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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Straightforward strategies for achieving sustainable practices and business success in the modern organization In Clean: Lessons from Ecolab's Century of Positive Impact, a team of veteran sustainability experts delivers a practical toolkit for creating a forward-looking and sustainability-focused business. From Ecolab's origins in sustainability 100 years ago to its ambitious 2030 environment and social impact goals, this book lays out a roadmap for business transformation and continued growth - today and for the next 100 years. You'll explore the principles and methods required to build and lead a sustainable company. You'll discover how to evolve your focus on sustainability over time, as your organization transforms and grows. You'll learn to: * Build and maintain momentum for sustainability initiatives and cement your firm's commitment to new practices through iteration and aligning business units around core, shared sustainability goals. * Embed new sustainable practices into your organization's governance and operations DNA * Identify and leverage specific sustainability levers that impact a wide variety of key performance indicators * Create a set of business processes that enable sustainable future and engage your employees in a higher purpose An essential playbook for students of sustainability and business, this book is a must-read for the modern manager, executive, or director seeking to solidify their business strategy and future-proof their company. Clean: Lessons from Ecolab's Century of Positive Impact describes the holistic and comprehensive approach to responsible business that we've all been waiting for.
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Table of Contents
COVER
TITLE PAGE
COPYRIGHT
DEDICATION
PREFACE
ACKNOWLEDGMENTS
FOREWORD
Chapter 1: THE CALL FOR A SUSTAINABLE WORLD
THE CHALLENGE OF SUSTAINABILITY
ECOLAB AS AN EXAMPLE OF SUSTAINABILITY
THE JOURNEY TO SUSTAINABILITY
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 2: PERSPECTIVE: THE FOUNDATION OF SUSTAINABILITY
WELTANSCHAUUNG: A PRIMER
THE PERSPECTIVE AT ECONOMICS LABORATORY AND ECOLAB
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 3: FROM PERSPECTIVE TO PURPOSE: eROI AND THE THREE PHASES OF SUSTAINABILITY
FROM PERSPECTIVE TO PRIORITIES
FROM PRIORITY TO PROCESS: THE EXAMPLE eROI
eROI AND SUSTAINABILITY
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 4: THE TONE AT THE TOP: EXECUTIVE LEADERSHIP AND MANAGEMENT
UNDERSTANDING LEADERSHIP
EXECUTIVE LEADERSHIP AT ECOLAB
THE DYNAMICS OF LEADERSHIP
LEADERSHIP AND SUSTAINABILITY
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 5: LEADERSHIP THROUGHOUT THE ORGANIZATION: 48,000 STRONG AND COUNTING
LEADERSHIP AT EVERY LEVEL: SELECTING GOOD PEOPLE
LEADERSHIP AT EVERY LEVEL: MAKING GOOD PEOPLE BETTER
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 6: CREATING A SUSTAINABLE PRODUCT PIPELINE
CUSTOMER INTIMACY AS THE CORE STRATEGY
CUSTOMER INTIMACY AND SUSTAINABILITY
CUSTOMER INTIMACY AND RESEARCH, DEVELOPMENT, & ENGINEERING
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 7: ACQUISITIONS: SUSTAINABILITY THROUGH ADDITION
ACQUISITIONS: A PRIMER
ACQUISITIONS AT ECOLAB
ACQUISITIONS AND SUSTAINABILITY
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 8: DIVESTITURE: SUSTAINABILITY THROUGH SUBTRACTION
DIVESTITURE AND MARKET/CAPABILITY FIT
DIVESTITURE AND SUSTAINABILITY
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 9: CATALYZING SUSTAINABILITY THROUGH MULTI-STAKEHOLDER PARTNERSHIPS
PARTNERING TO PROMOTE WATER STEWARDSHIP
THE EIGHT I'S THAT CREATE SUCCESSFUL WE'S
LESSONS FOR LEADERS
CONCLUSION
EMILIO'S THOUGHTS
NOTES
Chapter 10: LOOKING FORWARD TO ECOLAB'S SECOND CENTURY
PAUL'S KEY LESSONS FROM ECOLAB'S FIRST CENTURY
BEYOND 100: EMILIO'S PREDICTIONS FOR ECOLAB'S SECOND CENTURY
NOTES
ABOUT THE AUTHORS
INDEX
END USER LICENSE AGREEMENT
List of Tables
Chapter 1
Table 1.1 Ecolab Financial Performance Through the Years
Table 1.2 Ecolab Stock Returns over Time – $100 Investment
Chapter 3
Table 3.1 The Elements of eROI
Chapter 4
Table 4.1 The Role of Leaders
Chapter 7
Table 7.1 Major Successful Acquisitions at Ecolab
Chapter 9
Table 9.1 Eight I's That Create Successful We's
Chapter 10
Table 10.1 Lessons for Leaders: A Summary
List of Illustrations
Chapter 1
Figure 1.1 Creating a Sustainable Advantage
Chapter 2
Figure 2.1 Sustainable Advantage is Grounded by the RIGHT Mindset
Chapter 3
Figure 3.1 Sustainable Advantage at Ecolab
Figure 3.2 The Components of eROI
Figure 3.3 The Three Phases of Sustainability
Chapter 4
Figure 4.1 Executive Leadership at Ecolab
Figure 4.2 Executive Performance at Ecolab
Chapter 5
Figure 5.1 The Herzberg Model and Its Application at Ecolab
Chapter 6
Figure 6.1 Nalco’s Six Service Standards
Figure 6.2 A Unique Ecolab Logo
Figure 6.3 Creating Sustainable Value with Customers
Chapter 10
Figure 10.1 Ecolab’s Water for Climate Journey
Guide
Cover
Table of Contents
Title Page
Copyright
Dedication
Preface
Acknowledgments
Foreword
Begin Reading
About the Authors
Index
End User License Agreement
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clean
Lessons from Ecolab’s Century of Positive Impact
PAUL C. GODFREY WITH EMILIO R. TENUTA
Copyright © 2023 by Paul Godfrey and Ecolab Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data
Names: Godfrey, Paul C., author. | Tenuta, Emilio R., author.
