CASE EXAMPLE OF CES IN PRACTICE

In this new century, there is considerable pressure on the top six automakers to reduce their environmental footprint. The automaker that wins the race to build and sell the superior car will shape consumer preferences, thereby boosting sales and profits. The winning firm will fashion a corporate strategy that drives automobile emissions to near zero while simultaneously providing high levels of performance, safety, and comfort.

The model of social response product development as a CES strategy is built on four dimensions, like the structure of a house: knowledge depth—the ever­growing basement; knowledge durability—the ex­panding sides; knowledge dependence—the ceiling of use; knowledge floors—the ground base. The break­through at Toyota was recognizing that new technol­ogies mean that a new knowledge floor can be laid, one that makes it possible to meet all consumer expectations of performance, safety, and environment (fuel efficiency, emissions, resource efficiency, alter­native fuels) without the tradeoffs previously required.

Toyota and Honda have used a new form of CES to change the rules of the game by leveraging their knowledge depth to introduce superior new cars, such as the four-door, five-passenger Prius. The Prius achieves fuel efficiency rates of 55 miles per gallon (mpg), twice the regulated corporate average fleet requirement. The move to hybrid cars—those that can run on multiple fuels, most commonly, gasoline and electricity—will be understood as truly exceptional when the realization sinks in how absolutely ordinary it will make the hundreds of millions of cars now littering the current knowledge floor. This floor—containing everything from gas – guzzling sport utility vehicles and commercial trucks to Europe’s newest smart cars that are still dependent on the 100-year-old combustion engine—has been permanently superseded.

Some firsts of the Toyota Prius include the following:

1. The Prius has been designed to be recycled. Although this is most relevant to Japanese and European consumers, it does highlight how for­ward-thinking Toyota has become. The amount of waste avoided through this redesign is staggering, separating Toyota from General Motors, Ford, and DaimlerChrysler.

2. At 2003 gas prices, the average North Amer­ican would save at least $1/day, or a total exceeding $360, at the pump by driving a Prius rather than a typical compact sedan.

3. Consumers will enjoy the convenience of driving 600 miles between fill-ups.

4. The American version of the Prius has a battery pack with 20% more power than the Japanese equivalent, yet weighs 20% less.

5. The Prius has fundamentally changed the debate over clean cars, almost eliminating the shift to all-electric cars.

6. The Prius has already become legend. It can be found at the New York Museum of Modern Art’s exhibit ‘‘Different Roads.’’ In June 1999, Toyota became the first automaker in the world to receive the United Nations Global 500 Award, not only because of the Prius, but also because of all of Toyota’s environmental commitments to reduce dependence on landfills.

What is noteworthy about this case example is that much of this innovation occurred in anticipation of changes in corporate average fuel economy standards and related air pollution legislation across the globe. This represents a new form of CES as it involves aggressive product change before the reg­ulations take final shape, as a new means of competitive advantage.

9. SUMMARY

Although it would be historically inaccurate to claim that the above-described efforts of BP, Toyota, and DuPont represent a norm, they do signify a way in which corporate environmental strategists are suc­ceeding in the early part of the 21st century.

More and more corporate boards, after the Bhopal and Valdez accidents and following a second wave of reforms starting after Sarbanes Oxley required a more accurate disclosure of a firm’s lasting liabilities and product assets, are taking this series of steps in linking CES to their larger corporate and social responsibility obligations and plans. Their eventual success will prove to be based on linking their mission and goals, originally compelled by a desire to meet regulations and limit a firm’s liability, with products.

As in most corporations, where the product is king, this move may prove the means by which CES reinvigorates itself in the new century.

Acknowledgments

Celeste Richie, of American Hazard Control Group, is gratefully acknowledged for performing the research for this article.

SEE ALSO THE FOLLOWING ARTICLES

Business Cycles and Energy Prices • Clean Air Markets • Consumption, Energy, and the Environ­ment • Ecological Risk Assessment Applied to Energy Development • Energy Services Industry • Risk Analysis Applied to Energy Systems • Service and Commerce Sector, Energy Use in • Subsidies to Energy Industries • Trade in Energy and Energy Services

Further Reading

American Hazard Control Group. (2002-2003). ‘‘Corporate Strategy Today,’’ Executive Monograph Series. Lexis Nexis, Saratoga Springs, NY.

Baram, M. (1991). ‘‘Managing Chemical Risks.’’ Tufts Center for Environmental Management, Bedford, MA.

Elsevier. (1994-2003). Corp. Environ. Strategy.

Epstein, M. (1995). ‘‘Measuring Corporate Environmental Perfor­mance.’’ The IMA Foundation for Applied Research, New York.

Friedman, F. (1997). ‘‘Practical Guide to Environmental Manage­ment,’’ 7th ed., pp. 68-70. Environmental Law Institute, Washington, DC.

Hoffman, A. (2000). ‘‘Competitive Environmental Strategy.’’ Island Press, Washington, DC.

Kotter, J. (1996). ‘‘Leading Change.’’ Harvard Business School Press, Boston, MA.

Laszlo, C. (2003). ‘‘The Sustainable Company: How to Create Lasting Value through Social and Environmental Performance.’’ Island Press, Washington, DC.

Piasecki, B. (1995). ‘‘Corporate Environmental Strategy: The Avalanche of Change since Bhopal.’’ Wiley, New York.

Piasecki, B., and Asmus, P. (1990). ‘‘In Search of Environmental Excellence: Moving beyond Blame.’’ Simon & Schuster, New York.

Renfro, W. (1993). ‘‘Issues Management in Strategic Planning.’’ Quorum Books, Westport, CT.

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