Target Sustainability Audit and ReportSubmit PowerPoint presentation with 3 slides (rubric attached) about the company Target.Environmental/Sustainability Benefits: Discuss the emerging opportunities in the evolving “green markets.” In this part, cite strategic opportunities to pursuing green markets. One part of this would be to summarize the different green markets in the Clorox case and provide the strategic discussion as to how they successfully developed green brands or programs for the Company you have been assigned.. Summarize the benefits of these efforts for marketing, branding, reputation enhancement, and how it may relate to the IPAT model etc.In the above assignment, do NOT forget the benefits that accrue to people, consumers, localities, and other stakeholders as well as the planet. Sustainability is not just about money (or solely an instrumental benefits to the firm’s shareholders alone). Triple bottom line thinking is required. Benefits are financial, social, and environmental, and these benefits are related to each other.
SOON AFTER ITS LArox’s Brita water fiship position amonsystems, and b70% of the markfive yBrita’patience within, and in MaDon Knauss tolBrita had two ywould be sold offboard,question was, Hothis thing?” Then cturn: Brita recovwithin mon
Gregory Unruh (gregoryunruh.com) is a professorand the director of theLincoln Center at Thunderbird School of GlobalManagement and the authorof Earth, Inc. (HarvardBusiness Press, 2010).
Richard Ettenson ([email protected]) is an associate professor and a Thelma H.Kieckhefer research fellowin global brand marketingat Thunderbird.
Green growingThree smart paths to developing sustainable productsby Gregory Unruh and Richard EttensonUN SPHOTOGRAPHY: JUSTIN GOODE/GETTY IMAGES94 Harvard Business Review June 2010CH, in 1987, Clolter seized a leader
g pitcher filtrationy 2002 it controlledet. But over the nextears, as the market contracted,s share declined. Management’sth the brand soon worey 2007 Clorox CEOd shareholders thatears to improve or it. “When I got on” Knauss remembers, “thew quickly can we sellame a remarkableered its momentumths, achieving double-digitgrowth and leading the brand backwith a vengeance.How did its managers do it? By going green, as we’ll detail below.That strategy wouldn’t have beenobvious 10 years ago. But thanks toaggressive leadership by some of theworld’s biggest companies—Wal-Mart,GE, and DuPont among them—greengrowth has risen to the top of theagenda for many businesses. From2007 to 2009 eco-friendly productlaunches increased by more than500%. A recent IBM survey found thattwo-thirds of executives see sustainability as a revenue driver, and half ofthem expect green initiatives to conferHBR.ORGGROWING GREEN: THREE SMART PATHS TO DEVELOPING SUSTAINABLE PRODUCTSABEST PRACTICES Who accentuates well?SUPPLY CHAINNike requires that itsleather suppliers notsource from clear-cutAmazon forests.MANUFACTURINGFrito-Lay installed solarpanels on its SunChipsfactory.PRODUCTCSX markets rail as themost environmentallyfriendly option for movingfreight.PACKAGINGSara Lee’s modifiedpackaging for HillshireFarm has resulted in 900fewer truck trips a year.MARKETINGCOMMUNICATIONSStihl points out that itstrimmers and blowershave emission levels lowerthan those required bythe EPA.96 Harvard Business Reviewcompetitive advantage. This dramatic shift in corporate mind-set and practices over the past decadereflects a growing awareness that environmental responsibility can be a platform for both growth anddifferentiation.Nonetheless, the best approach to achievinggreen growth isn’t always clear. This article is for executives who believe that developing green productsmakes sense for their organization and need to determine the best path forward. We will introduce anddescribe three broad strategies—accentuate, acquire,and architect—that companies can use to align theirgreen goals with their capabilities. These strategiesemerged from 10 in-depth case studies of consumerproduct and industrial companies that were movinginto the green space; we validated the studies in discussions with dozens of senior and midlevel sustainability executives. The framework now plays a central role in the core executive MBA course offeringsin sustainable business strategy