Opportunity knocks, and leaders answer.

• Author: Newman, John C.
• Position: Leadership in Environmental Initiatives - Special Section: Answering the Call for Leadership

Conventional wisdom often casts opportunity as the opposite of risk. In reality, risk and opportunity are closely linked partners and must be managed together for an organization to succeed. Nowhere is this more evident than in the issues of corporate environmental management.

In our work helping organizations around the world manage environmental issues, we define three stages along the risk/opportunity continuum. At one end, an organization takes a "reactive" posture, viewing risk management very narrowly -- basically in terms of compliance with today's environmental regulations. A reactive organization also tends to view environmental issues as isolated concerns -- a necessary part of keeping the organization out of trouble but not an integral element of doing business. To a reactive company, "environmental opportunity" is an oxymoron.

As organizations move toward the middle ground, to a more proactive posture, their understanding and management of environmental risk broadens beyond minimizing penalties for noncompliance. Proactive companies begin to see opportunities related to the environment. Often, these opportunities are sporadic -- such as "green" packaging, recycling programs, tie-ins with environmental organizations -- but if well--conceived and executed, they usually benefit the organization.

Organizations at the far "innovative" end of the environmental management spectrum have a comprehensive understanding of potential risks, and assess the costs and benefits as well as methods to control risk. Innovative organizations clearly understand that managing risk creates opportunities. These range from the obvious, such as being able to focus on the marketplace instead of the courthouse, to the less obvious, such as having a wider range of strategic options because of positive perceptions by regulatory agencies, capital markets, and other stakeholders, such as employees, shareholders, the media, suppliers, and the public.

Environmental leaders lie at the innovative end of the risk/opportunity spectrum. In 1991, Booz-Allen surveyed more than 200 senior executives in major corporations to understand their opinions and actions related to corporate environmental management. The survey showed that many companies' environmental programs were driven more by threat (e.g., risk of lawsuits, regulatory sanctions, or adverse publicity) than by opportunity (e.g., competitive advantage, positive consumer response, cost reduction, and profit...