Title: Clean : lessons from Ecolab’s century of positive impact / Paul Godfrey and Emilio Tenuta.
Description: First edition. | Hoboken, New Jersey : Wiley, [2023] | Includes index.
Identifiers: LCCN 2022054078 (print) | LCCN 2022054079 (ebook) | ISBN 9781394153367 (cloth) | ISBN 9781394153381 (adobe pdf) | ISBN 9781394153374 (epub)
Subjects: LCSH: Social responsibility of business.
Classification: LCC HD60 .G643 2023 (print) | LCC HD60 (ebook) | DDC 658.4/08—dc23/eng/20221109
LC record available at https://lccn.loc.gov/2022054078
LC ebook record available at https://lccn.loc.gov/2022054079
COVER DESIGN: PAUL MCCARTHYCOVER ART: © GETTY IMAGES | SAEMILEE
Ecolab is a publicly traded company (ticker symbol ECL) headquartered in St. Paul, MN. Throughout the book we reference Ecolab, Nalco, and several specific products, solution sets, and services provided by Ecolab. For ease of reading, we have not inserted trademark or copyright designations where legal counsel might advise inserting them.
The following names, products, and services, are all registered trademarks of Ecolab, and are used with the company's permission:
List of product mentions here:
ECOLAB
®
NALCO
®
3DTRASAR™
SMARTPOWER™
AQUANOMIC™
FILLERTEK™
WATER FLOW INTELLIGENCE (no trademark marking)
ECOLAB SCIENCE CERTIFIED™
ECOLAB WATER FOR CLIMATE™
ECOLAB3D™
To Robin, your love and support make me better every day.
–Paul
To my wife Dawn and children Evan, Rachael and Emilio Marco – My life, my love and my legacy
–Emilio
PREFACE
There are a thousand hacking at the branches of evil to one who is striking at the root.
—Henry David Thoreau
The lack of a sustainable economy stands as a great, perhaps catastrophic, evil of our time. Climate change roils communities, natural landscapes, and markets. Discrimination and social inequality fester like an open sore and stain our ideals of democratic societies and free markets, and questionable ethics and practices by prominent firms and leaders erode trust in business as an institution. Many well-intentioned business, civil society, and government leaders create products, processes, and programs to address the latest crisis of sustainability, desperately hoping that these one-off approaches will move the dial on creating a more sustainable world.
Most of these efforts represent “hacking at the branches,” however, because the roots of sustainability lie out of view, they represent the outcome of long chains of cause-and-effect relationships, and require a different mindset to strike at them. Unless leaders identify the root causes of the lack of sustainability, they'll remain focused on the branches and churn out more temporary solutions. They'll fail to make a lasting, positive impact. How can we help leaders identify those root causes and move toward real solutions? By finding successful businesses that strike at the roots and adopting the core principles that guide them.
This book presents a case study of Ecolab, a company that's been building a truly sustainable world for a century. My first exposure to Ecolab came in 2017. I was consulting for a multinational industrial water company to assess the strength of its competitors. They really wanted to know about Nalco Water, a subsidiary of the Ecolab corporation. They knew Nalco was good, and the more I learned, the more I shared their respect for the company. Nalco created great products, went to market with a strong value proposition centered on sustainable water management, and enjoyed industry leadership. I wanted to get a personal take on Nalco's competitive goals and vision for the future, so one Friday morning in June 2017 I dialed the corporate operator at Ecolab and asked to speak with someone who might know about “sustainability at Nalco.” I prepared myself for the inevitable trip to the dead letter box we know as voice mail.