and in the executiveeducation programs at Thunderbird School of GlobalManagement.As we’ll see, green product development bringswith it unique cultural, operational, and executionchallenges.PATH #1AccentuateAn accentuate strategy involves playing up existingor latent green attributes in your current portfolio. Ofthe three strategies, it’s the most straightforward tocraft and implement and thus is a good place to start.Some companies find it easy to accentuate. Forexample, Church & Dwight’s Arm & Hammer bakingsoda has attributes that were just waiting to be leveraged. As green competitors emerged, and as customers demanded more environmentally friendlychoices, Arm & Hammer’s managers emphasizedits green credentials, positioning the brand as “the#1 environmentally sensible alternative for cleaningand deodorizing” and “committed to the environment since 1846.”Other companies may have to work harder thanChurch & Dwight did, but they can still harvest lowhanging green fruit. Consider how Brita repositionedits water filters. A decade ago Brita’s sales were siphoned off by the rising popularity of bottled water,which exploded into a billion-dollar business. Butwater bottlers attracted loud critics such as the WorldWide Fund for Nature and Corporate AccountabilityInternational, which condemned them for cloggingJune 2010landfills with plastic and deceptively advertisingtheir product as better tasting and healthier thantap water.Brita’s managers were quick to see an opportunity. Company research showed that replacingbottled water with Brita systems could potentiallykeep millions of bottles a year out of landfills. Tocapitalize on this benefit, the managers pursued anintegrated cross-media communications strategyto tout Brita’s green attributes, educate consumers about bottle waste, and encourage a switch togreener alternatives. As part of this strategy, thecompany launched FilterForGood, a website thatinvites visitors to pledge that they will reduce plastic waste by switching to reusable bottles. A deviceon the site graphically updates the tally of bottlessaved. Brita’s managers ensured that the mediapicked up on FilterForGood—for example, by arranging a partnership with NBC’s television showThe Biggest Loser. Within a year the company’s waterpitcher sales jumped a robust 23%, compared withjust 2% for the category overall.Brita’s impressive success came in part becauseit did not overreach in its sustainability claims. Companies that decide to pursue an accentuate strategy would be wise to follow its lead. Activists andenvironmental experts will not hesitate to pointout greenwashing or other undesirable corporatebehavior when they see it. Consider the experienceof Arm & Hammer. Promoting the environmentallyfriendly attributes of the product was easy, but thecompany overlooked a major liability: It used animal testing. Activists took to the blogosphere andcalled on customers to switch to the cruelty-free andequally green Bob’s Red Mill baking soda. Althoughsuch complaints won’t necessarily reach or resonatewith all your customers, anticipating and headingoff criticism will strengthen your overall greeningefforts. Transparency in claims and authenticity inexecution are important elements in the long-termsuccess of any green strategy.The broader your brand portfolio, of course, themore exposed you may be to activist and consumerbacklash. Most companies lack a green heritage;their products were developed before sustainabilitywas a concern. So they must carefully gauge howthe rest of their portfolio will look by comparisonwith the accentuated product. Touting the greenattributes of some products inevitably prompts theresponse “Great! But what about the rest of yourofferings?” A big gulf between your green and nonHBR.ORGIdea in Brief
Green growth is at the topof many leaders’ agendas,
An accentuate strategyinvolves highlighting ex istinggreen attributes in your
but the way forward is rarely company’s portfolio. An
alternative is to acquirea green brand. If youhave substantial product-development skills andassets, you can architectnew offerings—build themfrom scratch. Which strategyis best depends on how“greenable” your portfolio
clear. Here are three broadproduct strategies that canalign your green goals with
your capabilities.
