Sustainable business thinking is not the opposite of conventional thinking; it’s a paradigm shift. As I’ve written in other posts, it’s about rejecting “either-or” conventional thinking and imagining new solutions that deliver positive economic, environmental and social outcomes. That sounds great, but shift is hard. We all start as conventional thinkers and no matter which end of the spectrum you’re on, we’re all confronted with what looks like a contradiction. A story from my experience at REI illustrates the point and might help you manage change in your company.
After doing our first Green House Gas (GHG) baseline study we learned a lot about the business. For example, behind our electricity bill was a whole lot of coal and natural gas that we couldn’t see before. In addition to all the pollution impacts that represented, we had a new understanding of our exposure to cost volatility. No wonder we never seemed to get the utility budget right. This kicked off an energy efficiency program that had great results. Between 2008 and 2012, REI grew sales by 34% and added 40 stores without increasing energy use. We also changed our view of green power which moved from a “good will” PR opportunity to a cost management and business risk mitigation strategy.
Since renewable energy has very little recurring production cost (wind is anticipated to remain free), green power generators have the ability to offer long term fixed price contracts with very little risk, a big advantage over fossil fuel dependent producers. REI developed a strategy to buy stable rate energy contracts from new renewable energy sources wherever possible. The result was shifting around 20% of corporate electricity demand to green power. At the time, it made REI one of the largest commercial buyers of renewable energy in the country, which lead to some positive PR and recognition.
As the media picked up the story, I received e-mail from two people that perfectly illustrated the challenge of shifting from conventional to sustainable business thinking.
The first message came from an REI member in Alaska. It started with, “I can’t believe you sold out my co-op”. He went on to say that he didn’t want the co-op to spend money supporting Al Gore’s politics on climate change, he wanted the company to run a financially responsible business, delivering great service and solid dividends. I was able to respond that REI’s green power strategy was not politically motivated; it was a sound business decision. By purchasing locked-in energy contracts we had used renewable energy to hedge against fossil fuel price volatility and avoided six-figure fuel cost surcharges and price increases in the first 18 months. Making money with smart purchasing isn’t politics, it’s good business.
The second message came from a passionate REI employee. Ironically, she was saying, “I can’t believe you sold out my co-op”. She continued, “If we’re making money on green power, obviously we don’t really mean it”.
There’s a temptation to think these two thoughtful and passionate people have opposite views, but a closer look says that they actually share the same worldview. They both believe the conventional wisdom that we either make money or we make a difference – they have simply chosen opposite sides. The challenge of sustainable business is to reject a worldview that requires trade-offs and shift the thinking of both of these audiences. Sustainable business thinking says we can do things differently – if we suspend conventional “either-or” assumptions and unleash our innovation we can deliver positive financial, environmental and social outcomes at the same time.
Postscript: Following REI’s publication of the business case for how they looked at green power purchasing other companies began using the same strategy and became much larger consumers of renewable energy. A great example of leading companies building the runway that allows big changes to happen.