Business Insight Zone

Joel Makower provides an interesting overview of two detailed studies that assess how well corporations are doing at reporting their own environmental performance.

Makower’s whole piece is worth reading, but here’s the short version: corporate environmental reports tend to place too much emphasis on rosy possibilities, and not enough on downside risks. Companies also tend to think of environmental costs and benefits narrowly, instead of across a range of possibilities.

I like Makower’s conclusion:

Some of this may seem picayune, criticizing companies for being less than perfect rather than commending them for their efforts. But the time for celebrating mediocrity is behind us. Companies need to step up — to comprehensively report their climate policies, practices, commitments, goals, opportunities, and risks, and do it clearly. The stakes — for companies and the rest of us — are too high to accept anything less.

And the benefits to companies of doing so are considerable. Climate emissions, for all intents and purposes, represent inefficiencies, opportunities to improve operations, reduce risks, and save money, not to mention being seen as a leader in the eyes of employees, recruits, customers, and others. In that light, well-done climate reports are hardly an end unto themselves, but the beginning of a continuous improvement cycle — an opportunity to discover ways not just to be a better corporate citizen, but to be a better business.

In particular, I like the implicit muda thinking embodied in that last paragraph. It’s the sort of thinking that has long driven the Toyota Production System and (to a lesser degree) the Six Sigma processes used by big manufacturers like GE. The reduction of waste was also a driving force behind Pasquale Pistorio’s anti-pollution efforts in the 1990s and early 2000s at STMicroelectronics — efforts that reaped great rewards for the big European chip maker. These examples should make it clear that a sharp focus on waste reduction, along with candid reporting about environmental opportunities and risks, are hardly examples of feel-good environmentalism. Indeed, they’re becoming business necessities.