is and how ad vanced yourgreen product developmentcapabilities are. HIGHACCENTUATEFor any of these paths,understanding customers’GREENABLE ATTRIBUTESANY OFTHE THREEexpectations and competitors’ capabilities, andaligning offerings andmessaging to preventLOW HIGHACQUIRE ARCHITECTGREEN DEVELOPMENT CAPABILITIEScharges of greenwashing,are essential to success.Beware: Activists will not hesitate to point outgreenwashing when they see it.green products can undermine your legitimate sustainability claims.Consider BP’s troubled “Beyond Petroleum” rebranding effort. The company’s Helios logo and theprominent solar panels on its service stations couldnot hide the fact that more than 90% of its revenuescame from oil. Fortune highlighted the disparitywhen it wrote, “Here’s a novel advertising strategy—pitch your least important product and ignore yourmost important one.” To avoid negative commentary like this, make sure your strategy aligns withcustomers’ perceptions.Brita did that well. Its managers were careful intheir initial communications not to claim that theirbrand was a “green product” made by a “green company.” They recognized that Brita filter cartridges hadto be replaced every few months and were not beingrecycled. Because the FilterForGood campaign waspredicated on eliminating that kind of waste, themanagers realized that they needed a recycling solution for the cartridges. They forged an approach incollaboration with Preserve, which manufacturesproducts using recycled plastic, and with WholeFoods Market to provide a solution that was simplefor customers and highly visible.“The filter recycling program builds on the success of Brita’s FilterForGood campaign,” the company announced—and went on to share creditwith its customers: “Now Brita users are makinganother positive impact by recycling Brita pitcherfilters.” By accentuating the product’s green attributes and eliminating or mitigating its nongreenelements, Brita enhanced the credibility of its sustainability efforts.PATH #2Acquire Acustomer base. Within a year after Unilever acquiredBen & Jerry’s, for example, sales had increasedby 70% and Ben & Jerry’s had displaced HäagenDazs as the leading premium ice cream brand.The prospect of such robust growth is of courseappealing, but managers who seek another company’s green assets should be mindful of two considerations: Culture clash and strategic fit. Any merger oracquisition can stumble when company cultures collide. In green acquisitions that have idealistic, iconoclastic founders and countercultural workforces, theproblem is exacerbated. Consider Groupe Danone’stakeover of Stonyfield Farm. When shareholdersforced Stonyfield’s founder, Gary Hirshberg, to sell,he spent two years compiling a list of conditions—including rules about worker protection and environmental restrictions on business operations—toensure that the company’s social mission would bepreserved. It took another two years to close thedeal. By contrast, Unilever got around some but notall of the “founder challenges” at Ben & Jerry’s bycompleting what was in effect a hostile buyout ofthe brand. This approach caused many activists tocry foul and deprived Unilever of the wholeheartedIf your portfolio has no obvious candidates for accentuation, a good alternative is to buy someone else’sgreen brand. Many high-profile green acquisitionshave been made since 2000, including The BodyShop by L’Oréal, Ben & Jerry’s by Unilever, and Tom’sof Maine by Colgate-Palmolive. In such deals the buyer’s channel and distribution capabilities are oftenexpected to substantially broaden the green brand’sBEST PRACTICESWho acquireswell?NEGOTIATIONSColgate approached Tom’sof Maine with trust andrespect, viewing the dealas a partnership ratherthan a takeover.COMPANY INDEPENDENCEUnilever agreed to keepBen & Jerry’s separatefrom its U.S. ice creambusiness, with anindependent board ofdirectors.INTERNALCOMMUNICATIONSTom’s of Maine assuredemployees that theacquisition would helpColgate innovate aroundsustainability principles.EXTERNALCOMMUNICATIONSA joint press release fromDanone and Stonyfieldhighlighted the benefitsto both companies of twoway knowledge and talenttransfer.June 2010 Harvard Business Review 97GROWING GREEN: THREE SMART PATHS TO DEVELOPING SUSTAINABLE PRODUCTS
