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December 3, 2007 
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Collaborating with Rivals: Industry Partnerships
Some environmental issues are impossible for one company to handle on its own. But more than that, for some issues, a company that does try to go it alone may put itself at a competitive disadvantage. Often the only real solution is to work together to level the playing field. That means working with other companies from time to time and often with direct competitors. (I touched on this a bit in a previous issue, which highlighted the Climate Savers Computing Initiative as a great example of the tech sector tackling the big-picture challenges posed by climate change.)
But where should companies draw the line? It's a critical strategic issue without an easy answer. What information can and should you share? What issues should you compete on? Again, the tech sector provides a good example: Semiconductor companies have shared some best practices on pollution control and green operations, but when it came to how they would meet the EUs RoHS directive to take lead out of their chips, they were not so cooperative. The solution to the lead problem goes to the heart of how each manufacturer designs their chips critical intellectual property. Whichever company could reach compliance best and quickest would get a leg up in terms of entry into the big EU market critical for competitive advantage.
Here we'll look at a few kinds of industry partnerships to explore how companies balance the competitive and cooperative. Broadly speaking, these partnerships try to tackle a few areas and provide guidelines on (in rough order from company-specific, inward-looking activities to large-scale systemic change):
~Andrew Winston, Founder, Winston Eco-Strategies, Co-author, Green to Gold (Read his "Eco-Advantage" blog here.) Comments or questions? Join Andrew and other readers online at the Eco-Strategies Forum. Covering Your Bases: Responsible Care 
Some industries have gotten very specific about what it takes to act responsibly in the environmental realm. The chemical industry has built the most famous and longest-standing set of standards with Responsible Care (which came about in direct response to the Bhopal disaster of 1984). Click here (PDF) for some details on what the industry demands. For a company joining the industry trade group, committing to Responsible Care is not optional.
In 2005, a new charter (PDF) extended the principles to the full value chain - an important addition and improvement which helps companies manage full lifecycle environmental impacts and create real eco-advantage. The new directives also added an emphasis on sustainable development. Companies from 52 countries signed it. Hedging Your Bets: The Equator Principles and ClimateWise 
In 2003 some of the world's biggest banks agreed on the so-called Equator Principles for responsible investment in major construction projects. From now on, co-signers said, all projects over $50 million would be reviewed (PDF) for environmental and social considerations. (The guidelines were expanded in 2006 (PDF) to include all projects upward of $10 million.) It's voluntary, certainly, and many companies have not kept the highest standards, but it's remarkable that 54 financial institutions representing more than 90% of all project financing support this agreement today. Not to be outdone, leading insurance companies introduced their own set of green principles this fall, called ClimateWise. These industries are recognizing that environmental impact is not just about smokestacks, but also extends to those who finance and manage risk for the world's businesses.
Enrolling Your Suppliers: The Electronic Industry Code of Conduct 
The Equator Principles and similar guidelines commit companies to some behaviors, but let companies continue to compete. Another kind of partnership pushes guidelines onto suppliers, mainly on issues that B2B buyers would rather not compete on (like social standards). A great example is the Electronic Industry Code of Conduct (EICC), which emphasizes cross-collaboration among electronics manufacturers and their suppliers to ensure responsible practices upstream.
More recently, consumer products giants including Proctor & Gamble, Unilever, and Nestlι upped the ante on their suppliers. The new Supply Chain Leadership Coalition, launched in early October, essentially forces suppliers to compete for customers based on their environmental performance (and likely reflects, in part, a rippling back of the kinds of questions retailers like Wal-Mart are asking of these companies). Remaking Your Market: The Green Power Market Development Group 
A major step beyond agreements on principles or operating guidelines, some companies are stepping up to try to change entire marketplaces. Recognizing they can't move markets alone, no matter how big they are individually, they are trying to green industries by brute force or by commitment of real dollars. The Green Power Market Development Group is a prime example: Members including Johnson & Johnson, Dow, and Dupont are trying to build the renewable energy marketplace by no surprise here actually buying renewable energy (even at higher-than-fossil-fuel current prices).
Another example? The Paper Working Group is a novel coalition of non-competitive companies, from paper junkies (Staples and Time Inc.) to less obvious players (Toyota), all trying to increase the availability of environmentally preferable paper. They developed a tool, EPAT, to help them gauge their paper suppliers. (Click here for a PowerPoint presentation on how this collaboration works.) Surprising the Politicians: Lobbying for More Regulations 
Sort of the mother of all surprise coalitions lobbying for tougher regulations. Members of the Climate Action Partnership, including a range of heavy energy users from Alcoa and DuPont to Shell and GM, asked the U.S. Congress for a carbon cap and for legislation that would slash CO2 emissions 60%-80% by 2050. It was an environmental NGO's dream scenario. All of these companies face higher costs from a carbon cap, but they want a seat at the table to help shape regulations that they know are coming. (To quote Duke Energy CEO Jim Rogers: "If you're not at the table, you're on the menu.") The coalition doubled its membership last May, and it has some more announcements in the works watch this space.
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