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Resource Management as a Competitive Edge

Handle with Care
October 10, 2012 by Eugene Goh, Knut Haanæs, David C. Michael, Subramanian Rangan, Diederik Vismans, and Kim Wagner

Florida Ice & Farm is a Costa Rica-based beverage company. From 2002 through 2008, under new CEO Ramón de Mendiola Sánchez, the company’s revenues more than quadrupled. In 2008, Mendiola went further, announcing that 40 percent of the variable portion of executive pay would now be tied to the company’s performance on environmental and social measures. He put in place a regime of strict measurements and strong managerial focus on environmental metrics, particularly solid waste, water use, and carbon dioxide emissions. The company developed ambitious targets to achieve zero net solid waste by 2011, and to become water neutral by 2012 and carbon neutral by 2017. One of its bottling plants became the most efficient in the world in terms of water usage. At the same time, the company’s revenues and market share continued to grow through a tough economy. Mendiola firmly believes that this commitment to sustainability is the only way to achieve continued growth and to sustain Florida’s position as one of the most influential and admired companies in Costa Rica.

This is just one example among many of companies focusing on their “total return on resources.” These examples are part of a growing trend that has implications for all businesses. Continued population growth and development are straining natural resources and ecosystems that are vital to the worldwide economy. As old ways of production and distribution become more costly, companies will increasingly compete on the basis of a new paradigm: the efficient use of resources. They will monitor the payback from resources by optimizing consumption through the more efficient use of those resources. They will also manage the putback—that is, the effect of their actions on the future supply of natural resources and on the climate—in order to limit the damage.

In collaboration with the World Economic Forum, The Boston Consulting Group has identified 16 “new sustainability champions”—a group of emerging-market-based companies that are outperforming in terms of both financial results and their positive impact on society. We focus on five of these champions to explore what companies in both affluent and emerging countries can learn from them. Seven principles of resource management are crucial in creating competitive advantage. From these flow several simple steps that any company can take to improve its resource efficiency.