HOW SMALL FIRMS INNOVATE SUSTAINABLY

In Business, November-December, 2004, Vol. 26, No. 6, p. 24

Here's advice on using best practices and resources that pay off … build brand equity and make results more profitable.

Kris Nelson

SMALL and medium enterprises (SMEs) don't enjoy the incentives, subsidies, and scale advantages that large firms do. They struggle. Yet small business around the world is the engine that drives the economy. SMEs face both stiff competition and a rising bar of excellence in achieving sustainable practices. That leaves them to squeeze every dollar and every benefit from their under-funded attempts to do the right thing.
Fortunately, SMEs have access to best practices and resources that pay off, build brand equity and community support, that help sustain ecosystem services…practices that make this triple bottom line achievable and profitable.
Presenters at the recent Profitable Sustainability conference in Seattle (September 26-29, 2004) provided a multitude of useful tips and resources for SMEs to innovate better and be successful. One common thread to emerge was how SMEs are succeeding at improving the sustainability of their supply chain. Another was how SMEs are cooperating to lower operating costs while improving their triple bottom line. A third was what early adopters are finding to be successful and green. How green business can avoid ineffective marketing also emerged as a theme.

GREENING THE SUPPLY CHAIN
Improving the supply chain's sustainability requires tenacious focus. Gil Friend, a seasoned innovator of sustainable practices and CEO of Natural Logic in Berkeley, California, emphasizes that successful small businesses make a special effort to read their marketplace, asking, “Where are your customers going? Customers include your supply chain businesses. Have you surveyed them to know what they are doing to source sustainable materials and become more efficient?” Says Friend, “Everyone, whether you're large or small, has to operate radically more efficient because that's where the economics make sense.”
If your business hasn't done so already, find out the numbers on the impact of your materials. Bill Shireman, CEO of Future 500, a nonprofit organization whose purpose is to advance sustainable technology and shift purchasing practices, encourages small businesses to start with the basics: “Conduct a materials audit, such as use of paper. Look at changing whole systems so that you might eliminate these materials. Then,” he urges, “evaluate the quantity and sources of raw materials.” Bob Willard, author of The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line, suggests following benchmark metrics to identify the best benefit for the buck. “What have people been able to get and how does that compare to what you could get?” he asks.
Greening the supply chain is one step toward optimizing the return on efficiency improvements. The challenge is to spread the approach company-wide, claims Willard: “So, make sure the whole business is involved in a strategic way. That means a planned approach.” Especially in medium-sized companies, the trick is to get the attention and commitment of the senior management and the lowest-paid staff without insulting their intelligence, he says.
Efficiency can often be improved collaboratively. At the Burnside Industrial Park in Nova Scotia, the eco-efficiency center assists small businesses that don't have the staff or resources to research, network, and avail themselves of efficiency opportunities. The center coordinated a “pallet cascade” to match one size of discarded pallet with those who need it. Those receiving supplies from Europe, for example, provided pallets to those who ship to Europe. “For the companies involved it's been a big savings,” says Tracy Casavant of Eco-Industrial Solutions, Ltd., in Vancouver, British Columbia. “So by working together they can better identify the opportunities.” It's likely that other small businesses near you are interested in achieving similar improvements in their supply chain impact.

