Tuesday, November 25, 2014

Old Companies Are Environmental Sustainability Leaders

Who knew? Being an environment sustainability leader is a distinguishing factor of old companies I didn't expect - in fact we didn't even ask about companies environment efforts in our research. We should perhaps have had a clue based on how committed the old companies are to their communities as well as the fact that they have an attitude of stewardship regarding sustaining their business. But the fact is, I came across this factor by accident.

One of the courses I teach is Managing for Environmental Sustainability. In prepping for the course I ordered a new book I thought would be good for our business students called "Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage" by Daniel Esty and Andrew Winston. In the book they have a list of companies they consider forward-thinking in the area of sustainable business practices, which they call "wave makers." As I was reading through the list I recognized a number of them were also in my data base of 100-year-old companies! Most people (including me) assumed that a "green" strategy was something new and entrepreneurial rather than something embraced by old, established businesses.

The more I thought about this, the more sense it made: the stewardship attitude of leaders in the old companies means they see their role as one of preserving the firm for future generations. It's a logical extension of this behavior to include preserving the environment for future generations. Their environmental sustainability strategies likely flow from the old companies' sense of social responsibility to their communities (see previous blog post). It may also stem from these companies' frugality: "green" projects often require an up-front investment that saves money in the long run. Since these companies intend to be around for the long term, they know they will benefit from the investment.

Once I began looking for it, I saw this leading edge attitude toward environmental sustainability in almost every 100-year-old company I studied. When I visited the 200-year-old cruise ship manufacturer Meyer Werft last summer, their head of R&D mentioned that the company was working on the development of fuel cell technology to power ships. He said they didn't expect it to be viable for 20 years or so, but they were investing in the project because they felt it was the best way to address the issue of how to power big ships in an environmentally responsible manner. (He even hinted that it might lead to a new business for them if they could sell fuel cell 'engines' to other large ship manufacturers.) With a 20-year investment and just the belief that it is the best solution to an environmental issue, who other than a very profitable 200-year-old company would make such an investment? This is an amazing example of the innovative strategies of old companies: just because they are old doesn't make them dinosaurs; they innovate and change or they wouldn't have survived for so long. It is their strategy of stewardship that approaches innovation, including in environmental sustainability, in a manner that ensures their viability into the future. Not all creativity needs to be destructive.

More confirmation of the longevity and environmental sustainability connection came with the 2015 list of the "Global 100 Most Sustainable Corporations in the World," an index prepared by the Corporate Knights organization. Forty percent of the U.S. firms on this list are over 100 years old. Compare that to the fact that less than one percent of all U.S. companies are that old. Further if I define "longevity" as companies that are over 90 years old, 50% of the U.S. companies on this list are long-term sustainability leaders.

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