Eco-Efficiency: The Business Link to Sustainable Development, (1997, Cambridge, MA: MIT Press).
Written by: Livio D. DeSimone and Frank Popoff
Reviewed by: Laurel H. Martin
“Bottom-line benefits…run in parallel with environmental benefits.” Wouldn’t it be great if that were always the case – in every time frame, to every stakeholder, for every company? DeSimone and Popoff may appear overly confident in the financial business case for corporate sustainability, given the difficulties of demonstrating tangible benefits from acting on certain complex environmental problems. Nonetheless, following the 1992 Rio Earth Summit and the Brundtland Commission that defined sustainable development, eco-efficiency – the term coined for “activities that create economic value while continuously reducing ecological impact and the use of resources” – was the best argument for instigating involvement from business leaders in environmental issues. The term signifies the optimization of economics and ecology, rather than prioritizing one over the other. Heretofore, the environment had been the realm of environmentalists and maybe a few EH&S employees; to environmentalists, business was the problem, not the solution. Despite its shortcomings, Eco-efficiency makes a compelling case for the business rationale – nature and ethics aside – for why industry holds great potential for mitigating the damage modern society has inflicted on the environment.
The book places business as the protagonist: businesses are better poised than any other institution to understand fundamental customer needs, invent and commercialize technological solutions, and affect consumption habits through marketing. There are seven main ways that businesses can improve their impact on the environment. First, they can reduce the material intensity of goods and services; that is, do more with less while maintaining quality and functionality (by reducing bulky packaging, for instance). Through process improvement, better equipment, and utilization of waste heat, they can reduce the energy intensity of their operations. Greater vigilance and switching to alternative inputs can reduce toxic dispersion. Material recyclability can be enhanced by designing product components that can be reused or remanufactured. Replacing non-renewable inputs like petroleum with renewable inputs like plant fiber can maximize sustainable use of renewable resources. Product durability can be extended by using stronger materials and modular, easy-to-repair product designs. Lastly, service intensity can be increased by redefining the company’s offering in terms of the customer need it satisfies, rather than the physical product it currently sells (Zip Car is my favorite example of this concept – “mobility” is the need, and it is satisfied by a temporary sharing arrangement rather than individual long-term product ownership).
These principles will challenge existing business models, but will be well worth the effort. For instance, consumer goods companies that rely on repeat purchases are unlikely to willingly embrace the concept of durability. Nonetheless, DeSimone and Popoff posit that on the whole, business will benefit from adopting eco-efficiency. Companies will save a slough of money from avoiding litigation costs, preempting impending legislation, and reducing costly waste and pollution. Their reputations will be enhanced, aiding employee recruitment and retention, boosting customer demand, and satisfying a range of external stakeholders. Numerous examples are used to illustrate that these theories have indeed proved true for those companies who have mustered the leadership, foresight, cultural change, and capital investment in new management tools, R&D, and process change to implement one or more of the seven principles. The most successful companies have forged partnerships with suppliers, NGOs, or even competitors to create collaborative solutions to multi-faceted problems. The authors balance their anecdotes and key success factors with the future barriers to implementing eco-efficiency: namely, regulatory reform is critical to creating the right set of incentives for companies to continuously innovate and improve.
In providing a comprehensive definition of eco-efficiency, DeSimone and Popoff laid the groundwork for future elaboration of the potential synergies between business and the environment, demonstrating the benefits of sustainability through the lens of the corporate executive. Though most Erb students are well aware of these concepts, a decade ago most business leaders were not. The majority of companies in 1997 (and possibly still today) were environmental laggards who needed to be convinced on dollars, not values or scare tactics. This book demonstrates “the business link to sustainable development” by showing tangible ways that companies can cut costs, reduce liabilities, or enhance their reputation – all bottom-line benefits – while improving their environmental impact. It speaks the “language of business – money”, painting these issues in financial terms rather than appealing to emotion as most environmentalists have been wont to do. This depiction of the issues is much more palatable to the average pin-striped businessperson than ethical arguments or environmental radicalism because it leverages traditional business values of financial gain and strategic positioning. It presents the opportunities for business to create and maintain competitive advantage by becoming more sustainable. This positive tone inspires action and confidence, rather than despair or dismissal.
Readers who are already convinced of the merits of sustainability and versed in its basic principles may be disappointed to find no new solutions in Eco-efficiency. References to the uncertainty of climate change and the certainty of imminent environmental policy improvements are stark reminders of how much has transpired in the past decade. While many business leaders now understand the benefits of eco-efficiency, this may be due more to the rise of increasingly salient environmental problems than to effective lobbying by proponents like DeSimone and Popoff. With the benefit of hindsight, the authors appear overly optimistic that sustainability can be achieved through the current market system, with a few slight regulatory tweaks. They state that “there will always be opportunities for cost-effective pollution prevention, waste minimization, and similar initiatives”; but such activities may not be enough to reign in accelerating global warming, ecosystem degradation, and species loss. Issues such as these don’t lend themselves to simple solutions that boost the bottom line, at least in any meaningful time span. They require a fundamental mindset shift and large-scale collaboration of governments, companies, and citizens that we haven’t seen since the Bretton Woods era. Eco-efficiency no longer seems to be a sufficient answer.
A second deficiency of the book is the underlying assumption that businesses will readily accept the logic of eco-efficiency. Even if most environmentally-friendly activities do probably increase the value of the firm in the long run, there are plenty of shareholders out there who won’t look past next quarter’s earnings. For public companies, short-term financial pressures are the biggest impediment to undertaking projects that further long-term sustainability. Relying primarily on cost-avoidance to justify action, as the book does, will only convince shareholders to address the most pressing issues like current regulations and rising insurance premiums. The authors omit any description of the ecological issues that eco-efficiency is intended to address. While this was probably intended to cater to the preexisting concerns of the target audience, it fails to establish an understanding of the urgency and severity of the problems at hand. The emphasis on bottom-line results makes the consequent environmental improvements seem just a happy coincidence, rather than a principal driver for action.
The final pitfall of Eco-efficiency is its over-reliance on anecdotal evidence from a handful of companies. That DeSimone and Popoff are executives at Dow Chemical and 3M certainly lends the book credibility in the eyes of other business leaders; however, by drawing so many examples from these and other similar companies, the authors narrow the book’s appeal and relevance. There are few prescriptions for action other than to copy that which has already been done by this group of pioneering manufacturers. Executives in retail, transportation, and financial services would be hard-pressed to take away any actionable guidance. Business leaders today are likely more concerned with learning how to apply the concepts of eco-efficiency to their own firms rather than celebrating others’ successes.
This synopsis leads me to conclude that Eco-efficiency is probably not worth the read to most Erb students, unless they’d like a refresher on several basic – albeit very important – tactics that companies can employ to reduce their pollution, energy, and resource use. However, I believe the book could be highly influential to sustainability neophytes, particularly people who are likely to need to be convinced by a business case, rather than environmental exigency or moral imperative. In this case, the book should be one prong in an overall message that includes an up-to-date synopsis of the most pressing environmental issues and the myriad ways companies of all types can apply the principles of sustainability to their own business.