Green to Gold: Be Strategic—not Tactical

Green to Gold: Be Strategic—not Tactical

The entire value chain in the semiconductor industry–including tools and materials–prides itself on innovation, attracting top talent, and offering solutions to customer problems. At SEMICON West, Daniel C. Esty, a Yale professor and co-author of the best-selling “Green to Gold–How Smart Companies use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage,” shared his insights with senior EHS executives and managers at the SEMI EHS Executive Luncheon on July 17, 2007. He noted that the semiconductor tools, equipment, and fab industries use innovation, talent, and solutions approaches already, so they are uniquely positioned to make major advancements for the entire world.

Increased consciousness a key

Esty’s main theme–that environmental considerations offer challenges and huge opportunities–is based on his research into dozens of companies. The recent attention being paid to environmental concerns, Esty believes, is rooted in a widespread consciousness-raising. That awareness may be fueled by articles on the environment, public concerns about fossil fuel usage, geo-political awareness of the ramifications of energy dependence, or even the suspicion that Hurricane Katrina was spawned by global warming. Regardless of the source, through, Esty sees opportunities that SEMI companies can participate in.

Esty argues that the world, and especially the United States, is facing a “transformative watershed” in society about how to deal with energy issues. Since semiconductor companies are so practiced at innovation, he sees the semiconductor industry playing a critical role in developing new and efficient solutions to the challenge of energy development and production.

Take advantage of the “Green Wave”

The central point of Esty’s analysis and discussion in “Green to Gold” is that companies who make concern for all aspects of the environment a core strategy of their business can take advantage of the “Green Wave” sweeping the globe. He discussed several examples of success and failures, noting that investing in smarter and more efficient products offers opportunities for new markets, often–but not always–leading to increased profitability. The rise of environmentally-oriented stakeholders, including governments, environmental activists, and even company shareholders has sharpened the focus on the need for corporate executives to make environmental considerations paramount.

Cradle-to-Grave planning

By fully adopting this approach, Esty notes, the product development process expands to include “cradle-to-grave” planning, thus incorporating recycling or end-of-life issues into the entire cost and benefit modeling of a product. He said that companies who choose not to do this may find that these concerns become “legislated in” by government, and that will have a less-than-optimal effect on product development. Even worse, evolving regulations, changes in the natural world (warming, pollution, and water) and expanding stakeholder interest will reduce or eliminate market opportunities for companies deemed “insensitive” to the environment.

Green Car Wars

Similarly, Esty said, the companies who are “green”–at a strategic level–are those who will ensure their future. Citing the contrast between Ford and Toyota, Esty showed how Ford made improvements at a manufacturing site to be more “green”, while Toyota looked at their cars, realized that they could improve everything—and reduced weight and size, improved engine and electronic efficiencies, and made all their cars into “smart” cars, often through the use of computers and sensors. By seeing that “green” is a strategy and not a one-time tactic, Toyota has made being green “cool”, and that has extended across their brand and improved their market position. Ford, on the other hand, completely missed the fact that the public perception of the Excursion and Expedition branded the company as environmentally insensitive–regardless of any other green efforts–and that perception remains.

Top down implementation necessary

Esty challenged executives to think strategically about environmental issues, but offered the caution that successful implementations have to be driven from the top. With some companies adding a chief environmental officer function to the executive suite, he sees plenty of opportunity for excellence given the semiconductor industry’s practice at developing leading-edge solutions–not just for their own products, but for technology that can be used to address global energy generation and production needs.

“When your most important asset–your people–can walk out the door because they want to work for a more ‘green’ company,” Esty said, “how you do what you do becomes important. When pension fund managers, or stockholders, or government agencies scrutinize your actions, green becomes important. It’s easier being on the front end of this wave than on the back end, and there are plenty of opportunities everywhere.”

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