The Internet and related information technologies hold the promise of rapid, sustainable economic growth that directly benefits everyone on the planet. However, the same forces could also trigger traumatic social, environmental and economic disruption….
If technology firms simply follow strategies of maximizing short-term shareowner value by encouraging maximum consumption of products by customers, we exacerbate two of the most significant issues facing the planet today: damage to the natural ecosystem that sustains life for all of us, and the exclusion from articulation in the world economy of most of the world’s population. ” ?Carry Farina, CEO, Hewlett-Packard s 26 sustainability has become a strategic imperative for all businesses in the 21st century. It has become a fundamental market force affecting longer financial viability and success.
Customers are requiring sustainable huskiness practices. Shareholders are using “sustainability” as a measure of financial success and are developing sustainability indices. ‘ Stakeholder groups are organizing conferences and partnerships to raise awareness and encourage sustainable business practices twine the private sector and consumers. At its core, the concept of sustainability is about recognizing that the world is a closed rather than boundless system, with limits that modern society is heightening to approach.
The traditional definition of sustainability from the World Commission of Environment and Development is: “Sustainable development is the ability of current generations to meet their needs without compromising the ability of future generations to meet theirs. Sustainability at Hewlett-Packard: From Theory t o Practice Hewlett-Packard has been evolving through three distinct phases of environmental sustainability over the past two decades.
In the 1 ass, the environmental concerns were primarily pollution control and prevention with a focus on reducing emissions from existing manufacturing processes. During the sass, HP made great strides in pollution control and prevention, risk management, and facility improvements such as reducing toxic materials and emissions. In the sass, the focus shifted to product stewardship, which focuses on earlier intervention to minimize environmental impacts associated with the full life cycle of a product.
HP established a Product Stewardship function which focused on developing global processes for tracking and managing regulatory compliance issues, customer inquiry response systems, information management, public policy shaping, product take-back programs, green packaging, and integrating “design for the environment” and life cycle analysis into product development processes. Today, sustainability is about developing technologies that actually contribute a positive impact to environmental challenges. HP has recognized that pollution prevention and product stewardship have become saline market expectations.
To be an environmental leader in the 21st century, HP needs to integrate environmental sustainability into its fundamental business strategy. Laying the Foundation for Sustainability Prior to the sass, environmental initiatives and issues at HP were handled by the Environmental Health and Safety (SHE) group and were focused largely on pollution control and prevention?interpreting new environmental regulations, auditing divisions for environmental compliance and performance, and reporting to various environmental agencies.
In the early sass, a new function called Product Stewardship emerged within SHE to focus specifically on the environmental attributes of products. The Product Stewardship function consists of a network of over 70 product stewards, each responsible for the environmental attributes of a particular product line. Product Stewards work at all levels of product design, development, launch, delivery, and support to ensure that HP products meet market and customer environmental expectations.
Toward the end of the sass, product stewards along with other staff from SHE and HP Labs began informally exploring the concept of sustainability and how this might apply to HP. In 1998, HP Labs and the Product Stewardship function organized an internal 2-day conference to explore this concept. External experts, HP customers, and environmental organizations were invited to Join in the discussion. The goal of the meeting was simply to generate some discussion and begin brainstorming about how sustainability could be a business driver for HP, rather than to make any major strategic decisions.
The conference did however inspire the formation of an internal e-mail group created specifically to share information and ideas about sustainable development. The e-mail group included a range of staff?from senior to Junior level, from engineers to marketing people, and from Europeans to Asians. Over the two years, these employees CALIFORNIA MANAGEMENT REVIEW VOLVO 43, NO. 3 27 Sustainability at Hewlett-Packard: From Theory to Practice formed informal networks, from which “champions” emerged and ideas brewed.
Over the next two years, these sideline conversations about sustainability eventually triggered two new initiatives: the World E-luminous program, which addresses the social equity side of sustainability, and a reinvention of the former Product Stewardship function to focus on sustainability, a program called Environmental Strategies and Solutions (SEES). Articulating the Concept of Sustainability After making a decision to reinvent the Product Stewardship function building upon the concepts of sustainability, an important initial step was to articulate the concept of sustainability in a business context.
How does sustainability affect one’s business model and how is it relevant for Hewlett-Packard? In an attempt to bring in outside perspectives and devote one person full-time to sustainability issues, the SEES aerogram hired an MBA candidate to conduct background research and make recommendations about building a strategy grounded in the principles of sustainability. Sustainability has traditionally been a concept that is difficult to “sell” to senior management because it describes a state in the future that has never been experienced, rather than a specific process or methodology for how to get there.
