Environmental Product Differentiation
Environmental Product Differentiation:
IMPLICATIONS FOR CORPORATE STRATEGY
Forest L. Reinhardt
roducers of toilet tissue, outdoor wear, tuna, beef, investment services, trash bags, and herbicides have recently positioned their products as environmentally preferable, with the idea of capturing a price premium, winning new customers, or both. Managers are looking for ways to reconcile their need to deliver shareholder value with intensifying demands for improved envirofimental performance. Perhaps the most straightforward way to do so is'to provide environmentally preferable products and then capture the extra costs from consumers.
P
Environment and Business: A Debate Derailed
The debate about business and the environment is polarized. A group of business academics asserts that "it pays to be green." That is, they argue that firms can increase profits if they set ambitious environmental targets, lobby for tighter not looser government regulation, and make the environment the central organizing principle of their businesses. In this view, it is clear that the environmental problems society confronts are significant and that firms can and should profit from contributing to their solutions.' A second group of executives and business academics, emphasizing that firms exist to serve their shareholders.
'Numerous colleagues and friends have helped me to clarify my thinking on the points discussed in this article, including Bob Dolan, Alexander Dyck Pankaj Ghemawat, Robert E. Grady,Tom McCraw, Cynthia Montgomery, David Moss, Kash Rangan, Julio Rotemberg, Bruce Scott, Deb Span Richard Tedlow, Dick Vieton Lou Wells, and Steve Wheelwright. I am indebted, as well, to John Sawhill and his colleagues at The Nature Conservancy, to California Management Review editor David Vogel, and to two anonymous referees at the Review. Remaining errors are mine.
CALIFORNIA MANAGEMENT REVIEW
VOL. 40, NO. 4
SUMMER 1998
43
Environmental Product Differentiation
IMPLICATIONS FOR CORPORATE STRATEGY
Forest L. Reinhardt
roducers of toilet tissue, outdoor wear, tuna, beef, investment services, trash bags, and herbicides have recently positioned their products as environmentally preferable, with the idea of capturing a price premium, winning new customers, or both. Managers are looking for ways to reconcile their need to deliver shareholder value with intensifying demands for improved envirofimental performance. Perhaps the most straightforward way to do so is'to provide environmentally preferable products and then capture the extra costs from consumers.
P
Environment and Business: A Debate Derailed
The debate about business and the environment is polarized. A group of business academics asserts that "it pays to be green." That is, they argue that firms can increase profits if they set ambitious environmental targets, lobby for tighter not looser government regulation, and make the environment the central organizing principle of their businesses. In this view, it is clear that the environmental problems society confronts are significant and that firms can and should profit from contributing to their solutions.' A second group of executives and business academics, emphasizing that firms exist to serve their shareholders.
'Numerous colleagues and friends have helped me to clarify my thinking on the points discussed in this article, including Bob Dolan, Alexander Dyck Pankaj Ghemawat, Robert E. Grady,Tom McCraw, Cynthia Montgomery, David Moss, Kash Rangan, Julio Rotemberg, Bruce Scott, Deb Span Richard Tedlow, Dick Vieton Lou Wells, and Steve Wheelwright. I am indebted, as well, to John Sawhill and his colleagues at The Nature Conservancy, to California Management Review editor David Vogel, and to two anonymous referees at the Review. Remaining errors are mine.
CALIFORNIA MANAGEMENT REVIEW
VOL. 40, NO. 4
SUMMER 1998
43
Environmental Product Differentiation