Listening to the cacophony of calls for green business, green jobs, and green economies, you'd think that everyone now is for a green future. But unless your company is manufacturing solar panels or making socks from bamboo, environmental actions alone are not a broad-enough platform to sustain your business for the long haul. A successful strategy for sustainability must address changes in every dimension of the environment in which your business operates — social, economic, and cultural — not just the natural environment.
When CEO [now chairman] Anne Mulcahy took over Xerox in 2001, the vultures were circling. Xerox was more than $17 billion in debt and had lost $20 billion in stock-market value between April 1999 and May 2000. The company faced the very real prospect of bankruptcy. Yet by 2005, Xerox had gone from a $273 million annual loss to a $978 million gain. Mulcahy's turnaround at Xerox is testimony to good management — selling off nonessential businesses and cutting costs. But it is also an object lesson in executing a strategy for sustainability through steady leadership.
The process began in the mid-1990s, as globalization accelerated, threatening the company's competitive position. Foreign manufacturers were making inroads into the low-end product arena that Xerox had owned. Its corporate clients expected the company to collect equipment once it was at the end of its life, and new regulations made disposal expensive.
Seeing a changing world ahead, with new cultural expectations, Xerox hired Patty Calkins, a scientist at AT&T, to help integrate environmental design into its products and services. The company set a goal of "producing waste-free products in waste-free facilities to promote waste-free offices for our customers." It was a perfect example of what I call a North Star Goal: It inspired passion among employees. It was connected to Xerox's core business, which the company was redefining in terms of document services, not copiers. And it was tied to a global challenge: reducing the growing mountains of e-waste on the planet. Old-style Big Hairy Audacious Goals were created to challenge a company to succeed, ignoring the external environment. North Star Goals prepare companies to react to times of turbulence and link their future to the betterment of humanity.
"We had these warehouses full of old copiers, and our repair teams were cannibalizing them for parts," says Calkins. "And then we realized that if we design our products with remanufacturing in mind from the get-go, we could be moving quickly toward zero waste... Our goal was to get to 90% reusability."
When a product is recycled, it's frequently "downcycled" — that is, turned into another product that uses a lower-quality material. But when a product is remanufactured, parts are cleaned, repaired, and reused, which uses much less energy than downcycling or start-ing again with virgin materials. But "used" has a stigma. So Xerox's first step was to help develop an international standard for remanufacturing to guarantee quality so that customers would know they were receiving a fully functioning product.
Once Xerox engineers and designers were focused on remanufacturing, the breakthroughs began to accelerate: A product that once had 2,500 parts now had 250. Components could be used in different models. The company switched to total-life costing to reflect the fact that, while initial costs were higher, the company would save money as the parts were used over and over.
"The electromechanical parts needed to be built with more than one life in mind," Calkins says. Xerox even made new fasteners and bolts that sped up the disassembly of new machines.
Today, with Mulcahy's support and encouragement, the company has a 91% recycling rate for its copiers. The company has saved millions of dollars through its remanufacturing efforts, and its zero-waste initiative has brought the company closer to the needs of its customers.
"In 2000, we were worried about our survival," says Calkins, "but I was never worried about the work I was doing." She pauses. "In that time of complexity, sustainability was a tool that helped us prioritize, and those longer-term priorities worked."
Adapted from Strategy for Sustainability: A Business Manifesto, by Adam Werbach. Published by Harvard Business Press. Copyright 2009 Adam Werbach. All rights reserved.
A version of this article appeared in the July/August 2009 issue of Fast Company magazine.