1. STRATEGIC
ENVIRONMENTAL
MANAGMENT
Alfred Marcus
Carlson School of Management

2. What is Strategic
Environmental
Management?

3. From Compliance to Business
Growth and Development
 opportunity, not constraint
 enhance competitiveness
3

4. Win-Win
Conversion of Environmental Challenges to
Opportunities????
Old Model
Hi Win-Loss
Compliance
Profits Model (neutral)
New Model
Lo W in -w in
Good Bad
Environmental Performance

5. Evidence of Economic Benefits from SEM
 Corporate performance (CSP) and corporate financial
performance (CFP) are positively correlated.
 Reputation is an important mediator of the CSP-CFP
relationship.
 Meta-analysis of 52 studies by Orlitzky, Schmidt, & Rynes (2003)
5

6. Evidence of Economic Benefits from SEM
 Saving $ through energy saving and prevention of
risks/lawsuits
 Support from socially responsible investment
 $3.07 trillion in 2009 ($2.71 trillion in 2007)
(Social Investment Forum, 2010)
6

7. H O W A C H IE V E
S E reduce wastes
•LOWER COSTS:
M???
•INCREASE REVENUE: higher value products
INNOVATE ----INTRODUCE NEW TECHNOLOGIES
learning
Cost
b e n e f it s
Time

8. SEM Valuation
•Energy Efficiency
•Material Efficiency
•“Dematerialization”
•Reduction of Toxicity
Costs
Strategic
And Earnings Cash Change
Policy Flow In
Decisions Value
Risks
Cost of Capital

9. 3M --Dr. Joe Ling:
Pollution Prevention
“Pollution is … unused raw
material. By reducing the
amount of pollution, … [3M
can] save money both on
pollution control and on raw
materials the next time around.
It's a win-win situation.”
Dr. Ling launched 3M’s Pollution
Prevention Pays program in 1975

10. POLLUTION PREVENTION
LOWERS COSTS: REDUCES WASTE
product T
T 1
O
O
T
T haz/solid A
A 2 waste
L
L
Process/process
waste O
I step water
3 U
N
T
P
air P
U releases U
T
4 T
S
T o t a l in p u t s = other
S
To ta l o u tp u ts

11. Pollution Prevention Pays (3P)
 Foundation for governmental
environmental 3M’s 3P Results
(aggregate first year savings)
policies/programs
globally  Over 3 billion pounds of
pollution prevented
 Benefits for 3M or for its  Over $1.4 Billion saved
customers & suppliers.
 Fundamental to 3M philosophy

12. Valuation: Environmental Elements
•New products
•New markets
•New clients
• Price premium
Costs
Strategic
And Earnings Cash Change
Policy Flow In
Decisions Value
Risks
Cost of Capital

13. NEW GREEN PRODUCTS 1985-1990
Do consumers accept?
350 308
12%
Introductions per Year *
300 9.2%
Percent Share of Total Introductions
10%
250
262
200
* 8%
160
250 * 6%
122 4.5%
150
60
* * 2.8% 4%
100 2.0%
24
1.1% 2%
50 *
0.5%
0 0%
1985 1986 1987 1988 1989 1990
Note: Chart includes any product that claims in label or advertising to address environmental concerns.
Source: Marketing Intelligence Service
18

14. 3M- Using the Sun Instead of
Electricity
“Piping” sunlight
through a building
• Enabled by 3M Multilayer
Optical Film
• Materials & process
breakthroughs

15. “Core Daylighting” Impact
 Prototype systems installed in Canada, U.S. and
Middle East
 Energy savings larger than anticipated
 System now being commercialized
 3-5 Year payback anticipated

16. New Green Products Today
Do Good Bottom of the
– Affirmative !!! Pyramid (BOP)
• Activist
• Eco-entrepreneur Entrepreneurial
– Sustainable Opportunities
• Environment
• Social
• Economic

17. A $ 5 trillion Market

18. WHAT BUSINESS TO BE IN?
INNOVATE ----INTRODUCE NEW TECHNOLOGIES &
PRODUCTS
*Develop and acquire “green businesses”
*Divest and alter “environmentally damaging businesses
11

19. Strategic Realignment by Du Pont
 Edgar Woolard CEO 1989-95
 outspoken commitment corporate environmentalism
 “greening” of portfolio
 voluntary exit CFC production
 SUVA brand HCFC & HFC refrigerants, coolants, air
conditioning agents
 Chad Halliday his successor
 further “greening” of portfolio
 WHY?
 Global Challenge = Opportunity
 50% more mouths to feed
 aging population
 Technology
 7-8 years slight modification
 4-5 years whole new crop

20.  Funds research in “life sciences” with mature
businesses (e.g.nylon & polyester)
 Sells Conoco
 Acquires controlling interest Pioneer Hi-Bred

21. Uncertainties:
Obstacles to Realization
 Competition
 Monsanto: genetically modified material
• finance Searle - Nutrasweet & drugs (Celebrex)
– Novartis, Hoechst+Rhone Poulenc =Aventis
• same strategy
• Environmental & Regulatory
 Frankenstein Foods
 European regulation
 separation approved and unapproved strains
 food labeling
 Technological: picking winners - best options
 feedstocks for bioengineered chemicals
 corn for chicken feed
 soy for heart healthy oil

22.  SEM NOT EASY TO ACHIEVE: no slam dunk,
but necessary and essential to corporate bottom
line