MANAGEMENT AND THE NEW FRONTIERS (Managing Efficiency)

By Jonathan T. Scott

(All rights reserved. The following text and material is copyrighted.)

First, the Bad News:
Many people are aware that our environment is undergoing changes, but few appear to understand – or seem to want to know - the implications of this fact (equally ignored is the fact that there is money to be made in reducing this problem - not in an opportunistic manner, but in a long-term, sensible, ethical, and responsible way).
To begin with, our atmosphere contains forty percent more carbon dioxide today than it did at the start of the industrial age and the apparent consequence is that temperatures are rising around the globe. The five main culprits behind this carbon dioxide buildup are:

1. electricity
2. heat
3. transportation
4. agriculture
5. and deforestation

To put the problem in perspective, keep in mind that only five degrees in average temperature separates us from the last ice age. A few degrees in the other direction, therefore, may have an equally disastrous effect. No one is certain what that effect will be, but the warning signs have been evident for years. Property damage is rising an average of ten percent per year due to natural disasters caused by shifts in weather patterns and crop yields are dropping. Equally as worrying, open water was recently discovered at the North Pole for the very first time – a sign that warming trends could discharge tons of CO2 now lying dormant in tundra wastelands (about a third of the planet's CO2 is currently locked in permafrost regions) and the huge deposits of methane gas trapped in the freezing sludge at the bottom of both poles. The release of methane gas is very troubling - methane is twenty-one times more potent than carbon dioxide.

Agriculture
Meanwhile, one-third of the world’s croplands is losing topsoil at a rate that nature cannot replace. As a result, commercial agriculture, heavily dependent on chemicals, fertilizers, and pesticides, is experiencing diminishing returns – as is the livestock industry. For years both have steadily required more input and effort. Half of the world’s range lands have also now deteriorated into desert and water tables are falling. Indeed, it was predicted some time ago that one third of the world’s population would lack access to clean water by the year 2025. This prediction has come true twenty years early. Compounding this problem is the fact that the world’s forests (the earth’s lungs) are being cleared at an astonishing rate (half have been cut down since the agricultural industry began and more are being cut down now to compensate for the declining productivity of once-prime farmlands) and the world’s eighteen major oceanic fisheries have either reached or exceeded maximum sustainable yields.

Population
Yet the world’s population continues to grow and emit ever-increasing levels of pollution, garbage, and consumption. In 1950, the human population stood at around two billion people. Today the number is six and a half billion. By 2050 this will increase to somewhere between eight and ten billion (approximately 10,000 people are born every hour). Judging by our previous history, overpopulation and the limitng factors inherent in the world's resources will probably lead to more violence, more consumption, a further deterioration of the earth and its resources, and an escalation of toxins poured into the air, ground and water. Today we pollute our planet with 300 times more lead, 23 times more zinc, and 38 times more antimony (a metallic element used in alloys) than can naturally dissipate - and that's just the tip of the iceberg. Daily, on average, every person generates 4.4 pounds of garbage (2 kilos), much of which is laden with toxins, an amount that is projected to rise to 4.8 pounds ( 2.2 kilos) in the near future.

Disease
One of the more disturbing consequences of all this is that life-threatening health problems appear to be on the rise – not just for humans, but for plant and animal life as well (perhaps even bees, which are crucial to plant life). Indeed, some scientists believe there is a link between an upsurge in viruses that used to be considered rare and the increase in global temperatures (i.e.: bird flu, mad cow disease, SARS, Lyme disease, Ebola virus, Lassa fever, etc). For example, chytridomycosis (a waterborne fungus) is currently wiping out the world’s frog population (which is an indicator that an entire eco-system could be eliminated). Other viruses and/or parasites are ravaging trout stocks in Europe, decimating shellfish, and even killing off plant species (Margolis, 2006). In other words, minor changes in temperature are causing micro-predators to flourish faster than the species they prey upon can evolve natural defense mechanisms.

The Economy
Moreover, there is strong evidence to suggest that the world economy, which amounts to over US$40 trillion, is in trouble (Palley, 2006). As it is now structured, the current job market cannot grow fast enough to provide opportunities for the tens of millions of young people who wish to join the labor force every year – a situation that many experts believe will continue to contribute to terrorism. In the meantime, the gap between rich and poor is widening at an alarming rate. Since 1960, the world’s wealthiest individuals have increased their control over global production by fifteen percent (the rich currently control eighty-five percent of global GDP) while the poorest have lost more than half of the 2.3 percent share they once had. Today, large multi-national corporations account for a quarter of the world’s global economic activity while employing less than one percent of the world’s labor force. As if that isn’t enough, most of the world’s profits are produced by focusing on only the top third of the global economic pyramid (i.e.: the richest consumers) leaving two thirds of humanity out of the world’s economic loop (Hart, 2005).

Now the Good News: There is Another Way
Fortunately there are profitable solutions to these problems say numerous business and environmental specialists, including Stuart Hart, author of the book Capitalism at the Crossroads, but they involve changes in behavior. These changes include: (1) having businesses convert to efficient practices (which are defined as):

1. achieving optimal outputs with minimum inputs (doing more with less)
2. producing less waste, and,
3. reusing outputs (heat, discharge, waste, used goods, etc) wherever and whenever possible

And (2) reducing the distance between industry and humanity by bringing into the fold the over four billion people on the earth whose needs are currently not being met.

