, a privately held grocery chain with

sales of $3.4 billion in 2004, was named the best

other stakeholders, and improving reputation

and brand value.

Sustainability is a powerful engine of eco-

nomic and business growth, driving innovation

and new technologies. In 2004, $5.8 billion was

spent on “green building” initiatives, the design

and construction of eco-friendly, healthy, and ef-

ficient buildings.22 Entire new businesses have de-

veloped in support, including energy-saving

home appliances, low-flow toilets, ultraefficient

heating, solar heating and electricity, and super-

efficient cooling and insulation systems.

The sustainability mind-set is also helping

companies think creatively about how to gain

access to vast new markets that were once dis-

missed as unprofitable or even impossible. Sig-

nificant businesses are being built at the “bottom

of the pyramid,” among the four billion people

living on less than $2 per day, who collectively

represent enormous untapped buying power.

Companies that figure out how to sell goods and

services to the poor will reap huge rewards in the

decades to come and create new opportunity for

those in need.

C. K. Prahalad, the business consultant who,

along with Professor Stuart Hart, has studied op-

portunities at the bottom of the pyramid, ex-

plains how companies that respect the rights,

needs, and interests of the poor can create new

business models that in turn create economic op-

portunity for business and society.23

Prahalad cites Casa Bahia, a Brazilian retailer

with sales of over $1.2 billion and over 20,000

employees, which operates exclusively in the

favelas, or shantytowns, where the poorest people

of Brazil are found; Annapurna Salt, a Unilever

brand that has captured a significant share of the

market in India, Ghana, Kenya, Nigeria, and

other African nations with small, low-priced

packages of iodized salt specifically designed to

help combat rampant iodine deficiency disorder

among the poor; and Hindustan Lever Ltd., the

The sustainability mind-set is also helping companies think creatively

about how to gain access to vast new markets that were once

dismissed as unprofitable or even impossible.

Andrew W. Savitz, with Karl Weber26 / Winter 2007 / Environmental Quality Management / DOI 10.1002/tqem

company to work for in America by Fortune mag-

azine.24 The company offers higher-than-average

wages, high-end training programs, college tu-

ition assistance, and, perhaps most important,

jobs designed to empower workers to make deci-

sions to help customers. Wegmans’ commitment

to these practices is expensive: the company

spends 15 to 17 percent of sales on labor costs as

opposed to the industry average of 12 percent.

Wegmans has also spent over $54 million in tu-

ition assistance over the past 20 years.

But employee satisfaction creates sizeable fi-

nancial benefits for Wegmans. The company’s

costs related to turnover (for example, unem-

ployment insurance,

severance, training,

lost productivity) are 6

percent of revenues

compared to the in-

dustry average of 19

percent, which trans-

lates to a savings of ap-

proximately $300 mil-

lion per year, far more

than needed to cover the costs of the programs.

Moreover, the family-owned company is

thriving in the face of competitive pressure from

companies like Wal-Mart and Costco, and sees its

employee retention programs as fundamental to

its success. Wegmans’ margins are double those of

America’s four biggest grocery firms, and its sales

per square foot are twice the industry average.

Hard Cases Unfortunately, sustainability isn’t always an

easy win-win. Many situations arise, especially in

the short term, where being sustainable imposes

additional costs or redirects money away from

shareholders and toward other stakeholders.

Some of these situations are resolved as being in

the long-term interest of shareholders, but others

represent genuine, perhaps permanent conflicts

of interest between shareholders and other stake-

holders. These are the hard cases.

Many companies try to avoid those situations

by seeking new sweet spot opportunities or con-

centrating on activities that will move them closer

to the northeast corner of the Sustainability Map.

But avoidance isn’t always possible. The realities

of the U.S. automobile industry, for example, in-

clude both consumer demand for gas guzzlers and

a cost structure that currently makes big cars more

profitable than hybrids. It’s impossible, not to

mention highly unsustainable, for a company to

act against its own financial interest. Demanding

that the car companies or their executives do so is,

to put it kindly, counterproductive.

There’s a useful distinction between being sus-

tainable and being responsible. The responsible ac-

tion is for the automakers to meet the current de-

mand for SUVs while working to alter consumer

preferences and preparing to make hybrids prof-

itable. Thus, when Bill Ford Jr. publicly describes

the environmental downsides of SUVs and works

to make the hybrid Ford Escape a winner in the

marketplace, his behavior can be considered highly

responsible even though his industry, his company,

and his main products are not yet sustainable.

Similarly, we can’t expect, nor do we want,

the energy companies to give up on oil and gas

production today because extracting and burning

fossil fuels is unsustainable in the long term. But

we can and should expect them to work hard to

help society make the transition to renewable en-

ergy sources—as BP is doing, even while it main-

tains a high percentage of its current operations

in oil and gas extraction.

Hardest of all is when there is no sustainable

or responsible action to be taken. If, for example,

genetically modified food is conclusively proved

to be dangerous for consumers and bad for the

planet (like leaded gasoline or asbestos-based in-

sulation), the only responsible approach for com-

panies in that business will be to close down their

Many situations arise, especially in the short term, where being sustainable imposes additional costs or redirects money away from shareholders and toward other stakeholders.

Environmental Quality Management / DOI 10.1002/tqem / Winter 2007 / 27The Sustainability Sweet Spot

5. Blowing in the wind. (2005, July 25). Fortune. Second page of unnumbered insert titled “Fortune Global 500: The World of Ideas.”

6. Business Week. (2005, August 22–29). p. 130

7. Immelt, J. (2005, June 29). A consistent policy on cleaner energy. Financial Times, p. 13.

8. Davis, I. (2005, May 26). The biggest contract. The Econo- mist. Available online at http://www.economist.com/opin- ion/displaystory.cfm?story_id=E1_QDDRGQN.