support of the ice cream maker’s founders. BenCohen said, “Most of what had been the soul of Ben& Jerry’s is not gonna be around anymore.”All acquisitions present myriad management
Insight was), but it now dominates the fast-growingmarket for more-fuel-efficient cars. Toyota’s boldmove to create a green brand has paid handsomedividends. The Prius towers over the Insight, itsclosest competitor, in market share. Its dominancehas so distracted consumers from rival brands thatsome Honda dealers complain of customers whowalk into their showrooms and request a test-drivein the “Honda Prius.” Toyota has also successfullytransferred its hybrid expertise and green know-howto other brands in its portfolio. In 2005 the companybecame the first to establish green credentials in theluxury-car space when it produced a hybrid versionof the Lexus. Over time, Toyota’s luxury competitors
challenges, so the problems of integrating an idio
syncratic green business may not seem like a bigdeal. But scrutiny by the green community mayundermine the otherwise solid business benefits ofthe acquisition. Even if product sales go well, sharp
questions will most likely arise about the new par
ent’s green credentials. If the acquisition goes badlyand sales tumble, not only is the value of the new
asset diminished but—potentially even more damaging—the acquirer risks being accused of deliber
ately destroying a green competitor. Coke faced suchcriticism after it bought Planet Java coffee drinks andMad River Traders teas and juices and then phasedthem out two years later.
Clorox, too, in developing its Green Works cleaning products, shows how companies with limitedgreen expertise but substantial product development capabilities can architect a green brand. GreenWorks has received a lot of press, but the details ofClorox’s strategy—which we studied from inside thecompany—are less well known. The line of household cleaners emerged from a small skunkworks inthe Clorox Technical Center led by a handful of independent and dedicated scientists. In less than a yearcompany researchers established the benchmarkdefinition and best practices for a “natural” cleaningproduct and proceeded to design a line of offeringsthat would deliver the efficacy customers demand.The big surprise came when the marketing teamshopped the original five Green Works products(glass, surface, all-purpose, bathroom, and toiletwere forced to follow suit. Mercedes-Benz and BMWrecently introduced hybrid models to meet growingconsumer demand and to establish their green credentials and capabilities, and Audi and Porsche willsoon do the same.bowl cleaners) to major distributors, including WalMart and Safeway. According to a Green Works manager, “The realistic part of our expectations was ‘Hey,if we get three or four SKUs, we’ll be pretty happy.’”To the team’s delight, Wal-Mart wanted all five. Distributors across the board asked for the entire Green
An acquiring company’s actions may have an adA
verse effect on the carefully crafted brand image of
the acquisition. For example, when Danone’s agree-
ment with Stonyfield about employee protection
ended, Danone sent out pink slips and met with hos-
tile reactions in the press. Such criticism may have
limited impact on the bottom line, but it can dimin-
ish the credibility of a company’s green efforts.
Successful green brands are attractive targets be-
cause they have loyal customer bases and because
they come with specialized knowledge about eco-
friendly innovation and manufacturing, sustainable
supply chain management, and green market devel-opment. Bill Morrissey, the vice president of environ-
mental sustainability for Clorox, told us that Clorox
had not only growth but also knowledge transfer in BEST PRACTICESmind when it acquired Burt’s Bees, which had two Who architects
decades of leadership in the green product space.
well?
