Bringing the environment down to earth

Abstract

The debate on business and the environment has typically been framed in simple yes-or-no terms: "Does it pay to be green?" But the environment, like other business issues, requires a more complex approach--one that demands more than such all-or-nothing thinking. Managers need to ask instead, "Under what circumstances do particular kinds of environmental investments deliver returns to shareholders?" This article presents five approaches that managers can take to identify those circumstances and integrate the environment into their business thinking. These approaches will enable companies with the right industry structure, competitive position, and managerial skills to reconcile their responsibility to shareholders with the pressure to be faithful stewards of the earth's resources. Some companies can distance themselves from competitors by differentiating their products and commanding higher prices for them. Others may be able to "manage" their competitors by imposing a set of private regulations or by helping to shape the rules written by government officials. Still others may be able to cut costs and help the environment simultaneously. Almost all can learn to improve their management of risk and thus reduce the outlays associated with accidents, lawsuits, and boycotts. And some companies may even be able to make systemic changes that will redefine competition in their markets. All five approaches can help managers bring the environment down to earth. And that means bringing the environment back into the fold of business problems and determining when it really pays to be green.