Emilio Tenuta, then vice president of Sustainability at Ecolab, answered his own phone. That never happens in corporate America. Never. We had a great conversation. Three things impressed me.
First was Emilio's fundamental kindness; he took a call from a total stranger and spent the better part of a half-hour talking to me about Ecolab. I think that comes from his solid Midwestern upbringing.
Second was his passion for Ecolab and its commitment to sustainability as the core of its business model and strategy. Ecolab competed in an old-school industrial sector with a very new-school, cutting-edge approach.
Third, Emilio impressed me with his, and Ecolab's, vision for the future. Water is central to almost every industry, and industrial water use happens at a scale that's hard for most people to fathom. Water is scarce, and water fouled through industrial processing becomes water unavailable for drinking or other life-supporting uses. What Emilio, Nalco, and Ecolab saw clearly was that the stewardship of water would be the defining business, societal, and global issue within a decade or two. Emilio described the expansive Nalco/Ecolab mission to avert a water crisis by helping major industrial users reduce, reuse, and recycle immense volumes of water.
Emilio, who will offer his take on every topic I raise in the book, commented on our meeting:
When Professor Godfrey reached out to me back in 2017, it was a totally serendipitous encounter. He was looking for answers to some questions about Nalco and their products and someone put the call through to me. I picked up the phone and the rest, you could say – in keeping with the theme of this book – is history.
In that very first call, Paul and I connected about Ecolab's core purpose: sustainability, a topic that is both near and dear to me and the focus of my work for the past 11 years. At Ecolab, we're proud of our long and successful history, which is rooted in the principles of sustainability. We have always followed the belief that we must conduct business ethically and sustainably, being true to what we do best.
For us, that means delivering exceptional business and sustainability outcomes at the highest return for our customers. Our business model is even more relevant today than it was a century ago. Why? Because our greatest opportunity is to drive sustainable development through innovative solutions that help companies around the world achieve outstanding results while minimizing environmental and social impact. That has never been more important than it is today when we are faced with unprecedented global challenges.
That phone call in 2017 sparked a productive partnership. We've worked together to produce two cases for business school students, one about the Nalco acquisition – literally a textbook case of M&A done right – and the second about the development of Ecolab's 2030 sustainability goals. We worked well together and decided that the 100th anniversary of Ecolab's founding in 1923 (Nalco appeared five years later in 1928) provided a great platform to collaborate on a book about Ecolab and its commitment to sustainability.
This book aims much higher than being a mere recounting of Ecolab's first hundred years, an homage to a successful company and its leaders. The book builds from a simple premise: Companies, from the largest and oldest enterprises to the smallest and youngest startups, can learn valuable lessons from Ecolab to propel themselves on their journey toward sustainability. Ecolab's “secret sauce” isn't secret, it's based on time-honored and well-grounded leadership principles. Most of those principles are eminently transferrable. I hope that as you read, you'll say, “My company, or my team, can do that,” and that you'll invest the energy, money, and time to become a more sustainable company in your own sphere. A century of experience is interesting, but if the lessons of that experience help you improve yourself and your organization, then that's a book worth reading.
For me, that hundred years of experience distills down to two key lessons: Being a good business is part and parcel of sustainability, and for sustainability to work over the long term, a company must “yarn-dye” a few important perspectives, principles, and priorities. Ecolab is a good business in the ethical sense of “good business” as praiseworthy. The company isn't perfect, and we'll point to more than one poor decision or outcome, but it's for good reason that Ecolab regularly appears on the “best company” lists of several organizations. Its management philosophies and systems make it a great place to work and a valued business partner for customers, suppliers, and community stakeholders.
More importantly, Ecolab is a “good business” in a very traditional, economic sense of excellence along a number of key business metrics: market share, product and process innovation, and profitability. Nobel laureate Milton Friedman argued a half-century ago that executives had to choose between “social responsibility” and shareholder value. Ecolab reveals the error in Friedman's either/or logic. Here's a hint of what you'll learn in Chapter 1: $100 invested in Ecolab when it went public in January 1957 would have been worth $249,770 in January 2020. That's 5 times the return on a similar $100 invested in sector leader Procter & Gamble, and 34 times the return on the S&P 500.
“Yarn-dyed” is a metaphor for deeply embedded. I’ll frame the metaphor with a question: Which shirt holds its color better and longer, one where the color was printed onto a previously white cloth or one whose cloth is made of dyed threads? You guessed it. Yarn-dyed fabrics hold their color better and longer than print-dyed ones. You'll read in these pages how many of Ecolab's best practices became “yarn-dyed.” In fact, Ecolab used sustainable business best practices decades before sustainability came in vogue. When these practices become “yarn-dyed” into your company's actions, products, people, and culture, sustainability will flourish for you, just as it has for Ecolab. Yarn-dyed principles help leaders at any company identify the roots of sustainability and make lasting, long-term contributions to a better world.