PATH #3Architect
NEW-PRODUCTDEVELOPMENT
For companies with a history of innovation andsubstantial new-product-development assets, architecting green offerings—building them fromToyota directed itsengineers to developa new fuel-efficient andenvironmentally friendly
scratch—becomes a possibility. Although architectvehicle within three years.Works line and requested that the brand be extended
ing can be slower and more costly than accentuatingor acquiring, it may be the best strategy for somecompanies, because it forces them to build valuableNEW PRODUCTIONMETHODSPatagonia created a line ofproducts using a closed
into other categories.The development of Green Works induced Clorox to accumulate a range of new competencies, in
competencies. Toyota took this route when it develloop production system itcluding specialized knowledge about eco-conscious
oped the Prius. Although the company is currentlyaddressing a raft of quality problems, the lessons ofits architect strategy still stand. The Prius was not thecalls EcoCircle.SKUNKWORKSClorox provided theresources for a separate
consumers’ preferences and expertise in the supplychain for natural-product sourcing and procurement.Through its deepened relationships with Wal-Mart
first hybrid introduced in the U.S. market (the Honda98 Harvard Business Review June 2010Green Works business unit.and other distributors, Clorox quickly doubled theHBR.ORGAnalyzing Growth OptionsTo evaluate the fit of a given green product strategy, ask the following questions:Accentuate
FIRST STEPS
YOUR PORTFOLIO
YOUR CUSTOMERS
YOUR COMPETITORS
RED FLAGS
What’s our strategic goal?• To leverage latent assets?• Revitalize existingbrands?• Broaden appeal to greencustomers?• Gain green credibility?Are there potential greenbrands in our portfolio?Do we have the resourcesand capabilities neededfor this initiative?
How will this initiativeaffect the positioning ofand resources for ourexisting brands?Should our greened brandbe a stand-alone or astrategic brand that puts agreen halo on the businessas a whole?
Which consumers in thecategory are looking forgreener products?Does our candidate brandhave “permission” to enterthe green space?Can we enhance the valueof green in the category?
Are our competitorsgreening their existingproducts?Can we differentiate ourbrand?How can we exploitour competitors’ greenweaknesses?How can we capture a“share of voice” in thecategory?
Do we have environ mentalskeletons in our currentportfolio or businessmodel?Will our green claimsbe credible—or are wevulnerable to accusationsof “greenwashing”?
Acquire
FIRST STEPS
YOUR PORTFOLIO
YOUR CUSTOMERS
YOUR COMPETITORS
RED FLAGS
What’s our strategic goal?• To capture customers?• Bring in new greencapabilities?• Broaden access tomainstream customers?• Gain green credibility?Which companies wouldmake attractive greenacquisitions?Do we have the resourcesand capabilities neededfor this initiative?
How will this initiativeaffect the positioning ofand resources for ourexisting brands?Will the initiative providenew abilities that can beapplied to other brands?Should our acquired brandbe a stand-alone or astrategic brand that puts agreen halo on the businessas a whole?
Can we sell the greenbrand to our currentcustomers?Will acquired customersview us as a crediblesteward of the brand?
Is this the prototypicalbrand in the green niche?How can we exploitour competitors’ greenweaknesses?How can we prevent competitors from poaching ournewly acquired customers?Can we add green attributes to the new brandor emphasize existingattributes to increasecompetitiveness?
Do we have environmental skeletons inour current portfolio orbusiness model?Will our green claimsbe credible—or are wevulnerable to accusationsof “greenwashing”?Does the proposedacqui sition have an iconicfounder, a counterculturalworkforce, or some otheraspect that might createculture clash?Can we preserve theintegrity—“the magic”—of the acquired brand?
Architect
FIRST STEPS
YOUR PORTFOLIO
YOUR CUSTOMERS
YOUR COMPETITORS
RED FLAGS
What’s our strategic goal?• To create new greensolutions?• Develop unique competencies?• Respond to new marketneeds?• Gain green credibility?Will an independentbusiness unit be required?Do we have the resourcesand capabilities neededfor this initiative?
How will this initiativeaffect the positioning ofand resources for ourexisting brands?Will the initiative providenew abilities that can beapplied to other brands?What will be the relat ionship between the parentand the new line?
What innovations areconsumers looking forin a greener alternative?Does our parent brandhave “permission” toenter the green space?Will this initiative requireus to develop a newbrand?Will we need to educateand develop the marketand bring new customersinto the category?
