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December 03, 2001
GEMI Elevates Environmental Consciousness from the Bottom to the Top Line
    by William Baue

The Global Environmental Management Initiative releases a new report promoting environment-friendly methods of enhancing corporate performance.


Environmental consciousness is moving its way up the spreadsheet. Three years ago, the Global Environmental Management Initiative (GEMI), an industry organization of 40 leading companies, released a report linking environmental stewardship to bottom-line performance. Last week, GEMI released a sequel report: Environment: Value to the Top Line.

The former report, entitled Environment: Value to Business, presented ways to protect the environment while simultaneously reducing operating costs, increasing resource efficiency, and streamlining the time to market--all bottom-line considerations.

The new report moves to the top line, discussing environmentally-friendly ways to increase revenues or sales, grow market share, boost share price, and enhance branding. It focuses broadly on a range of corporate social concerns collectively known as "Environment, Health and Safety," or EHS.

"Once, there was a belief that quality costs money," say Motorola Chairman and CEO Christopher Galvin and Robert L. Growney, President and COO. "This myth has been dispelled. Among many companies there is a similar myth that EHS excellence costs money. However, many companies are discovering that EHS excellence is actually a competitive advantage. And eventually, EHS excellence will be necessary for our very survival."

The report strives to fulfill several goals: to inform senior managers that environmental considerations can create top-line value; provide case studies as examples; supply tools for companies to implement new ideas; and promote communication between business and environmentalists. The Boston Environmental Group served as consultant on the report.

GEMI adopts the Top Line Framework presented by Michael Treacy and Fred Wiersema in their 1995 book, The Discipline of Market Leaders. They point out that successful companies generally define customer value in one of three ways: best total cost, best product, and best total solution. Companies generally do not ignore any of these aspects, but rather focus on one predominantly.

The Top Line Framework offers two sets of variables by which companies can characterize themselves in order to select the best strategy for employing environmental considerations to enhance top-line value. In the first set of variables, a company's core strength tends to lean toward either product innovation or customer intimacy. In the other set of variables, companies find that one of two strategies tends to suit them best: either a revenue-driven solution, or a brand-driven tactic.

Since these four variables can combine in four different ways, the Top Line Framework allows a company to tailor its environmental solutions to its own strengths. A revenue-driven strategy for product innovation yields a customer-oriented environmental solution, while a brand-driven tactic for product innovation leads to environmentally responsible products. A revenue-driven strategy for fostering customer relationships points to environmental services, while a brand-driven tactic for fostering customer intimacy centers on enhancing the brand.

The report also incorporates the concept of the value chain presented by Harvard Business School Professor Michael Porter in his 1985 book, Competitive Advantage. The value chain focuses attention across the entire production process: research and development; raw materials sourcing; manufacturing and service delivery; marketing; customer service; and the product's end of life.

GEMI demonstrate s these strategies in action through case studies of companies such as DuPont (ticker: DD), with its solution dyed nylon exemplify ing sustainable development, and the branding of Koch Petroleum Group's Blue Planet Gasoline illustrating stakeholder engagement as well as teaching lessons about the manufacturing and service delivery link in the value chain.

"We're talking about commerce and profits," says DuPont Chairman and CEO Chad Holliday. "Those are the means we can use to bring the power of the modern global market to bear on improving human lives while safeguarding the global environmental commons."

 

 
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