Each chapter draws on the history of Ecolab or Nalco to illustrate how both good business and sustainability became yarn-dyed in the company, but the book is far more than a trip down corporate memory lane. We'll rely on well-established theories and frameworks of leadership, organization, and strategy to tease out the why behind the what of Ecolab's success. I’ve tried to make these ideas accessible because they are absolutely essential for you to realize that Ecolab's success is not accidental. You can't replicate Ecolab's history, but you can install and instill the underlying principles in your own organization.
ACKNOWLEDGMENTS
The two of us, Emilio and I, share the byline for the book, but we've been supported along the way and we'd like to spend some ink formally recognizing and thanking those who've made this book possible. For Emilio, that list begins with his companion of 36 years, Dawn, and his three children who inspire him every day – Evan, Rachael, and Emilio Marco. Paul thanks his colleagues at Brigham Young University, especially Kim Clark, Lisa Jones Christensen, and Ben Lewis, for their long-term collegiality and their short-term feedback on chapters in the book.
The team at Ecolab, including Heather Dubois, Jeanne Modelski, Nigel Glennie, Jennifer McClean, Lori Nelson, Scott Adams, Jeff Hunt, Angela Busch, Larry Berger, Gail Peterson, Paul Langlois, Laurie Marsh, Jose Prado, Michael Sawlsville, Sam Hsu, Varsha Shah, and Emilio's sustainability team – Oriana Raabe, Anja De Reus, Amie Hedblom, Dallas Tebben, Christian Hoops, Laura Kowalski, Anna Wertheim, Kyle Kapustka, Daniel Kopan, Meredith Englund, Iris Raylesberg, Geoff Townsend, Amy Hahn, Anna Sarvello, Eliza Chlebeck, Tom Vandyck, Megan Kaatmann, Sarah Bresnahan, Melissa Callejo, Lynne Olson, Raj Rajan, and Matthea Najberg – all went above and beyond in providing data, insights and inspiration.
Finally, the Godfrey family, particularly Paul’s wife, Robin, has endured another book project and given their full support, including edits and feedback that have made the book better.
FOREWORD
By Maelle Gavet, CEO Techstars and author Trampled by Unicorns
Beyond our flourishing program partnerships and co-investments in a number of successful startups in the future of food and agriculture space, Techstars and Ecolab have a great deal in common. Although we are markedly different businesses operating in different spheres, and Techstars has been in existence for a tiny fraction of Ecolab's now century-long history of pioneering innovation, we share two foundational principles.
First, we both believe that whether a company is at ideation stage or post-IPO, two hackers at a kitchen table, or a team dispersed around the world, the concepts of sustainability and profitability are not mutually exclusive. Rather, the first increasingly informs and underpins the second. Ecolab has been an outlier in this regard, successfully developing a business strategy where sustainability, and what it terms eROI, are core to the very purpose of the company – and long before corporate bosses were talking in such terms or there was a bandwagon in sight. Furthermore, we both believe that the application of this approach, at a time when the climate crisis affects all organizations, must be sector-agnostic for it to have global and generational impact. Techstars has invested in more than 700 sustainability/climate-tech companies, but the principle of embedding sustainability and long-term thinking in a team applies not just to them but to startups in every area from AgTech to Web3, and FinTech to fashion.
Second, we share a deep conviction that sustainability – and the business performance, productivity, and growth it unlocks – can only be achieved through technology and digital enablement. Not only does Ecolab invent and develop new technologies, but innovation itself has become an ever-bigger part of its overall strategy. Whether it's in manufacturing, automotive tech, the paper industry, or in 30,000 McDonald's restaurants around the world, Ecolab develops direct technology that marries up with its onsite expertise across 40 industries to improve water quality, climate, health and food safety outcomes, and resilience at a time when all of these are under unprecedented duress.
One of the reasons I was so pleased to be asked to write the introduction to this book is that the ideas it contains are highly relatable and applicable to the hundreds, and soon to be thousands, of early-stage tech entrepreneurs Techstars invests in every year. Among the most important of these is how startups, from the get-go, should think about the holistic impact that their product or service can deliver for clients and communities. A robotics company, say, can not only offer its customers enhanced performance capabilities and productivity gains but also help drive down costs and reduce their carbon emissions and water footprint. A holistic approach for a transportation and logistics startup, meanwhile, would consider impacts on the environment and community stakeholders, as well as suppliers and employees, alongside successfully scaling its customer base.
Another defining area is leadership – and not just in the top-down sense. Standout leadership today is about staying true to your core values and empowering an entire organization – in Ecolab's case, 48,000+ employees – so that every single team member understands that a company doesn't exist in a vacuum but in a wider world in which all its impacts need to be taken into account.