Are we creating a newgreen category?Can we differentiate ourbrand?How can we exploitour competitors’ greenweaknesses?Does the categoryalready have entrenchedcompetitors?
Do we haveenvironmental skeletonsin our current portfolio orbusiness model?Will our green claimsbe credible—or are wevulnerable to accusationsof “greenwashing”?
June 2010 Harvard Business Review 99GROWING GREEN: THREE SMART PATHS TO DEVELOPING SUSTAINABLE PRODUCTS HBR.ORGsize of the “green clean” market. Even niche brands suchas Seventh Generation andMethod benefited from itsmarket development.Making GreenGrowth HappenWith an understanding of thethree paths to green growth,managers can begin to craft astrategy that suits their objectives and their business context.They should begin by evaluatingeach option: Is it feasible? Is it desirable? How would it be implemented?
Feasibility. In this step companiestake stock of their assets along two dimen
also knowledge transfer in mind
sions: greenable attributes of their existing products and brands, and organizational green product when it acquired Burt’s Bees.and brand development capabilities. The first requires a careful review of opportunities to promotebrands’ green benefits. Of course, each product willhave its own category-specific attributes, rangingfrom recyclability to energy efficiency to reducedtoxicity. The Global Reporting Initiative’s list ofmore than 70 sustainability performance indicators,at www.gri.com, is an excellent resource for managers. It can help them to identify less obvious greenfeatures and benefits that are suited to an accentuateapproach or to frame strategies and gauge capabilities required for an architect approach.Clorox had not only growth butThe second dimension involves appraising thecompany’s green resources and capabilities. Thismay include a broad review of the processes and priorities for innovation and new-product development,supply chain management, the coordination of andcollaboration among distributors, and even partnerships with environmental organizations.Desirability. In this step, managers assess thestrategic fit of each option with the company’s objectives and the resources they can bring to bear onthe green initiative. They need to consider speed tomarket and the investments, reputation, and competencies that the initiative will require. For example,an acquire strategy will deliver high speed to marketfor a company setting out with low green credentials and low to medium green capabilities—but itinvolves significant investment. A company choosing an architect strategy must have high green capabilities and medium to high green credentials—andbe prepared for a low speed to market. Companiesunwilling or unable to allocate major resources forgreen initiatives will find accentuation the mostattractive way to enter green markets. For others,green growth may be part of an enterprisewide sustainability initiative to retool operations, shift theculture, and, ultimately, reposition the organization.Implementation. This third step involves actingon all the factors that affect successful execution. Asoutlined in the exhibit “Analyzing Growth Options,”companies must align their green strategy with theirexisting product portfolio and devote or develop theresources and capabilities needed to achieve theirstrategic goals. They must ensure that the strategysatisfies customers’ expectations and, when possible, takes advantage of competitors’ green weaknesses. Finally, they must address “red flag” issuesthat could undermine implementation.WHATEVER PATH you choose—accentuate, acquire,or architect—activists, customers, and the publicwon’t see your green initiatives as independent ofyour other activities and offerings. Rather, they willview your efforts as part of the organization’s overallapproach. That means the companies that ultimatelysucceed in growing green will be distinguished bytheir commitment to corporatewide sustainabilityas well as the performance of their green products.HBR Reprint R1006G100 Harvard Business Review June 2010Harvard Business Review Notice of Use Restrictions, May 2009Harvard Business Review and Harvard Business Publishing Newsletter content on EBSCOhost is licensed forthe private individual use of authorized EBSCOhost users. It is not intended for use as assigned course materialin academic institutions nor as corporate learning or training materials in businesses. Academic licensees maynot use this content in electronic reserves, electronic course packs, persistent linking from syllabi or by anyother means of incorporating the content into course resources. Business licensees may not host this content onlearning management systems or use persistent linking or other means to incorporate the content into learningmanagement systems. Harvard Business Publishing will be pleased to grant permission to make this contentavailable through such means. For rates and permission, contact [email protected].
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