COLLABORATING TO IMPROVE THE TRIPLE BOTTOM LINE
The SMEs that strategically begin to embrace a triple bottom line in conjunction with others are showing innovative approaches to increasing revenues. Consider research and development. Small and medium businesses can leverage their tight resources by collaborating on R&D. Beyond federal and state programs such as the Environmental Protection Agency's Energy Star program (energy management, etc.: ww.energystar.gov) and the Department of Energy's Best Practices program (www.oit.doe.gov/bestpractices/), local networks are also effective. One example is Berkeley, California's Sustainable Business Working Group. “It's a public-private partnership. They're addressing energy and land use policy. They're forming purchasing cooperatives,” explains Friend.” We're working with UC Berkeley to create an R&D channel to local business needs. Schools are untapped resources.”
Besides R&D collaboration, SMEs can take advantage of their brand equity in the community by partnering with local nonprofits. Points out Friend, “There are business allies for every social or environmental cause. Those need to be identified and acted upon.” Once networks of businesses build alliances with nonprofit advocates, they begin to recognize the influence they can have collectively, such as “advancing changes in the marketplace and bringing companies together with environmentalists to change some of the signals in the marketplace if they're leaning to nonsustainable practices,” he says.
In Canada, one industrial park is working to operate as an ecoindustrial system. A first step for cooperation is to establish an advisory committee among the interested parties, explains Casavant. A priority project is to identify and study the raw materials being used and the wastes being produced. If you can find six businesses that use the same material, then they can work with a bigger supplier or volume orders to access it. In the process, the cooperators create another product: “Just doing the study to identify who has waste and how much is not enough. The relationships are important to secure supplies,” she emphasizes. Other opportunities to work together may arise. Take logistics and training. One company in an industrial park supports 24 training courses a year. Until they joined an advisory committee, it hadn't occurred to them that several other businesses around them had to provide the same training to their employees. In many cases, they hire out the needed training. Casavant found that “if you're a small business, those cost savings are more significant than for a large business.”
Even without the organizing opportunity of an industrial park, small businesses are exploring collaborative relationships in geographic terms. In Vancouver, BC, the Greater Vancouver Industrial District is discovering how an ecological, collaborative approach can work among businesses in a regional town center, a commercial sector. “You have restaurants and shops and services and they're all taking in paper and packaging and using water and electricity,” says Casavant. “It's on a smaller scale, but they're looking at the barriers and opportunities on that scale.”
Another collaborative mechanism worth considering is the role of the local chamber of commerce. In the Vancouver area, the Delta Chamber of Commerce is coleading the formation of an ecoindustrial partnership. They've organized workshops and meetings to educate stakeholders about how ecoindustrial networking works and the benefits being achieved elsewhere. Then the regional government conducted a study to determine what the area's collective expense was for water and energy per year. They found that the businesses spent about $20 million, for example. Casavant's firm provided a forum for the businesses to discuss avenues to cooperate and reduce their environmental impact and increase cost savings. It worked.

SUPPORTING GREEN EARLY ADOPTERS
Emerging businesses scramble, by necessity, to effectively uncover and draw on a spectrum of development resources. Shireman points to New Leaf Paper as an example of partnering with nonprofits. As a start-up, the company worked with nonprofits and activists to become known as the champion of recycled paper. Much of their business still comes from people saying if you're not using New Leaf Paper, you're not supporting a cause, a movement. “People and customers are skeptical when a company comes to them and says this product is better for the environment, but when an independent third party endorses that product, they're much more likely to believe it,” says Shireman.
Partnering with local nonprofits often adds to company value. A recent study found that over 70 percent of a company's value stems from intangibles, not what's recorded on an asset sheet. Ranking high as intangibles are usually reputation and brands. How does a company improve them? They strategically work on excellence in corporate responsibility and sustainability. “Both are high risks if you don't look after them,” says Willard. What are smart companies doing to improve them? It means getting ahead of those risks by demonstrating that your company understands, cares about, and acts on corporate responsibility expectations. If done locally too, it positions the company well “with their community, their so-called license to operate, whether it's legal or social,” adds Willard. “It's smart business.”
A major challenge for all early adopters is to be role models for the laggards in seeing the wisdom of sustainability. Willard explains that this comes down to the communication approach. That means articulating your story more convincingly. The drivers that move about five percent of the businesses to become more sustainable don't motivate the other 95 percent, he claims. If we learn from that, we'll get smarter about articulating the business value of adopting sustainable practices in the company as a strategic business initiative.
“What we need to do is talk a different language,” Willard urges. That suggests a new mindset. “It's no wonder that people don't understand the value of this because we're not connecting with them where they are today,” he believes. “What I'd like to do is go to a business and not talk about saving the world. I'd want them to get filthy rich from this. If they're interested in profit or shareholder returns, help them understand these strategies are a means to those ends. For those of us who see this as an end in itself, that's wonderful, but use that as stage three or stage four,” he says. “They're just trying to survive for the next quarter. It has to do with saving money and making money. That's the language we should be using.”
AVOIDING PITFALLS OF GREEN MARKETING
Early adopters may be prone to over-selling their green benefits, but even seasoned SMEs can learn from others to tactfully market green products and services. Take the recycled paper industry. What might they do now that most companies offer recycled products? Shireman says, “When your industry becomes a provider of the green product alternative, don't over emphasize the green aspect, because there is often a perception that green products compromise on quality or price.” He suggests stressing different and better. In a word, smarter. It might be less toxic to the user. It might last longer. It might save on using other materials or services to get the job done.
When asked what Shireman sees happening among sustainable SME leaders, he identifies a new consensus: “I think there's a general understanding that we need to become more pragmatic. Just articulating your ideals and expecting perfection doesn't accomplish anything. You've got to cause actions to change,” he states. Referring to old, consumptive ways, “If you're not causing actions to change, you're not succeeding.”