Ecolab's inspiring leadership teaches us to build sustainably from the start. Think holistically. Take the long view. Consider our place in the world. Sadly, we live in an era where greenwashing is more widespread than many of us would like to admit, and window dressing and slick PR all too often replace the hard yards required to reduce negative impacts and build resilience. Ecolab is the antithesis to this approach. And it isn't “just” startups that can learn from them. So, whether you are formulating a strategy for a Fortune 500 company or are in your kitchen tweaking your first product, this book will help you connect your work with the most pressing issue of our time: creating a sustainable organization and society.
–ENDS–
Chapter 1THE CALL FOR A SUSTAINABLE WORLD
Tó éí iiná (Water is Life)
—Navajo saying
Amid the chaos, fear, and confusion of the early days of the COVID-19 pandemic lockdowns, something unforeseen appeared: clean air. People around the globe found themselves in various states of lockdown as offices, restaurants, schools, theaters, and almost everything else shut down. With nowhere for drivers to go, the number of cars on the road plummeted. The result? Global levels of PM 2.5, the particulate matter that generates haze in both skies and lungs, declined by 30–40% and concentrations of the nasty pollutant sulfur dioxide fell 25–60% worldwide.1 In the crazy days of spring 2020, people from Tokyo to Tacoma, and from Boston to Buenos Aires breathed easier during the first months of a policy-induced global economic coma.
That global breath of fresh air reinforced two prevailing ideas about building a sustainable economy, in terms of both ecological renewal and human health. The first cemented the notion that dramatically reducing, if not eliminating, the fossil-fuel-powered internal combustion engine is an essential element. The second emerged from our collective consciousness as we experienced the outside world through Apple's Facetime, Facebook, Skype, Teams, or Zoom: digital technology would pave a golden road to a more sustainable world.
The pandemic experience validated the first idea; the second, less so. Consumer-facing apps from Amazon through Zillow can reduce travel, fuel usage, and foul air, as well as accidents, breathing disorders, and the stress and general mayhem that all come with commuting. That pristine view of the digital-economy-as-sustainable-economy gets murkier the farther we go back in the internet value chain. Movement from software to hardware reveals an expensive and extensive web of “server farms” that enable us to seamlessly connect to and transact over the web. As of 2020, there were 3 million of these farms, known as data centers, around the world, but 600 or so constitute the largest type, hyperscale data centers. These behemoths occupy up to 400,000 square feet (about 10 acres) and house up to 5,000 servers. An average data center may use up to 50MW of electricity a year, enough to power 32,500 homes in a developed country. All that electricity generates heat, and if the temperature in a center gets too high, the problems begin. At best, a center goes offline – at a cost of $8,000 per minute in lost revenue; at worst, 5,000 servers melt, at a cost of $75,000 to $100,000 each. Keeping those servers cool and functional requires massive air conditioning capacity, and an average center will use 200 million gallons of very clean water every year to keep servers cool. That's a year's worth of drinking water for up to 667,000 people, or a city the size of Portland, Oregon.2 With the amount of data being produced and stored expected to grow 50 times between 2019 and 2030, the expanding backbone of the internet presents its own sustainability challenge.
Where do the world's biggest server “farmers,” from mega player Microsoft to specialist Digital Realty, turn to for help with managing their water needs? These “new economy” companies partner with a very “old economy” company for the most sophisticated and sustainable water management tools on the planet: Ecolab, founded in 1923, and its younger sister and subsidiary Nalco Water, founded in 1928. A sustainable digital economy depends very much on the deep knowledge, skills, and talents of companies with decades of experience in a sustainable industrial economy. The experience of Digital Realty, a San Francisco, California–based owner and operator of over 280 data centers in 50 metro areas around the globe, highlights the value of this knowledge and skill.
The core of the air conditioning system is a cooling tower, a very large unit that allows hot water – the heat generated by the servers – to cool by transferring that heat to the air. Digital Realty pays for the water it puts into that system and the water it discharges as sewage. The physics of a cooling tower, however, means that 80% of the input water evaporates during cooling, leaving Digital Realty to pay sewage charges for water it never returns to the system. Several US states, including California, offer an evaporation credit if a company can document its evaporation loss. Walter Leclerc, director of Environment Health and Safety for the company, brought in Nalco specialists to help document and claim those credits for one of its small centers in Los Angeles. The business result? Digital Realty now claims over $150,000 in annual evaporation credits just for that site.
That work, begun in 2015, established what is now a long-term partnership. Leclerc and Ecolab team members used tools such as the Smart Water NavigatorTM to create a global water use plan, and they deployed Nalco's 3D TRASARTM technology to implement the program along with Ecolab3DTM technology to document results. The partners worked together to create and implement a global water strategy and solution for data center management. As of 2022, Digital Realty used 30 million fewer gallons of water each year, consumed 17MW less electricity, and emitted 12,000 metric tons fewer greenhouse gases. That's good for the environment and the health of those living nearby. It's also good for the bottom line. Digital Realty has saved $8 million to date, for an ROI of 60%.3 Walter Leclerc says of his experience with Ecolab, “I could not have done it without them. Their technology is fantastic, but it's the people that make the difference.”
