The Triple Bottom Line Blog

Fascinating, isn't it, how boring, "mature," old-fashioned industries can become sexy growth businesses when new thinking is applied--as in this example (courtesy of Business Week) of a European-based water utility company that is being refashioned as a sustainability pioneer:

As the world's largest water company, Veolia is riding soaring demand for water supply and treatment in China. In the U.S. it's focusing on the fast-growing energy-services business—helping large industrial and commercial customers trim their heating and cooling bills with more-efficient generation and distribution. Even in relatively slow-growth Europe, which accounts for 70% of revenues, Veolia is powering ahead by taking stakes in government-owned water and waste-treatment businesses that are now being partially privatized.

It's an impressive story. But then you dig a little further and run across a story with a different slant on Veolia:

Once again an impoverished Texas neighborhood, in this case in the town of Port Arthur, has become the disposal point for hazardous waste, only this time the waste is potentially so lethal that a drop the size of a pinhead can kill.

A chemical-weapons facility in Indiana is destroying obsolete weapons containing VX nerve agent, producing caustic wastewater that the Army is shipping to Veolia Environmental Services for incineration. The Army has claimed the waste is no more dangerous than kitchen cleaners. But when environmental scientists began looking at the disposal process, they found scary scenarios. The "neutralized" waste still contains some VX, and the incinerators might not destroy all of it. There are no monitors on the incinerator smokestacks to sound the alert if it isn’t eliminated. And VX components in the water could reconstitute in shipping tanks under certain conditions, endangering lives along the transportation route.

The article in The Texas Observer seems to do a responsible job of citing opinions on both sides of the controversy, including the comment, "It's just wastewater," offered by Dan Duncan, who is in charge of safety at the Veolia incinerator at Port Arthur. Who is right? I don't know, and it will take time for the dispute to get sorted out.

Fortunately, it appears that the key issues--the safety and transparency of Veolia's processes, the accuracy of the monitoring techniques in use, and the integrity of the local officials overseeing it all--are on the table, thanks in part to media like the Observer. Hopefully, one way or another, the rights of all parties will be respected by the courts and regulators now addressing the case, and the proper resolution will be reached.

I don't have the expertise to adjudicate in this matter, and I wouldn't want to pass judgment on the folks at Veolia, who for all I know may be utterly blameless. But I can offer a few observations that business people may find relevant:

1. With sustainability issues now high on the agenda of communities, governments, activist groups, and the media, green business opportunities are (finally) becoming exciting, even sexy. But that same sex appeal makes them lightning rods for controversy. Don't expect to take advantage of the boom in green business unless you're ready to take seriously the life-and-death responsibilities that go with it.

2. Business Week notes that Veolia's attractiveness as an investment is due, in large part, to its current acquisition spree. Since being spun off by its former owner, the Vivendi conglomerate, Veolia has been shedding debt and using increased profits to buy environmentally-minded companies around the world. That's fine--but most business people know that acquiring companies and imbuing them with your corporate culture and values can be quite challenging, time-consuming, and at times perilous.

I would be nervous about engaging in a rapid-fire series of acquisitions in an area as sensitive as environmental remediation, where a single procedural misstep (or even a mere misunderstanding) can cause real harm, both to the environment and to your corporate reputation.

Is a strategy of rapid expansion an absolute no-no for an environmental company? I wouldn't go that far--but I would wave a yellow caution flag if I were a corporate manager or an investor.

3. A business involved in sensitive environmental issues can't afford to rely on government assurances or regulatory clearances to shield it from accountability. In the Texas case, Veolia is working under contract for the U.S. Army, and local government officials (including the mayor of Port Arthur) have pooh-poohed the concerns of community activists.

One might think that this would clear Veolia of any further responsibility, particularly in a conservative state like Texas, where respect for the military and for government authority is a strong tradition. But no. If green groups on the local, state, or national levels decide to press Veolia on this issue, all the government sign-offs in the world won't matter. The company's name can still be dragged effectively through the mud--with potentially serious effects on its future business prospects and stock price.

The moral: If you're a business executive and are lucky enough to get laudatory press coverage like that given to Veolia by Business Week, enjoy it--but don't let it go to your head. It's nice to be a leader in this quarter's "sexiest" business, but remember what your junior high school Phys Ed teacher told you: The fun of sex comes with plenty of risks and consequences.

