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Volvo CEO discusses environmental issues and business strategy


What would an environmentally sound world look like? On April 9, Leif Johansson, president of AB Volvo and CEO of the Volvo Group, tackled this question before an MIT audience of 200.

The talk inaugurated MIT's Wallenberg Lectures on the Environment and Sustainability, funded by Sweden's Knut and Alice Wallenberg Foundation. The foundation also sponsors a fellowship program that brings outstanding young Swedish scientists, engineers and policymakers to MIT for one to two years of study on environmental science, technology, policy and sustainable development.

There is a growing number of statements about what it means to be environmentally sound, including the Nine Principles of the World Economic Forum's Global Compact -- which encourages the development and diffusion of environmentally friendly technologies -- and the Guidelines of the Organization for Economic Cooperation and Development (OECD), Mr. Johansson noted. Leaders in the developing countries are saying they don't want to repeat how the western world developed.

Consequently, Mr. Johannson urged increased efforts by developed countries to bring emerging technologies to developing countries at low cost and at a much faster rate. The consequences of inaction, he said, would only aggravate global warming and climate change.

"If emerging countries repeat the experience of the developed countries, there will be a big problem on a global scale. We need to have leadership across the globe's more capable countries on these types of issues," he said.

Thirty years ago, environmental concerns were restricted to production (in particular, emissions from industrial plants). Today the issue covers everything from product planning and development to purchasing, market communication and aftermarket, to scrapping and recycling, he said.

From 1984-97, Mr. Johannson was CEO of Electrolux, the world's largest manufacturer of refrigerators. That company initially used CFCs as a refrigerant, a compound which was later found to attack the ozone layer protecting Earth from harmful radiation. Though Electrolux initially resisted the call for an end to use of CFCs, he said he came to the realization that it's better from an engineering and business standpoint to spend one's intellectual resources "seeking solutions rather than defending the undefendable."

Environmentally sound products needn't cost more than other products, Mr. Johannson said. Although years ago, CFCs were a cheap refrigerant because a widespread industrial infrastructure existed for its manufacture, it turned out that butane, which does not attack the ozone layer, was even cheaper, once a good source for it was found, he noted.

Mr. Johannson said a strong environmental policy is part of sound business strategy, which can mean a competitive advantage for a company if it has a 20-year horizon to deal with these issues and is in the forefront of new technology favorable to the environment. But there is a larger issue: from a moral standpoint, if there is a technology that has a lower environmental impact, then a company should apply it, he said.

"If you are in global business, then you are in a position to impact the world around you, you do impact the world, and you will have the world's eyes upon you -- and rightly so," Mr. Johannson said.

A version of this article appeared in MIT Tech Talk on April 25, 2001.

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