Professor Andrew A King, a leading authority on environmental performance and innovation, is Low Tuck Kwong Visiting Professor at the National University of Singapore (NUS). A pioneer in scholarship on sustainability, he talks about why it makes business sense for companies to protect the environment.
Q: Tell us, in layman’s terms, about the nature of your work.
A: I am trying to understand how firms and collections of firms can supplement or supplant the role of government in protecting the environment. To elaborate, firms engage in self-regulation by forming standards and codes of conduct or by forming certification programmes. I investigate both approaches. I also study how firms act like governments through their acquisition process by changing the performance of the entities that they acquire. I am also interested in the detailed mechanisms of how things change.
Q: What are the three pieces of advice for companies that want to follow sustainable practices?
A: Firstly, what gets measured gets managed. This comes out of research I just completed with Nilanjana Dutt of Duke University. In the US we have something called the Toxic Release Inventory which tracks more than 600 chemicals every year. When firms start doing anything with this chemical waste – burning, recycling, or treating it – they often discover that they are producing twice as much waste as they thought they were. After wards, they reduce waste by 15 to 20 percent a year. Before the careful measurement needed for waste processing, managers did not know how much waste their facilities were generating. When they measure waste accurately, they make improvements.
Secondly, build environment protection into the business model. For instance, Vermont-based Green Mountain Coffee Roasters source high-quality coffee from many tiny coffee producers that are mostly family farms. To maintain the high quality of their coffee, the company vets these producers. The problem was that with coffee prices going up and down, these small coffee farms would go out of business and Green Mountain would have to continually vet new farms. By supporting fair trade, which puts a floor on coffee prices, and by contributing back to the community, Green Mountain actually made it easier for themselves as they did not incur the cost of validating the farms every year.
Thirdly, think about changing the game. There is more opportunity when firms think – not just about improving how they play the game but – about whether they can create a better game. For example, Clearwater Seafood in Canada lobbied the government and helped set up a total allowable catch limit to limit the fishing and keep the fishery productivity high. So they changed the rules of the game and were profitable. Firms should be thinking beyond boundaries. For instance, can we set it up so that recycling becomes the expectation of everyone in the industry, firms are rated by it and there’s a cost for not recycling.
Q: How important is it to investors to support companies that are environment-conscious?
A: In the US it is huge and growing. It is One tenth of the total investments are invested in a socially screened fund and these funds are growing at 22 percent a year. That’s the good news. The bad news is that one has to be sceptical about how accurate the measurement of those screened funds are. There are hundreds of considerations at play.
Q: Your thoughts on the work NUS is doing in this field.
A: NUS is a newcomer to this space but it is very well placed. It has some fantastic talents now and there’s some very interesting work going on here. Dr Kenneth Richards (the Musim Mas Chair in Sustainability at NUS Business School) is here. The Dean of NUS Business School, Professor Bernard Yeung, wrote a paper that is a classic. It shows that if companies set standards across their units – instead of downgrading or upgrading environmental standards according to the country where they are operating – it works better for the company. Professor Chang Sea-Jin has written several articles on the spillover from foreign companies to surrounding firms. Professor Ivan Png has an interesting paper on the ‘Sunk Cost Fallacy and Driving the World’s Most Expensive Cars’. You have terrific people here.
Q: You are a committed mentor. Why do you mentor?
A: It is fun. The best way to stay alive intellectually is to be interacting with younger minds. They think about things differently and they push you. They are energetic, and I find that in working with younger people, you can have direct and honest conversations. I benefit from bouncing my ideas off of them and getting their unvarnished response. And they are my kids.
Andrew King is Professor of Business Administration at Tuck School of Business, Dartmouth College. He has been an Assistant Professor at Stern School of Business, a Marvin Bower Fellow at the Harvard Business School, a Visiting Associate Professor at University of Michigan as well as the Massachusetts Institute of Technology. He is also an Academy of Management Journal Best Paper Award winner and his PhD thesis won the Massachusetts Institute of Technology’s Zannetos Prize.