I open with data centers because this business highlights two issues that I'll come back to throughout the book. First, the challenge of sustainability is multifaceted and complex and will require a mix of both simple and complex, industrial and digital innovations and solutions. Second, very “old line” companies like Ecolab and Nalco will play a significant role in creating a truly sustainable world. My research on water management led me to Ecolab, a 100-year-old company that developed, expanded, and nurtured a sustainable business model as it grew from a single employee to a team of over 48,000, each of whom possesses and deploys world-class expertise in environmental and human health. That expertise drives product, process, and service innovations that keep Ecolab in the vanguard of companies pioneering a sustainable future.
Sustainability may be a recent concept, but the principles that deliver it are ageless. In what follows, you'll see that Ecolab's success relies on a disciplined, integrated, long-term, and sophisticated approach to business. These aren't just one-off or timely tactics; the roots of Ecolab's success come from its application of enduring principles of business success. Whether you are online or old-line, you can adopt these principles to help your organization and people create the expertise we all need to build a truly sustainable world.
THE CHALLENGE OF SUSTAINABILITY
Neither Emilio nor I know if the sustainability movement has an undisputed birthday, but we both trace a pivot point in sustainability to the first Earth Day in the United States, April 22, 1970. A burning oil slick on Cleveland, Ohio's Cuyahoga River in the summer of 1969 dramatically illustrated the extent to which the natural environment had been used as an industrial dumping ground, and that first Earth Day catalyzed the need for change.
Fast forward to 1987; the United Nations joined the growing movement by appointing the Brundtland Commission to propel progress through a clear definition. That group defined a sustainable economy as one “that meets the needs of the present without compromising the ability of future generations to meet their own needs.”4 That definition of sustainability holds today, but like most things in this space, it continues to be debated – refined by adherents and rejected by critics. At its core, a sustainable economy represents a complex compromise between two very old and deeply embedded ideas: progress and conservation.
The idea of progress, according to South African historian Jacobus Du Pisani, traces its roots back to the earliest days of the Hebrew (and eventually Christian) conception of history that portrayed time as linear and inevitably moving forward toward a clear end state. To the religious, that end state was either salvation or damnation. Progress, writ large, indicated blessing – and thus spiritual salvation. As the world secularized during the modern era, progress became embodied in the notion that economic, scientific, and social innovation would benefit people through an ever-improving material standard of living. The growth of the global population, increasing personal income, and increased longevity since the dawn of the Industrial Revolution in the late eighteenth century provide, for its advocates, powerful evidence of beneficial progress.
The need to offset the impact of progress through conservation traces back to ancient times as well. Indeed, Plato, Pliny, and other classical writers tutored their followers about the dangers of deforestation and environmental degradation caused by ever-encroaching human activity. The Industrial Revolution marked a pivot point where the scale and scope of economic activity began to seriously outstrip the planet's and its societies' ability to renew needed resources. Historians mark the industrial age beginning in 1800 and peaking around 1970, with perhaps the burning Cuyahoga symbolizing a high-water mark in the havoc the industrial economy could wreak. During that time, global population more than trebled from just under 980 million to 3.6 billion; however, manufacturing output grew 1730 times over the same period.5 That first Earth Day in 1970 – perhaps the beginning of the end of the industrial age – catalyzed a growing global concern for the potential dire outcomes for both people and the planet if societies failed to stabilize progress and conserve/preserve our natural and social resources.
The Brundtland Commission's definition sought to balance the demands of many, including those representing billions living in so-called “developing” countries, for an upgraded standard of living with those who argued that the total cost of a standard life would end up destroying the planet and human societies. The commission's work acknowledged the importance of continued economic growth but recognized that decision-makers needed to include the long-term impacts of that growth on human and natural environments. Making trade-offs would become critical. A truly sustainable world would require policymakers, business leaders, and citizens to draw a fine line that separated meaningful from unchecked progress and cut precisely at the joint between appropriate versus stifling conservation. Many of the debates we see today showcase our collective struggle in drawing those lines and our imprecision in cutting at that joint. The conversations and arguments about how to make those trade-offs have become more sophisticated and more pressing as the years go by.
At a macro level, sustainability gave voice to two previously voiceless stakeholders: the natural environment and future generations. At an individual level, sustainability invited each of us, in our personal and professional roles, to adopt a much longer time horizon and broader view as we thought about what to buy, where to invest, and how to define our own progress. For business leaders, the Brundtland report birthed the concept of a triple bottom line, one focused on economic (profit), one on social (people), and one on environmental (planet) sustainability, or the 3Ps.
