Is Slow the New Fast?

Posted by Rupert on Mar 3rd, 2010 | no comments home title

About the Author: During more than two decades as a consultant and entrepreneur in business and sustainability, Rupert Davis has worked at the investor, owner, board and chief executive levels. Today, as global head of MontaRosa’s Sustainability Practice, Rupert combines his finance background with a unique understanding of long-term environmental business engagement issues, including climate change action, triple bottom line entrepreneurship and clean tech development. Read more from this author

It seems that one thing you can always count on is that things get faster. Ever since the emergence of time-based competition, businesses have pushed for speed. Now one global company, the giant Danish shipping firm Maersk, is betting on slow.

As reported in the New York Times, shipping quickly across the ocean burns a lot of fuel – driving up costs – which in turn increases the negative environmental impact of the ships.

“By halving its top cruising speed over the last two years, Maersk cut fuel consumption on major routes by as much as 30 percent, greatly reducing costs. But the company also achieved an equal cut in the ships’ emissions of greenhouse gases.”

Maersk’s customers like the savings and many are willing to wait a bit longer for their goods in order to pocket the savings. The practice began two years ago in response to the spike in oil prices; the reductions in CO₂ are an added benefit.

I met Soren Stig Nielsen, Maersk’s director of environmental sustainability, when I was in Copenhagen for COP15. He told me that not only is Maersk adjusting their cruising speeds to maximize fuel efficiency, they are also using super-slick coatings on the hulls of their boats to reduce drag in the water.

Maersk’s moves are an example of creating advantage by looking at the business case for sustainability through a cost lens. Without the need for major investments in innovation, Maersk was able to drive down costs and increase its appeal to companies that are calculating the total carbon impact of their products. This strategy is similar in intent to the one pursued by Wal-Mart that resulted in a 30 percent improvement in their truck fleet efficiency over three years.

Of course cost is just one lens to use. Other companies look at brand, top-line growth, innovation, or regulatory advantage.

There was also interesting news in the latter category just a few days ago. BP, Conoco Phillips, and Caterpillar have all dropped out of the U.S. Climate Action Partnership (USCAP). While they have effluvious statements about why, from my view, these companies joined the partnership because it looked like either cap-and-trade or a carbon tax was a near-certainty and thought it best to be on the inside helping to shape the debate. Now that things are more in flux, they’ve calculated that it is better to be in the more traditional business position of slowing down regulation.

It’s a simple risk-reward calculation. As much as those of us who are true believers in sustainability may not like it, companies place these kinds of bets every day. They seek to advance their interests as they see them.

Increasingly it has been common for sustainability leaders to try to cement their advantage through regulation and public policy – USCAP was the poster child for this. If you’ve done more than others, why not try to make your standards the bar that others must clear? Those that haven’t will try to keep the bar as low as possible.

I think that an explicit cost for carbon and other greenhouse gases is inevitable but I can’t begin to guess how soon it will happen in the U.S. Executives at BP, Conoco Phillips, and Caterpillar obviously think that it will be later rather than sooner – and they’re going to do what they can to ensure their bet be right. Maersk, to bring it all back around, sees a clear case for burning as little of BP and CP’s fuel as possible. And even though three companies have dropped out of USCAP, those that remain – including the oil company Shell – represent something in the neighborhood of $3.2 trillion in revenues and they are actively advocating for legislative action around greenhouse gases.

Companies and industries look at sustainability from different perspectives. The lenses they use lead them to make different choices. Given the uncertain economy globally and the difficulty of advancing major legislation in the Congress in the U.S., it will be interesting indeed to watch it play out.

What do you think? If you were running one of the four companies I’ve written about, would you make the same bet – or a different one?

Rupert

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