Why go green

“All of a sudden, everybody wants you to be in their movie,” Ruta, director of corporate partnerships with Environmental Defense, said recently with a laugh.

It’s possible to take that statement quite literally — after all, the environment was the star of the Oscar-winning “An Inconvenient Truth.” But what is really exciting Ruta these days isn’t the buzz out of Hollywood but the increasing interest across the country, on Wall Street. For corporate executives, going green is becoming, if not mainstream, at least more commonplace.Companies ranging from retailing titan Wal-Mart to investment firm Goldman Sachs are jumping on the green bandwagon and pledging to make tangible changes that go beyond the public relations-oriented “greenwashing” of years past.

In another major shift, some big companies are even asking that they be regulated on greenhouse gas emissions, arguing that it is the only way for them to plan for how to deal with the rising threat of global warming. A coalition of businesses and environmental groups earlier this year formed a partnership called the U.S. Climate Action Partnership aimed at doing just that.

Are corporations experiencing a sudden rash of social consciousness? Not exactly. Instead, companies are increasingly realizing that going green could be a new way for companies to save — or even make — more green, as in money.

“The strategies that are being … implemented by some of the leading-edge companies are done to maximize profits and to mitigate risk,” said Fred Wellington, senior financial analyst for the environmental group World Resources Institute.

Still, the big surprise isn’t so much that companies are getting involved in environmental issues, but what companies are doing it. People expect companies like Whole Foods, Patagonia and REI to have environmental initiatives; not only is it key to their public relations efforts, it also makes good business sense for them to preserve resources.

But DuPont? BP? Wal-Mart? These are companies that still raise the hackles of environmentalists for some of their practices, yet are also taking serious steps toward promoting things like solar power and reducing greenhouse gas emissions. What exactly do they have to gain?

The answer, as always, lies in the bottom line.

Cost savings in energy savings
When Wal-Mart Stores Inc. pledges to significantly reduce energy use at its stores, that translates into lower costs for running the same business. It’s not the only money-saving environmental effort under way at the famously stingy retailer.

DuPont, the giant chemical maker that once was considered among America’s worst polluters, estimates that it has saved $3 billion from a nearly two-decade effort to dramatically reduce carbon emissions. Not surprisingly, the company is pushing for even more cuts.

And what about BP? The oil and gas giant will remain just that for a long time, but it pays to be thinking about the future now. If oil prices surge even higher, or supplies dwindle, people will still want to heat their homes, drive their cars and turn on their lights. For a company like BP to make it in that type of market, it might help to be able to offer alternative products, such as solar or wind energy.

Pat Tiernan, Hewlett-Packard Co.’s vice president for social and environmental responsibility, says that for the computer maker, “sustainability is about making business sense.”

“We don’t do things just to be good. We don’t do things just to be, for example, tree huggers,” Tiernan said. “We do select things that have a brand value to them, but most of the things that we do, it has to make business sense.”

Environmental groups also are increasingly trying to show companies the business case for environmental improvements. Ruta, of Environmental Defense, said her group notes three major potential benefits — cost savings from energy reductions, increased market share from more competitive products, and managing the risks associated with depending on fuels such as oil, which could spike in price or become more heavily regulated.

Companies are starting to pay more attention.

“What we’re witnessing is some of the bigger, major corporations in the United States understanding that these are fundamentally business issues, and they’re developing business responses and strategies,” said Wellington, of the World Resources Institute.
The same logic applies to corporate efforts to push regulation of carbon emissions, which many say are a key driver of global warming.

By now, it seems inevitable that big businesses will eventually face some sort of U.S. regulation, so clearly there is an incentive for corporations to be involved in how those regulations are crafted. For those that have already taken action to reduce such emissions, there’s also a big incentive to get credit for what they have already done voluntarily.

Some big businesses are calling for a system dubbed “cap and trade,” in which companies that beat emission targets can essentially sell pollution credits to more egregious polluters who don’t meet the standards. Such a free-market system could prove lucrative for companies that employ the right strategy.
One alternative to cap and trade would be an outright tax on all carbon emissions. Supporters of that idea say it would force costs directly onto almost all carbon emitters, perhaps pushing them to move more quickly to find cleaner alternatives or cut energy use.

The trend toward going green is extending beyond the most obvious polluters, and reaching companies ranging from big Wall Street firms to technology mainstays.

“Whether for altruistic reasons or not, (companies) realize that our sort of 19th-century energy economy that we are currently running on is coming to an end,” says Josh Dorner, spokesman for the Sierra Club. “It’s to their advantage — to their business advantage — to start gearing up for a low-carbon economy.”

The Goldman Sachs Group has invested more than $1.5 billion in alternative and clean energy including solar and wind power, and also is establishing a business dealing in carbon-emission credits. A “cap and trade” system similar to what U.S. companies are proposing is already in place in Europe, and a voluntary trading system has been set up in the United States.

Golman Sachs also is now applying environmental criteria when deciding whether to approve a loan or underwrite a transaction, and it has developed a business giving institutional investors information about companies’ environmental and social practices.

“We’re proud of the environmental things we can accomplish, but we’re also, I think, being smart business people,” said Mark Tercek, head of Goldman Sachs’ office of corporate citizenship.

Electronics makers including Dell and Hewlett-Packard are encouraging more recycling amid mounting concerns about the environmental effects of dumping electronics — and their accompanying toxic chemicals — into landfills. HP’s Tiernan said part of his company’s motivation is an expectation that regulations on electronics recycling and disposal will become more stringent.

In some cases, HP charges for shipping and handling of recyclables. The company also sees some benefit from reusing plastics and other products that it recycles.

HP and other companies also are seeing increasing interest in products that can save their customers money. Dell’s Web site keeps a running tally of estimated carbon emissions avoided — and money saved by customers — because of its improved technology.

Strange bedfellows
Environmental groups, some of which have been enlisted to help corporations achieve their new goals, admit that it can be a bit strange to work with companies who have been — and in some cases still are — their opponents in other areas.

BP has pledged to spend $8 billion over 10 years to develop a profitable alternative fuels business, among a host of other environmental initiatives. But the British company also has come under fire for leaky pipes and lax maintenance at its giant Prudhoe Bay oil field in Alaska and for a deadly explosion at a Texas refinery.
DuPont is often mentioned as one of the most aggressive companies tackling environmental issues, having effectively reinvented its practices since about 1990. But the company also is embroiled in several disputes with environmental regulators, and continues to produce some products environmentalists would prefer not to see, such as insecticides.

Wal-Mart continues to build Supercenters the size of several football fields, surrounded by massive parking lots. But the world’s largest retailer also has pledged major energy-saving initiatives over the next few years, and is pushing its environmental agenda onto its massive chain of suppliers. Wal-Mart’s potential clout is so great, in fact, that Environmental Defense recently put an office in the company’s hometown of Bentonville, Ark.