As the twenty-first century proceeds into its third decade, the language of sustainability has changed again. The 3Ps are still the same, but the focus has shifted from societal outcomes to corporate actions. The new terminology calls for environmental, social, and governance (ESG) performance. Activists, investors, and regulators each work to measure current ESG performance and encourage change and progress along each dimension at the business level. ESG measures provide a snapshot in time of how each company contributes to the 3Ps, and when ESG reporting becomes commonplace, the combined snapshots essentially become a movie that captures dynamic progress toward sustainable 3Ps.
Sustainability as a Business Problem
Managing a triple bottom line presents executives and leaders with a complex business challenge, and today no company or executive team can claim mastery. Sustainable business practices are and will remain a work in progress. Although complex, leaders approach the challenge from one of two well-known starting perspectives, one that views sustainability as a financial, physical, or technological problem to be engineered and the other that sees it as a set of natural relationships to be nurtured. Building a bridge requires a technical mindset, for example, while saving a failing marriage involves a relational one. The technical approach focuses on developing and deploying bundles of money and steel designed to solve the problem while relational approaches seek to influence the human psyche or social culture. Each mindset presents a different set of problems, proposes different processes, and opens a different opportunity set. Each constitutes a weltanschauung, a worldview or simply a perspective.
I'll talk much more about mindsets and perspectives in Chapters 2 and 3, but I'll lay out a few important elements here.
First, a purely technical or relational mindset captures the essence of very few problems. Building a bridge invites a technical approach, but new bridges change the relationships in a biological ecosystem, economic transactions in and between communities, and social relationships in affected families and groups. Engineers who fail to engage in relational analysis usually face stiff opposition, even when their technical specifications are impeccable.
Similarly, rescuing a sinking marriage always requires attention to relationship skills and status but often includes technical elements such as new jobs, new housing, and new knowledge. Surveys indicate that while relational issues lead to most marital breakups, money plays a leading role in almost one-fourth of divorces, and wise therapists explore economic as well as emotional and erotic challenges in relationships. Put simply, a single- (simple-?) minded approach to problems usually leads to simplistic and partial solutions.
Second, in terms of process, the technical view adopts a coercive approach to problem-solving. A knowing, independent actor can deploy technical resources to provide adequate (and sometimes exceptional) targeted solutions to isolated business problems driven by downside risk management or compliance with existing rules. In contrast, the relational view invites collaborative problem-solving. Interdependent actors marshal both objective (knowledge) and subjective (cultural) human and social capital to develop holistic approaches that recognize the larger system in which the problem lives. The relational approach emphasizes lasting solutions at the system, rather than merely the problem, level.
Third, technical and relational mindsets complement each other; each has advantages that overcome the disadvantages of the other. The technical attends to discrete problems and conceives efficient, cost-effective solutions to problems. However, my experience teaches that a tight, technical focus tends toward a whack-a-mole approach to thorny issues. The relational view uncovers elements that require time and energy to understand the inherent complexity of any issue and more time to build consensus around both underlying problems and solutions. Speed is not a feature of the relational approach. The upside? That focus on systemic and continuous contexts of issues means that solutions identify and center on core, causal human and social drivers of sustainability challenges. The time spent building consensus helps people make and follow through with the tough decisions that lead to meaningful progress.
Real and lasting progress around sustainability, financial performance, product development, productivity, or any other business challenge leverages the power of both views and seeks solutions that address technical and relational elements. Technical solutions provide the tangible and time-bound assets and actions required to solve problems such as sustainability while the relational element works to change the priorities and processes that constitute the deep causal structure of problems. Technical solutions look different than relational ones, but both contribute vital elements to lasting solutions.
Finally, which viewpoint opens the conversation matters because each mindset uncovers different opportunities and solution sets. The holistic approach of the relational view naturally invites us to consider the role technical elements can play in a solution. Marriage partners working on their relationship will eventually uncover needed financial or occupational adjustments. The converse, however, is not true. The technical view, with its analytic backbone, isolates and compartmentalizes problems; it often obscures a broader view of the larger human issues and undervalues the systemic context that surrounds any issue. The complex engineering specs that create a stable and lasting bridge are independent of the impacts of a changed commute on individuals and families, and the technical view will not naturally lead to a relational one. Which frame you employ first determines if and how well you'll see the other.
I spent so much time discussing these two overarching worldviews because they form the foundation of Ecolab's success. From its earliest days, the company has operated from a relational weltanschauung, and the ability to see its business and the world as first and foremost a set of relationships. That's how and why they've been practicing sustainability for a century. Your ability to adopt a similar perspective will, I believe, ultimately determine your success in driving sustainability into the bones of your organization. To foreshadow what you'll learn in Chapter 2, Merritt J. (MJ) Osborn founded the business that eventually became Ecolab on two fundamental beliefs: the dignity and common humanity of all people and the fact that the world is an integrated, interconnected, and interrelated system.
