The Big Pivot: Radically Practical Strategies for a Hotter, Scarcer, and More Open World by Andrew S. Winston

Author:Andrew S. Winston
Language: eng
Format: mobi
ISBN: 9781422167816
Publisher: Harvard Business Review Press
Published: 2014-03-10T18:30:00+00:00

Use a Portfolio Approach

A few companies have found a powerful way to invest more money in greener projects by grouping them together. The cleaning products company Diversey, for example, established two hurdles for projects in its carbon reduction plan: a three-year payback and a cost per megaton of carbon avoided. Out of 120 possible projects ranging from lighting retrofits to solar photovoltaic systems, only 30 cleared both hurdles. But about 60 of the other ideas could reach one.

An expanded 90-project portfolio, all added together, met the double hurdle. The combined portfolio, by including ideas higher up the efficiency tree, made more money than just taking a smaller segment of the lowest-hanging fruit. Diversey was able to increase its carbon reduction goal from 8 to 25 percent and generate a higher net present value.6

A portfolio approach is critical for hitting really big efficiency targets, such as an 80 percent reduction in carbon. Think of it this way: if you don’t combine projects and you only do the ones with the quickest payback, then the next year, you’re stuck. The next batch of projects, the higher-hanging fruit, doesn’t clear the hurdle in simplified ROI terms. As Auden Schendler, VP of sustainability at Aspen Skiing Company, says, “because of your success picking the low-hanging fruit, you can’t make additional progress.”7

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