Progress toward environmental sustainability has stalled in the global political arena, but companies are increasingly getting involved. Often they’re working with nongovernmental organizations, and perhaps the biggest of these is WWF (World Wide Fund for Nature) International. As the organization’s director general since 2005, Jim Leape has overseen a shift toward encouraging these partnerships. WWF’s goal is both to move the political needle and to generate innovations that will drive major gains in sustainability. Knut Haanaes, a BCG partner and managing director in the firm’s Geneva office, spoke with him at the organization’s global headquarters in Gland, Switzerland.
What changes do you see in the role of business on the issue of sustainability? Why do you think certain companies are stepping up and moving aggressively into this area?
I think we’ve seen quite a pronounced change over the last several years. Several years ago, most companies thought of sustainability or environmental issues as issues of compliance, in terms of regulations and laws, of course—but beyond that as issues of corporate social responsibility. What you see now is a growing recognition that sustainability issues are actually a core business concern, fundamental to the future of the business.
That comes, as I talk to CEOs, from a variety of motivations or insights. One is that a growing number of their customers care about these issues and will prefer companies whom they see as responsible. Another is frankly the recruitment and retention of talent. To get the best talent coming into the market, they need to be a company that people are proud to work for. Sometimes it’s about security of supply—how do they make sure there will be fish, or cacao, or soy for the long term, to meet the needs of their business? Sometimes it’s about social license to operate. Are they seen as responsible members of the community in the places where they have their factories and facilities? And often it’s a combination of those things. But you see a recognition by many leading CEOs that this is about business and not just about philanthropy.
WWF International itself in the last five to ten years has begun partnering with certain companies and industries, where business becomes part of the solution. What explains this change, and what are the key issues in managing these kinds of relationships?
You don’t have to spend much time watching the multilateral process in the UN or even the political process in most countries to realize that it’s important to find other vectors for driving conservation action—that we can’t just rely on public policy change as the sole lever for advancing the sustainability agenda. That’s led us, over the last several years, to increasingly focus on the opportunities with the private sector, and to look at how we can work with companies to begin to make things happen.
The payoffs are several. One is, of course, direct impact. If a company makes changes in its operations, in the materials it buys, in the way it produces its goods, in the goods themselves that go to consumers, it can reduce carbon emissions, for example, in a tangible way. But it’s also a recognition that if some companies move, they can inspire others to follow, and they can begin to open up the political space for governments to do what we need them to do.
How can sustainability, the whole green area, become a source of innovation and competitive advantage for companies?
One is that, in some cases, it’s an opportunity for competitive advantage. In other cases, we’re increasingly encouraging companies to think of these issues as precompetitive—that it’s in the interest of the entire sector that they find ways to move to sustainability in the way they operate. There’s no question that leading companies are using sustainability as a spur to innovation. It’s in working with their suppliers to come up with better ways of producing the commodities they use—finding ways to reduce the use of water to grow sugar cane, for example. To reduce deforestation associated with palm oil or beef production. And then further up the value chain, in the actual products. Unilever and Procter & Gamble, both of whom we work with, have increasingly focused on products such as cold-water detergents that get your clothes clean with less hot water, which is the big carbon footprint of laundry.
With sustainability, one of the things you see are the so-called hockey stick graphs, which show carbon emissions just skyrocketing, and deforestation, overfishing, other impacts on the planet taking off at an exponential rate over the last half-century. It’s helpful to think about the challenge we now face as creating our own hockey sticks, finding the solutions that can go exponential. Now we are on the flat part of those curves. You begin to see sustainability solutions coming out of business and of other places in terms of not just renewable energy but also agriculture and so forth. None of those is yet approaching the scale that we need. I think the key is to figure out where are the solutions that really can take off, in the way we need them to. There certainly is that potential in what’s emerging in the market now.
What is your perspective on the “green consumer”? Is that important today? Will it be of major influence and opportunities for companies tomorrow?
Yes and yes. It’s important today, and it’s crucial to recognize that it isn’t a matter of whether a majority of consumers are demanding sustainable products. It’s whether you have enough salience in the marketplace—enough nascent consumer interest that companies see the need to get ahead of the curve and begin to address these issues now. That’s why, over the last few years, we’ve seen particular attraction with some of the biggest consumer-facing brands.
Such companies as Unilever and Coca-Cola, Wal-Mart and Carrefour are exquisitely attuned to emerging consumer interests and have seen a need and opportunity to move on these issues. That’s partly because they see the consumer interest developing. And over time we need to build that interest. We need to, as an NGO, but I think business, too, needs to find ways to continue to build consumer commitments toward more sustainable choices in the marketplace. It’s important to recognize business has a role there because business, of course, invests more than anybody else in educating consumers. Business, of course, is directly engaged with consumers at point of sale, and I think there are opportunities to help guide people’s choices, to help move onto a path that is much more sustainable.
Are emerging markets going to be able to address their, and our, challenges? How do you see that playing out?
Emerging economies actually have a different set of opportunities. They have an opportunity to chart a path for their own development that’s more sustainable but also better.
No one would set out to build a city like Houston, in terms of traffic patterns and sprawl, in terms of a variety of things. Or frankly to build a city that has the problems that currently beset São Paulo or Manila or other big emerging-economy cities. There is the possibility to build cities and communities on a different model that depends less on cars, with lower impact in a variety of ways, but also offers a better quality of life. We need to be pushing on those opportunities.
The broader trend you see now is a growing recognition among emerging economies, both in governments and in the private sector, of issues here that they need to come to grips with. We just organized a roundtable with some of the largest retailers in China, all coming together to look at sustainability and what role they can play in bringing it into their value chain. That’s encouraging as at least an opening to begin to bring these issues into the mainstream.