A relationship-first perspective grounded Osborn's private world of hearth and home, the system of commitments that created an employee-centered business firm, the transactions between that firm and its many stakeholders, and the final impact on local, regional, national, and international communities. One of those critical communities has been and continues to be the natural environment. For Ecolab, it's relationships first, technical solutions second. The goal of an earnest, honest, and mutually beneficial relationship with each stakeholder determines which technical solutions and what chemistry the company brings to the table in each case.
Sustainability as a Leadership Problem
You may believe you can find the perfect blend of technical and relational solutions to the problems you face; however, my experience teaches that no one (at least no one I know) perfectly balances a technical and relational orientation along a razor's edge. Instead, genetics, upbringing, education, and life experiences predispose us to either a technical or relational default setting of how we view the world. As we confront and manage problems and lead others toward solutions, either the technical or the relational perspective serves as our baseline for action, and as our paradigm of choice leads us to success – and each one leads to its own type of success – our commitment to that baseline waxes stronger. Over time, our perspective, or weltanschauung, becomes more stable and frames our approach to leadership and management.
This book is about leadership and management because they represent, in both my and Emilio's view, two keys that unlock the door to creating sustainable businesses and societies. I'll avoid quips and false comparisons, such as “management is doing things right; leadership is doing right things.”6 I'll also avoid simplistic ideas such as “management is simply controlling others or driving results,” or “leadership is about motivating people and getting out of the way.” Emilio and I have accumulated years of experience as leaders, and much of that work involved management; they fit hand in glove.
Leadership is the work that mobilizes people in a process of action, learning and change to improve the long-term viability and vitality of the organization in three ways: purpose, people, and productivity. Purpose is realized more effectively, people experience increased personal growth, meaning and purpose in their work and lives, and productivity is strengthened.7 Management is a set of tools leaders employ to accomplish their work: they allocate resources based on purpose and priorities, they design processes and products that enable people to grow and thrive, and they measure/report the viability and vitality of their organizations in terms of productivity and performance.
Figure 1.1 illustrates the proper relationships between these elements in a thriving organization. I've employed alliteration to make the elements of Figure 1.1 easy to remember, and I'll return to each level of the pyramid throughout the book as I explain the principles Ecolab follows to create a sustainable enterprise. Your ability to execute on the different Ps of sustainable advantage will, to a large extent, determine your ability to create a sustainable organization and economy. The most important thing to remember is the base of the pyramid: How we lead and manage depends on our fundamental perspective.
Perspective provides the bedrock or core that informs everything that we do, whether individually or in relationships, from family to firm. That perspective generates a defined purpose and set of priorities, what we really want to accomplish. Purpose and priorities enable us to build a set of processes and products that in turn realize our ultimate aims. The right processes and products allow people to productively engage with markets and stakeholders. Productivity drives performance. Leadership and management provide the fuel that brings the pyramid into being and keeps it aligned over time. Note that the arrow representing leadership and management runs both ways. Leadership enables performance, but performance informs and molds perspective. Positive performance deepens our commitment to our worldview while negative performance invites us to reexamine that view. Everything you read from here on in (and I encourage you to read every word!) builds on Figure 1.1.
Figure 1.1 Creating a Sustainable Advantage
ECOLAB AS AN EXAMPLE OF SUSTAINABILITY
MJ Osborn worked as a pharmaceutical salesman for most of the first decade of the twentieth century. Osborn noticed that the hotels he stayed in took rooms out of service for up to two weeks every time they cleaned their carpets. Osborn developed a carpet cleaner – Absorbit – that cleaned carpets in less time and required less labor and water, meaning that rooms would be back in service much sooner. Although customers paid more for Absorbit, their total cost of cleaning – factoring in labor, water usage, and downtime – declined enough that profits increased.8 The product proved a boon for hotels, but not for Osborn – a container of Absorbit was so economical that Osborn saw few follow-on sales.
Osborn named his nascent company Economics Laboratory (EL) – “Economic” because it saved customers time, labor, and material costs, and “Laboratory” because the products were backed by laboratory research. In 1924, he acquired a chemical formula from a University of Minnesota chemist and introduced Soilax, an easy-to-use and measure dishwashing detergent. In 1928, Osborn rolled out a line of Soilax dispensers and other dishwashing equipment. EL became a provider of dishwashing solutions, not just products.9
Over the next century, the company developed and deployed a rather simple business model: Identify a pressing customer problem in cleaning/sanitation and develop a scientific solution that would save customers labor, maintenance, and downtime and preserve equipment. Customers would pay a premium for the company's products because the savings and regular on-site service provided by EL would more than make up for the price premium of the products. Sales grew from $35,000 in 1924 ($554,917 in 2021 dollars) to $12.733 billion in 2021: a nominal cumulative annual growth rate of 14% and a real (if we hold dollars constant) 11% CAGR. That's one of many impressive measures of Ecolab's economic success.
