Visionary leaders tackle great challenges with grand consequences over long timespans. How long? Well, the current crises in the global economy and the consequent reshaping of capitalism will work themselves out over a decade or two. But the threats posed by the potentially inexorable ecological meltdown of our planet will play out over centuries.
That meltdown has direct implications for business leaders. The vast majority of industrial platforms, designs, chemicals and other habits of commerce were developed blind to their ecological impacts. The discipline that reveals these impacts is but a decade or two old: industrial ecology, which measures the manifold consequences of any product with an engineer’s precision. The main method, life cycle assessment, renders values for the environmental, health (and, more lately, social) impacts of an item over the course of its entire life cycle.
Standard practices in industry and commerce today are largely the legacy of an ecologically innocent time, before we could assess such impacts. Now that we can measure those impacts, we need to rethink and reinvent almost every man-made thing. We need to innovate on a vast scale, finding new technologies that are at least neutral in their ecological impacts — and, ideally, some technologies that replenish our debts to nature.
This leap requires going beyond today’s business practices of identifying inefficiencies to save money and involves creating a marketplace where ecological impacts of every kind become a basis for gaining or losing market share. Leading this change in the most basic habits of business and industry will require leaders with daring, great vision, remarkable persuasive and collaborative skills, and a keen business sense.
Such leaders can capitalize on an emerging market force: ecological transparency. Recent innovations in information systems make it possible to create databases of life cycle analyses that aggregate masses of information in a consumer-facing display that instantly compares the ecological impacts of any product versus its competitors.
One proof-of-concept for such systems can be seen in GoodGuide.com, which launched only a few months ago. GoodGuide rates an item’s ecological impacts on a ten-point scale based on an aggregation of more than 200 databases — and lets shoppers instantly compare any product’s environmental, health, and social impacts with all its competitors. When I spoke with Dara O’Rourke, the University of California-based industrial ecologist who developed GoodGuide, he told me his hope for this information system is “to provide a giant lever that shifts markets to prod manufacturers incrementally to get better across the board.”
Facilitating that perpetual ecological upgrade is the point of Earthster, a supply-chain management system that takes openly disclosed LCA data, helps companies spot where they can make the biggest ecological improvements, and then guides them in finding suppliers who can provide the needed upgrades.
In a coming era of radical transparency a supply management system like Earthster might in turn feed precise metrics to a consumer-facing rating system like GoodGuide. That flow of data would fuel a process of ongoing innovation, as ecological impacts become as competitive an arena as price is today. As Gregory Norris, the industrial ecologist who designed Earthster says, “When anyone in your supply chain makes a smart move, it makes your product greener, too — as well as the purchases of everyone who buys your product. That ripple effect turns thousands of upstream suppliers into your allies, to the extent any of them make improvements.”
Achieving such an ecologically intelligent future will depend not on the actions of politicians, but executives at the companies who take the lead in embracing radical transparency as a core business strategy. Going first will immediately raise the bar for everyone, not the least by alerting the shopping public to their new power to weigh ecological impacts along with price and quality in their purchase decisions. Needless to say, such companies will score enormously in reputation points.
But to get there, leaders will have to first sell internally a major shift in thinking about some basic practices of global operations today, such as exporting externalities like pollution to some distant supplier, and disavowing responsibility. Great leadership here will come with a corporation acknowledging — rather than denying or disowning — the realities of what’s upstream and taking responsibility to upgrade operations in ways that mitigate the worst impacts, and publicly making this the beginning of a gradual, but perpetual, upgrade.
Toyota is the world model for such ownership of the supply chain, keeping their suppliers in touch with what customers want in their autos, and co-developing improvements. Another best practice model can be seen in Nike’s response to the revelations that their supply chain relied on sweatshops — and Nike then taking the leadership in its sector in finding ways to ensure fair working conditions.
There are countless executives leading sustainability initiatives at companies worldwide. Good starts, but no company has come near the full vision. Which consumer products company will accomplish the ultimate raising of the bar for all the rest: making LCA data fully transparent, vowing to lead the way in perpetual ecological upgrades? What retailer will be the first to post LCA product ratings next to the item’s price tags, and have brands compete for shelf space on the basis of their ecological footprint?
Whichever company that turns out to be will, no doubt, have a great leader at the helm, one who will hold a hallowed place in the history of business in the 21st century.
Originally posted at harvardbusiness.org