How to design a "good" green business strategy

Pre-Discussion Memo (W3-W4 Business Strategy)

20143423 Yu, Youngjoon

How to Design a “Good” Green Business Strategy

Prior to think about whether a certain green business strategy is good or bad, we are usually challenged to the question that green and business can go together. In this question, green means that company makes an effort to protect the environment and takes the social benefits from that. Meanwhile, business means that company tends to focus more on its competitiveness, increasing economical profits and reducing costs. According to the Hoffman’s “Competitive Environmental Strategy”, it looks like a win-lose perspective between them. However, I think the relationship between green and business cannot be fixed as natural born in win-win or win-lose. I rather insist that this correlation could be easily changed by the combination of environment factors (which is not a green or environmental meaning, but the surrounding factors).

From this point of view, I agree with the Hoffman’s opinion that there is a huge difference between company’s environmental management and environmental strategy. If the environmental protection and economic growth are one-way unilateral relationship, it would be fixed either win-win or win-lose perspective and cannot be changed like an environmental management view. However, I think this relationship is more correlated and there are so many surrounding variables that can affect it. Therefore, this characteristic shows up as the intertwined Venn diagram like an environmental strategy view. And I think that in the intersection between the economic growth and environmental protection we could find the core factors can lead us to green business strategy.

Then, what could be the environment factors can make green and business go together? I think the main, key factor is the innovation. Actually, we have already discussed about the periodical relationship between green and business in our class discussion. There was an opinion that green and business relationship changes over time. Particularly from that opinion, their relationship is a win-lose perspective in short-term, but it changes to a win-win perspective in long–term. I partially agree with this argument. I agree with the statement that the relationship can be changed and their graph could be U-shape as time goes by. However, I think the changing inflection point is depends on the outbreak of an innovation, not a matter of time. Also, even in short terms, I think they can experience the win-win perspective if they already achieve the innovation and know how to apply it in appropriate ways.

This brings us to another question. Are there any possible environment factors can make green and business to be matched accordingly? I think there are a lot of microenvironment factors and macro environment factors that can affect to the green innovation and this innovation makes an effect on green business strategy. In my opinion, customers, company, competitors, and other important stakeholders are in the category of microenvironment factors. Otherwise, such as the legal restrictions, political regulations and social limitations would be classified as macro environment factors. Let me look at these factors one by one.

The first microenvironment factor is the customers, the market conditions. This factor is mainly related with the bearing hidden costs for wasted resources and willingness to pay for environmental protection. From the case of Clearwater seafood, we can see a lot of green consumers who care strongly about environmental issues and sustainable fishery ecology. Their willingness to pay for environment is also very high. Actually, in this case, I think that customers were bearing the costs for wasting low-quality seafood in previous commodity market. Then, Clearwater has changed the buyer’s view from the price centered to focusing on the quality by achieving technological and channel distribution innovation. That means Clearwater could achieve an innovation by detecting the customer’s hidden costs. In the MSC label certification case, customer’s environment protection needs can influence on setting a company goal. How about the Toyota’s case? Okuda said that consumers can recognize the threat that pollution and global warming present to them and their children. Consumer’s need for environmental protection and high demand for fuel-efficiency (which still let them to develop PHEVs and EVs) make this firm to go forward with the technological innovation continuously.

Second factor is the company itself which means the company’s core-competency and the differentiation of their product could be extracted from its internal potential.  Clearwater achieves their innovation by integrating the harvesting and processing, devising the special storage facilities called dryland pounds and investing in basic science by focusing on its premium core-competency, the freshness. Also, the atmosphere of the G21 organization and the flexible assignment of human resources in Toyota become a huge driving force to launching Prius which is a representative for technological innovations.

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