9. Wall Street Journal. (2005, October 15).

10. Murray, S. (2005, April 21). Queen’s awards for enterprise: Diversity of British endeavour wins the greatest accolade. Fi- nancial Times, p. 7.

11. Dawson, C. (2005, June 20). Proud papa of the Prius. Busi- ness Week, p. 20.

12. Hakim, D., & Brooke, J. (2005, August 4). Toyota develops hybrids with an eye on the future. New York Times, p. C3.

13. Cited in Who cares wins: Connecting the financial mar- kets to a changing world. (2004). Investment Financial Cor- poration/World Bank. Available online at http://www.unglob- alcompact.org/docs/news_events/8.1/WhoCaresWins.pdf.

14. Data from Sustainability pays off: An analysis about the stock exchange performance of members of the World Busi- ness Council for Sustainable Development (WBCSD). (2004, October). Vienna: Kommunalkredit Dexia Asset Manage- ment.

15. Quoted in Integral business: Integrating sustainability and business strategy. (2003). PricewaterhouseCoopers LLP.

16. Global equity research—Food and beverages. (2005, Octo- ber 24), p. 4. UBS Investment Research.

17. The notion that sustainability can improve your business by helping you protect it, run it, and grow it was originally formulated by the World Business Council for Sustainable De- velopment.

18. Quoted in Singer, A. W. (2000, October). The perils of doing the right thing, p. 18. Across the Board.

19. GM food banned at Monsanto canteen. (1999, December 24). Urban 75 ezine. Available online at www.urban75.org/ archive/news099.html.

20. Stock market valuation calculations by James Wilbur, an- alyst at Salomon Smith Barney. Cited in Stipp, D. (200l, Feb- ruary 19). Is Monsanto’s biotech worth less than a hill of beans? Fortune. Available online at www.fortune.com/for- tune/subs/print/015935,368798,00.html.

21. Quoted in Holliday, C. O., Jr., Schmidheiny, S., & Watts, P. (2002). Walking the talk: The business case for sustainable de- velopment, p. 27. Sheffield, England: Greenleaf.

22. Estimate by U.S. Green Building Council. Cited in Smith, R. (2005, March 3). Beyond recycling: Manufacturers embrace “C2C” design. Wall Street Journal, p. B1.

23. Prahalad, C. K. (2005). The fortune at the bottom of the pyramid: Eradicating poverty through profits. Upper Saddle River, NJ: Wharton School Publishing.

24. Boyle, M. (2005, January 24). The Wegmans way. Fortune, p. 62.

operations as fast as possible while trying to mit-

igate the adverse impacts of doing so. Any other

choice would be socially irresponsible, making

them the legitimate target of activists, responsible

businesses, and society, while at the same time

exposing their shareholders to ever-growing lia-

bility risks.

Concluding Thoughts We believe that sustainability enhances prof-

itability for the vast majority of companies. It

serves as a road map for doing business in an in-

terdependent world. It offers new ways to protect

your company from environmental, financial,

and social risks, to run your company with

greater efficiency and productivity, and to grow

your company through the development of new

products and services and the opening of new

markets. It provides intangible benefits that in-

clude an improved corporate reputation, higher

employee morale, and increased customer good-

will. Sustainability will set you and your organi-

zation on the path to long-term success.

For More Information For further discussion of the many reasons

why sustainability is becoming a crucial factor in

twenty-first-century business success, see our

book The Triple Bottom Line (published by Jossey-

Bass, a Wiley imprint), from which this article is

adapted.

We also invite readers to visit The Triple Bot-

tom Line blog at http://getsustainable.net/blog-

files/blog.html.

Notes 1. Quoted in Gunther, M. (2004, November 15). Money and morals at GE. Fortune, p. 176.

2. Boston Globe. (2005, June 3), p. E1.

3. Quoted in GE hotline gives workers some clout. (2005, May 19). Financial Times, p. 19.

4. Welcome to Ecomagination. GE corporate Web site. Avail- able online at http://ge.ecomagination.com.

Andrew W. Savitz, with Karl Weber28 / Winter 2007 / Environmental Quality Management / DOI 10.1002/tqem

Andrew W. Savitz, president of Sustainable Business Strategies, helps organizations think creatively about opportunities and risks related to sustainability. As a partner in Environmental and Sustainable Business Services at Pricewaterhouse- Coopers LLP, he assessed, designed, and helped companies implement environmental and sustainability programs. He represented PwC on the World Business Council for Sustainable Development and the Townley Environmental Center of the Conference Board. Savitz was the general counsel of environmental affairs for the Commonwealth of Massachusetts and a staff member of the U.S. House Committee on Commerce, Consumer and Monetary Affairs, where he worked on corporate governance, labor, and consumer protection issues. Savitz served on the U.S. National Environmental Educa- tion Advisory Council and currently serves on the Steering Committee of the Environmental and Natural Resources Pro- gram in the John F. Kennedy School of Government at Harvard University. He is a member of the board of the Environ- mental League of Massachusetts and the Advisory Council of Zoo New England. He currently serves as board chair of the Massachusetts League of Environmental Voters. Savitz has graduated from The Johns Hopkins University; New College, Oxford; and Georgetown University Law Center.

Karl Weber is a freelance writer specializing in nonfiction, with a focus on business and current affairs. He has coauthored several acclaimed books on management and strategy by noted consultant Adrian Slywotzky (most recently, How to Grow When Markets Don’t ) and also coauthored the best-selling book The Power of We with Jonathan Tisch, CEO of Loews Ho- tels. As an editor, Weber has helped develop books by such figures as former U.S. President Jimmy Carter; former repre- sentative Richard Gephardt; U.N. ambassador Richard Butler; and the national director of the Anti-Defamation League, Abraham Foxman.