Labels: Port Arthur, Reporting and Transparency, Role of Government, Veolia, Waste

Over at Treehugger, another website that is worth a regular visit (and which we hear tell is the most-visited sustainability site in the blogosphere), we read a Chicago Tribune story about an ongoing environmental controversy roiling the Windy City. At its heart is a plan by BP to increase dumping of ammonia and suspended solids into Lake Michigan as part of a big refinery expansion program.

Now Mayor Daley, the regional office of EPA, and a collection of activists have pressured/shamed BP into backing away from its plan and sitting down at the negotiating table to work out an alternative, hopefully using new technologies that reduce the pollutants more effectively.

Perhaps the most interesting--and certainly the most telling--quotation from the article is this one:

"The environment is a prominent part of BP's advertising," said Sadhu Johnston, Daley's deputy chief of staff for environmental initiatives. "We're sure they can make it a prominent part of their actions too."

Notice what is happening here: The press and the political powers-that-be are holding BP to a higher environmental standard precisely because of the company's past public professions of commitment to environmental stewardship. If the current debate involved, say, ExxonMobil, neither the mayor's chief of staff nor the Chicago Tribune could use the company's own words against them--because Exxon has never tried to promote itself as a "green" energy company. An accusation of hypocrisy, which could hit home against BP, would seem irrelevant when aimed at another company.

On the one hand, this might seem unfair, as if BP is being "punished" for its reputation as a relative "good guy" in the universe of Big Oil. But from a broader perspective, being held accountable for its environmental promises is probably a good thing for BP--provided they were sincere about those promises in the first place. What BP is now doing (admittedly under pressure) is the essence of stakeholder engagement: meeting with all the relevant, concerned parties to develop a program that will meet everyone's long-term needs, including those of BP and its stockholders.

Running ads like BP's declaring yourself the "beyond petroleum" company dedicated to eco-friendly energy solutions is a little like standing up at a holiday party and announcing your intention to go on a diet and lose forty pounds in front of all your family and friends. You'd better not say it unless you really mean it. Because if you don't mean it, you're going to feel mighty foolish a week later when your sister or your best friend catches you scarfing down a pint of Ben & Jerry's.

ADDENDUM: If you're interested in more detail on the BP/Lake Michigan saga, here is a good story from the online Columbia Journalism Review summarizing both the unfolding controversy and the well-crafted coverage it has received from the city's two main newspapers.

Labels: BP, Chicago, ExxonMobil, Role of Government, Waste, Water

An interesting article from a New York Times series on business and "The Energy Challenge" about how some companies are rethinking their packaging practices to reduce waste, cut shipping costs, and improve recyclability. There is certainly plenty of room for consumer companies to do a better job of making their packaging eco-friendly. But one key issue that is sometimes overlooked is the competitive marketing aspects of packaging.

Suppose you are selling an item that will end up on the health care or cosmetics or housewares shelf in your local discount store. And suppose the product itself is quite small--for example, a tube of something that is two by five inches in size. It may seem like a no-brainer to re-design the tube using stronger, more rigid materials that enable you to get rid of the bulky cardboard box surrounding the tube. It's certainly a wise environmental move.

But what if none of the competing companies follows suit? The result could be that your product ends up looking a lot smaller, taking up less space on the store shelf, and therefore attracting less attention from customers. Unconsciously, customers may even think, "Package A looks bigger than Package B, yet they cost the same--so Package A must be a better bargain." And the fact that the fine print discloses that the tube in both cases contains the same 3 ounces of product may not register with busy, harried shoppers.

Thus, an individual company's well-intentioned move toward more sustainable packaging may end up hurting its own business--not a desirable outcome, to say the least.

(In a funny way, I've seen this phenomenon at work in the industry I happen to know best, book publishing. During my years as a publisher, I had a number of marketing and sales managers who told me, "Please don't publish any books that are just 150 pages long. They look skimpy and get lost on bookstore shelves, especially when they're displayed spine-out." The result is that publishers ask authors to expand manuscripts so as to get the books up to 250 pages or more and thereby make them more noticeable--and saleable. Which helps to explain why so many books read like "glorified magazine articles" that someone has padded with fluff: They are.)

These competitive pressures are why a crucial role is played by the Wal-Marts of the world, as discussed in the Times article. By creating and enforcing across-the-board packaging standards for their suppliers, the big retail chains can encourage companies to move toward more responsible packaging without fearing they will be losers in the shelf-space wars. It's a great example of how supply-chain interconnections are one key to reshaping the world of business along more sustainable lines.

Labels: Packaging, Supply Chain, Wal-Mart, Waste