April 17, 2018

In a new book, MIT professor Yossi Sheffi examines the trade-offs companies face when grappling with sustainability issues.

In 2010, the environmental group Greenpeace launched an online campaign against Nestle, the food-production giant. Nestle’s KitKat bars, the campaign charged, contained palm oil supplied by a company that was improperly clearing rainforests.

But Nestle, as MIT Professor Yossi Sheffi discusses in a new book on sustainability in business, thought it had already addressed the issue. The company had adopted a “no deforestation” policy, stating it would no longer use palm oil from companies clearing forests after 2005. In 2009, Nestle had joined a group developing industry standards on the issue, the Roundtable on Sustainable Palm Oil.

Nonetheless, within eight weeks of the start of the Greenpeace campaign, Nestle dropped the supplier providing the palm oil in question. Perhaps the campaign had affected KitKat sales. Maybe Nestle executives grew weary of seeing activists dressed up as orangutans outside company headquarters in Frankfurt, Germany. (Orangutans are losing their habitat due to deforestation for palm oil plantations.) In any case, the public relations problem had become significant.

But in the view of Sheffi, an MIT professor and leading expert on logistics in business, such episodes can create an overly simplistic narrative about business and the environment. Sustainability in commerce, Sheffi says, should not be regarded as a matter of “good or evil,” but is typically a clash of “people versus people” around the world, who have their own different interests at stake.

“It’s the importance of the environment against being able to have a job and afford things,” Sheffi says.

Indeed, as Sheffi sees it, these are precisely the central trade-offs of sustainability: We need a clean environment, but consumers also want affordable products, and tens of millions of people make a living as part of the global supply chain that brings consumer products to people. Improving sustainability in these circumstances, Sheffi contends, is not a straightforward matter.   

So when exactly should companies pursue sustainability measures — and when is it in their interest to hold off? That is the question Sheffi explores in the new book, “Balancing Green: When to Embrace Sustainability in a Business (and When Not To),” just published by the MIT Press.

To grasp the importance of the issue, consider that industry, as Sheffi points out in the book, consumes about half of all energy produced. Still, as Sheffi also notes, most consumers do not make purchasing decisions with the planet in mind. 

“People say they’re willing to pay for sustainability, but when they go to the checkout counter, almost nobody does,” says Sheffi, who is the Elisha Gray II Professor of Engineering Systems at MIT and director of MIT’s Center for Transportation and Logistics. “Or 10 to 15 percent of people do, modestly, but it’s not enough to move the market.”

Sustainability certainly does become an important consumer issue when activist campaigns arise, however. Sheffi believes this is one factor that makes “risk mitigation” the first broad reason why companies should pursue sustainability measures. In some cases, those hazards are reputational, as Nestle experienced, but in other cases, it may be that environmental changes are affecting a company’s resources. In either case, Sheffi notes, environmental inaction carries risks.

“Companies should respond to pressure or be just ahead of pressure,” Sheffi says. But for the most part, he adds, “I think companies should lead on good products, good marketing, good quality, and selling them to as many people and getting a good profit. That’s legally the role of a company.”

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