The following is an excerpt from Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage by Daniel Esty and Andrew Winston.

                       * * *

The Environmental Lens
SONY’S VERY EXPENSIVE CHRISTMAS

In the weeks before Christmas 2001, the Sony Corporation faced a nightmare. The Dutch government was blocking Sony’s entire European shipment of PlayStation game systems. More than 1.3 million boxes were sitting in a warehouse instead of flying off store shelves. Was this a trade war or an embargo against violent video games? Sony executives probably wished it were something that easy to fix.

So why was Sony at risk of missing the critical holiday rush? Because a small, but legally unacceptable, amount of the toxic element cadmium was found in the cables of the game controls. Sony rushed in replacements to swap out the tainted wires. It also tried to track down the source of the problem—an eighteen-month search that included inspecting over 6,000 factories and resulted in a new supplier management system. The total cost of this “little” environmental problem: over $130 million.

Sony executives refer to their PlayStation disaster as the “Cadmium Crisis.” They’ve vowed never again to be caught unaware of environmental risks. In fact, they’re now much more familiar with their own operations as a result of hunting down the problem.

So what can we learn from all this? Did an environmental ogre get what it deserved? Hardly. Sony has been a business powerhouse for years, and despite a few hiccups, the company is also generally perceived as an environmental leader. Nothing, in fact, foreshadowed the PlayStation stumble, yet it happened. Why? From Sony’s difficult experience, we draw three lessons:

• Even the best companies can be surprised by environmental issues.
• The environment is not a fringe issue—it can cost businesses real money.
• Real benefits can come from seeing things in a new light.

* * *

In the chapters that follow, we’ll explore how leading companies are layering environmental (often called “green”) factors into their corporate strategies—spurring innovation, creating value, and building competitive advantage. These leaders see their businesses in fresh ways. They create new products to meet environmental needs. As they look up and down the value chain, they keep environmental impacts firmly in mind. They know that working to protect the planet also protects their own companies—by safeguarding their assets, inspiring current employees, and attracting valuable new “knowledge workers” looking for more than a paycheck.

In Green to Gold, we take you inside leading companies, across industries, and around the world. We show you the real costs, hard choices, and trade-offs companies face when they make environmental thinking part of their core business strategy. Pundits who dismiss the natural world as an issue—or commentators on the other “side” who underestimate the difficulties businesses face in executing environmental strategies—do neither the business world nor the planet any favors.

By systematically analyzing the experiences of dozens of companies, we’ve been able to extract the key strategies, tactics, and tools that are needed to establish an environmentally based competitive advantage. In a marketplace where other points of competitive differentiation, such as capital or labor costs, are flattening, the environmental advantage looms larger as a decisive element of business strategy. Indeed, no company can afford to ignore green issues. Those who manage them with skill will build stronger, more profitable, longer-lasting businesses—and a healthier, more livable planet.

* * *

You can find more information about Green to Gold as well as additional exerpts here.