Far from being expensive, these paths have reduced production costs and greatly increased profits for many companies. Just ask Dow Chemical. Their pollution reduction programs and efficiency pursuits (led by employees) have saved the company over $1 billion over the past thirty years. By replacing incandescent light bulbs with energy-efficient bulbs, using large super-insulated windows and/or skylights for most lighting needs, incorporating wind turbines and solar cells for energy production, and making products from recycled and/or recyclable materials, most businesses - like Dow did - can start saving enormous amounts of money.

What this means is that the solutions to the world’s major environmental dilemmas are no longer a technological problem. Humanity has already developed the technology it needs to solve its environmental problems as well as quite a few economic problems. The real challenge is trying to convince managers that many of the business processes they manage are wasteful, costly, and self-destructive.

Saving Money, Saving the World, and Winning Over Customers
Perhaps the greatest obstacle to developing a clean, streamlined, and productive business operation is getting over the absurd notion that efficiency and sustainability are expensive. The practices of reducing waste, saving energy, and treating resources as precious commodities pay for themselves in the long run and more often than not reap huge financial dividends to boot. For example, the head of the UK Government Economics Service (Sir Nicholas Stern) recently reported that the costs of taking action in regards to global warming are much smaller than the costs of business as usual – by a factor of between five and twenty. Stated differently, teaching businesspeople to be efficient is contingent upon trying to get them to understand basic math.

Take the Hudson Bay Company in Canada as a case in point. By refitting its stores and offices with more efficient lighting systems and lowering its thermostats, Canada's oldest company saved $12 million in energy costs. Corporate giant 3M saved $500 million between 1975 and 1990 by reducing its pollutants by more than fifty percent and DuPont saved $45 million over a four-year period by reducing waste and emissions (they expect to save over $1 billion in the coming years). Ice cream maker Ben & Jerry’s, as well as companies like The Body Shop have also shown that being ecologically friendly gives concerned customers one more reason to choose their product over someone else’s.

Still not convinced? Think about it this way: there is little doubt that rigid environmental laws can be expected soon due to the world’s worsening state. Germany and Japan, for example, make many manufacturers legally responsible for their products after a sale has been made (although somewhat toothless, these laws will be strengthened) and dozens of other countries have already initiated similar programs. Failure to adhere to this incoming legislation may result in hefty fines or the closing of non-complying businesses. You have been warned. Astute entrepreneurs should get off the fence and prepare for these upcoming changes while saving money, reducing waste, winning over customers, and maximizing profits in the process.

There are two messages here. The first is that soon no one will be allowed to conduct business under the false assumption that the earth remains unscathed while being raped, pillaged, and fouled at every turn. Second is that opportunities and yet undiscovered riches lie in wait for businesses that are willing and able to capitalize on the seven new frontiers that make up the components of basic business efficiency.

Interested in reading more? Click on the business books icon at the top of this page and follow the instruction to either download a free copy of the book Managing the New Frontiers or purchase the 407-page softcover paperback.

Sources

Business and Source Reduction, www.nrc-recycle.org, September 2006.

Elegant, Simon, Barely Breathing, Time World, 13 November 2006, www.time.com.

Friedman, Thomas L., The World is Flat, Penguin Books Ltd., London, 2006.

Fussman, Cal, ‘The Energizer’, Discover Magazine, Vol. 27, No. 02, February 2006, pp. 23-26.

‘Greening Your Business: A Primer for Smaller Companies’, www.greenbiz.com, September 2006.

Hart, Stuart, Capitalism at the Crossroads, Wharton School Publishing (Pearson Education), New Jersey, 2005.

Hawken, Paul & Lovins, Amory & Lovins, L. Hunter, Natural Capitalism, Little, Brown and Company, Boston/New York, 1999.

Lovins, Amory & Lovins, Hunter & Hawken, Paul, ‘A Road Map for Natural Capitalism’, Harvard Business Review, May-June 1999, pp. 145-158.

McDonough, William & Braungart, Michael, Cradle to Cradle: Remaking the Way We Make Things, Northpoint Press, New York, 2002.

Margolis, Mac, ‘Why the Frogs are Dying’, Newsweek International, 16 October 2006, pp. 10-14.

Palley, Thomas, ‘A New Development Paradigm: Domestic Demand-Led Growth’, Foreign Policy in Focus, www.fpif.org/papers, September, 2006.

Prahalad, C. K. & Hart. S., ‘The Fortune at the Bottom of the Pyramid’, Strategy + Business, vol. 26, 2002, pp. 2-14.

Prahalad, C. K., & Lieberthal, Ken, ‘The End of Corporate Imperialism’, Harvard Business Review, vol. 76 (4), 1998, pp. 68-79.

Womack, J.P., & Jones, D.T., Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Simon & Schuster, New York, 1996.

The World Bank, World Development Report, Oxford University Press, 2000.

(All rights reserved. The above text and material is copyrighted. The titles ‘Management and the New Frontiers’ and ‘The Seven Components of Business Efficiency’ a.k.a. 'The Seven P's of Business Efficiency', as well as any derivatives depicted herein (e.g. the seven P’s alliteration), are from an original university course that was researched, compiled, and is taught by Jonathan Scott in 2005, 2006, 2007, and 2008 and published as a book titled 'Managing the New Frontiers' in the summer of 2008).