At a theoretical level, the concept of sustainability makes sense, but translating the concept into actionable steps and investments has proven to be a significant stumbling block for a number of companies and organizations. After conducting extensive literature reviews, reviewing benchmark studies and competitive analyses, and holding conversations with independent consultants and nonprofit organizations devoted specifically to this work (such as Businesses for Social Responsibility, World Resources Institute, The Natural Step), it was confirmed that sustainability does offer companies a strategic competitive advantage.
Furthermore, sustainability will become increasingly important for businesses in the coming years. SEES bases its definition of sustainability on the recognition that the world is a closed, rather than endless, system with limits that modern society is beginning to hit. As several scientists predict, this is going to change today’s fundamental economics, it is going to change prices, and it is going to change what is socially acceptable. These limits clearly affect the business environment in which HP operates.
The environment, therefore, is no longer Just a concern for philanthropy or corporate citizenship, but rather needs to be linked to Hap’s core business strategies in order to achieve long- term economic success. This will enable HP to transform potential environmental abilities such as climate change, resource exhaustion, and the energy crisis into strategic business opportunities and competitive advantage. This approach represents a significant shift from that of Product Stewardship in the sass.
The Pr us Stewardship vision and been to minimize the negative environmental impact of Hap’s products and services. Essentially, the goal was to reduce Hap’s environmental footprint. While this was innovative in 28 1990, the concept of sustainability now challenges HP to go beyond this and to develop solutions that actually contribute positive solutions to environmental halogens. The high-tech information industry in general has been viewed as relatively benign environmentally and has enjoyed a favorable position with respect to the environment.
Many even view the electronic and wireless communication industry as having the potential to increase energy efficiency and dramatically reduce reliance upon paper resources, travel, and transportation, thereby contributing positively to environmental sustainability. However, as the new economy gathers steam and high-tech companies dominate the market place, environmental impacts from IT are attracting more attention. Although controversial, studies are reporting that the growth of information technology may in fact be encouraging resource and energy consumption rather than reducing it.
The manufacturing processes, for example, require significant resource use and toxic materials. Similarly, the disposal of products, after very short life spans, is choking landfills and creating environmental burdens. As these challenges escalate, IT companies are being forced to confront these issues and redesign business strategies that recognize the natural limits. HP is no exception. As it moves beyond product stewardship, HP must redefine TTS core business utilizing the principles of both environmental and social sustainability.
Building the Business Case The next step for HP involved building a business case illustrating why it should pursue a strategy grounded in the principles of sustainability. There are several reasons this strategy is important not only for becoming a market leader, but also for remaining competitive. Meeting Customer and Market Expectations?As customers become more aware of global environmental conditions, they are demanding more environmentally responsible products and services.
Hap’s survey of 20 major customers in 1998 highlighted the expectations of its business and consumer customers. More than 80% of the enterprises studied mentioned the following criteria in purchasing decisions: an ISO 14001 certified environmental management system, documentation of continuous improvement against environmental performance objectives, and clear environmental attribute information for their products. Over 50% of the companies said they expected end-to-elite programs, supply chain management programs, and energy-efficient, safe products.
For a variety of reasons including total cost of winnowers, it is becoming increasingly apparent that environmental factors are becoming a purchasing decision differentiator. VOLVO. 43, NO, 3 29 Improving Market Access?The Government Affairs function at HP recently identified market access as one of the top three public policy issues. The linkage between market access and environmental performance is becoming increasingly clear with the surge of regulatory and legal requirements. For example, there are product take- back regulations in Europe, packaging take-back regulations, and increasing bans on certain hazardous materials.
These regulations are spreading to Asia and eventually o the United States. Increasing Cost Savings?elf the goal is to create value for shareholders and customers, it is critical to reduce the money spent on waste in order to enable greater profits from products. Waste costs money. A By implementing waste and energy reduction projects, companies have saved millions of dollars. While there may be an initial investment required, the savings are substantial over time. As a side benefit, Hap’s customers can also save money by using energy efficient products.
Creating Market Opportunities?As noted, changing environmental conditions create new market opportunities. A key characteristic of a successful company is one that is continuously adapting to change. For example, in addition to designing energy-efficient printers, HP is exploring business opportunities that would enable customers to monitor and ultimately reduce their overall household energy consumption. Enhancing Brand Image?Numerous marketing studies illustrate that people prefer to buy products associated with responsible business practices, given similar products and prices.
While HP has significant environmental accomplishments, Hap’s brand is only loosely associated with environmental accessibility, according to recent global marketing research. HP needs to make this linkage direct and explicit by moving beyond its reputation of being a responsible citizen to building a brand image around environmental sustainability. Leveraging Competitive Advantage?As noted, a recent competitive analysis conducted by HP reveals that practices that were considered “above-par environmental performance” five years ago are now becoming the merely baseline performance across the industry.