In boom times or bust, "green" is smart business

It's not easy being green during a slowdown, but that's likely what it'll take to stay in the game.

By Art van Bodegraven and Kenneth B. Ackerman

There will always be those who see the green movement as more fad than force of change. And the booming business in green conferences, books, webinars, and so forth has only given cynics further reason to sneer.

But the prevailing evidence suggests the green movement is more than a passing fancy and further, that green initiatives can deliver real benefits, including, believe it or not, long-term cost savings. Re-use, recycling, reduction, and renewability will ultimately all pay off some day. Pegging "some day" on the calendar is a bit of a challenge, but looking past tomorrow—or next quarter's earnings imperative—can help develop confidence in the economic, as well as moral, correctness of doing smart green things.

The question of the moment is how much momentum the green movement may have lost as a result of the economic slump. When the economy headed south, businesses began curtailing even essential expenditures—travel, training, inventory investment, hiring, and more. Executives, understandably, haven't had the stomach for initiatives—of any kind—with long payback periods. Any project lengthy enough to warrant talking about net present value or discounted cash flow has had virtually no chance of seeing the light of day.

Guess what—green initiatives tend not to be quick fixes and frequently take years and years to deliver payback. And quantum leaps are in short supply. Take solar power, for example. High cost is admittedly solar power's dark side. Although recent advances in technology have led to the development of a thin-film panel that costs 40 percent less than the popular silicon panels, there's a catch. The thin-film panels generate only half as much energy as their silicon counterparts, so the net gain is not yet exactly a breakthrough and won't change the long-term payback equation by all that much.

Maybe volume and some level of critical mass could change the cost equation a bit more. But it seems to us that the efficiency of panels of any type ought to be a focus area for improvement. The newer thin-film products convert anywhere from 10 to 14 percent of sunlight into electricity; that compares with 19 percent for silicon.

That vision thing
In the short term, however, it appears that when it comes to eco-initiatives, the focus will remain squarely on programs that offer a speedy payback. A 2009 survey of DC Velocity's readers showed a clear bias toward short-term, tried-and-true measures that deliver nearly immediate savings—notably in energy costs (see "into the green"). Bigger, longer-horizon efforts, especially those with less-certain paybacks, barely made the list.

We wish that companies and their leaders would avoid knee-jerk reactions in periods of transient difficulty. Somebody's going to break a jaw that way. We wish that every business leader had the courage and the vision to take the long view and do the right thing(s).

But sadly, only a few do. And the pressure to make a profit—and make it now—is immense. Not to mention how important it is in publicly held companies to not disappoint The Street. So, with a little luck, enough organizations will pursue the simple, short-term things that look like they'll keep the boss out of trouble in enough cases to make a bit of a difference.

As economic conditions improve, maybe there's a fighting chance of getting the really important green infrastructure bits back on the table.

Here's a harsh reality, and we can look to Europe for a preview of coming attractions. The dad-gum gummint isn't going to care that 2008/2009 were tough years. Our dedicated public servants are likely to become enthralled by the promise of green and mandate what we, as organizations, have got to do and when. Think the government won't be here soon? Surprise! The administration's secretary of labor has made the creation of green jobs a high priority.

Seems to us that the prudent management tactic for today is pre-emption. Doing everything we can—now—to make/save real money. Setting the wheels in motion for the big, but longer-term, projects that will make life both greener and more profitable into the coming decades. Our guess is that those who set strong and positive green agendas now are going to be way ahead of those who close their eyes and hope that the mandates are never issued.

When Washington sets the agenda and timeline, the relevance and payback for specific companies are typically not in the equation. But there'll be no forgiveness—and maybe even crippling penalties—for those who don't comply.

Staying in the game
So, it's not as easy being green as it might have been when companies were more profitable, but the stakes in being—or not being—green have grown. And those are the stakes we've got to deal with if we're going to be in the game.

Even if you're not quite ready to reconfigure your distribution network, or build a new green DC from scratch, or explore biofuels and fuel cell technology, there are things you can do—or plan for. Remember, though, simply swapping out light bulbs—while a good thing—won't get you remotely close to where you need to go in a new, green world.

Like it or not, we've got to get real about our efforts to green up our act, including initiatives that might be slow to produce results but can radically change the resource consumption equation. Using alternative fuel sources—and less of them—comes to mind. Extending preliminary advances into arenas with potentially huge payoffs—e.g., over-the-road trucking—does as well.

Art van Bodegraven, practice leader at S4 Consulting, may be reached at (614) 336-0346. You can read his blog The Art of Art at blogs.dcvelocity.com/the_art_of_art.

More articles by Art van Bodegraven

Kenneth B. Ackerman, president of The Ackerman Company, can be reached at (614) 488-3165 or ken@warehousing-forum.com.

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