Kris Nelson is the principal of Geonomics Consulting in Portland, Oregon. He can be reached at krisjn@earthlink.net.

BUILDING SALES BY NETWORKING WITH NONPROFITS
ONE GREEN COMPANY that has effectively built partnerships with nonprofit organizations is New Leaf Paper. In 1998 in San Francisco, the company set out to raise end-user awareness of the benefits to using recycled paper, although the challenge was to break into a market that merchants for the large paper companies served. Enter nonprofit champions of forest and resource protection.
New Leaf identified specific nonprofits that were campaigning to shift commercial paper users to a greener paper. The company targeted books, magazines and catalogues to market their recycled paper in cooperation with the nonprofits. “We offer them samples to pass on to companies they've targeted,” said Justin Tiret, account executive in Portland, Oregon. Most nonprofits provide companies a list of recycled paper suppliers, so it's not an exclusive relationship, he explained.
One nonprofit partner in Canada, Markets Initiative, recommended that the publisher of the latest Harry Potter book use recycled paper prior to their printing in Canada. The group gave the publisher New Leaf Paper's information, who contacted New Leaf and awarded them the paper contract.
Another company approached networking with nonprofits with education of sustainable alternatives to toxic cleaners as the goal. Coastwide Laboratories - based in Portland, Oregon - grew out of an old cleaning products company. Ten years ago, it began to reinvent itself and the environmental cleaning products industry through its partnerships with schools and institutions, leading to relationships with local nonprofits.
The company faced the challenge of early biobased cleaners not performing well and costing more. They also faced the low cost bidding practices of schools, which exposed janitors to unsafe chemicals. They realized they needed to shift perceptions toward the added productivity and value gained from using safe, environmentally sound cleaners. They started by networking with the Building Owner and Managers Association and the Oregon Natural Step Network (ONSN). Then things started to click.
The ONSN forums led to meeting the manager of a sustainable redevelopment project. The redeveloper wanted to achieve Leadership in Energy and Environmental Design (LEED) status for a new, multi-use building. They discussed how to work together . “Tell us how we can keep this building green and meet the expectations of the condo owners,” explains Rick Woodward of Coastwide Laboratories. Now the owners receive both educational materials on green cleaners and two free bottles of green cleaners. They can refill their bottles from the building concierge.
Since then, Coastwide has forged a growing relationship with a regional nonprofit, the Northwest Earth Institute. Hoping to apply their value of supporting community sustainability, the company opened a dialogue with the Institute's staff. Woodward invited them to visit the company's facilities, “so when they have an opportunity to discuss facilities' sustainability, they can talk with others about that,” he said. The staff did visit several times. The company's organizational commitment to sustainable values shined, and soon the Institute helped set up green teams among employees to learn more broadly about sustainability. Next, employees will also participate in Institute workshops on a variety of topics. Such a relationship based on reciprocal education promises long-term opportunities for collaboration. - K.N.

RESOURCES FOR THE ECOINDUSTRIAL PLAYER
o Yale University published a book called Developing Industrial Ecosystems: Approaches, Cases, and Tools (Bulletin 106), which looks at commercial centers: www.yale.edu/environment/publications/bulletin/106.html.
o The Eco-Industrial Development Council held an event in Vancouver, BC, recently. They posted 30 presentations online, which include presentations about small and large communities, by people who are working on projects: www.eco-industry.org. The site includes a report by the Delta Chamber of Commerce. They're supporting a triple bottom line approach to economic development. They would like to see it transferred to some of their towns to act as a model for sustainable business.
o Eco-Efficiency Centre in Burnside, Canada: www.mgmt.dal.ca/sres/
eco-burnside/homepage.html
o Library for Eco-Industrial Networking: www.cardinalgroup.ca/cein/
virtual.html
o The Network for Business Innovation and Sustainability (NBIS: www.nbis.org), the main sponsor of the Profitable Sustainability conference in Seattle, has a new Web site for enabling members to share best practices, resources, news, and dialogue about sustainability issues and policies: www.fmyi.com/NBIS.
o Eco-Industrial Case Studies: www.smartgrowth.org/library/eco_ind_case_intro.html
o The US Department of Energy's Center of Excellence for Sustainable Development Web site provides information about other communities that have discovered the benefits of sustainable development, helps to locate technical and financial resources that can help communities plan and carry out sustainable development projects and provides access to model codes and ordinances that other communities have used to implement sustainable development. Specific information about eco-industrial networks can be found under the heading of Sustainable Business: www.sustainable.doe.gov/business/buintro.htm.

Copyright 2007, The JG Press, Inc.