July 2007
If past is prologue, then to
forecast where businesses will be in tackling environmental protection,
humane labor practices, biodiversity, water supply and other
sustainability challenges, we have to look back.
Fifteen years ago, when the GreenMoney Journal was launched, a relative
handful of niche companies such as Ben & Jerry's, Timberland, and Tom's of
Maine, were integrating the social consciences of their founders and even,
in some cases, their spiritual values, into the capitalist model. But
these companies were far outside the mainstream of American corporate
culture, throwbacks to the idealism of the 1960s, and represented a tiny
fraction of American corporate power.
Indeed, for decades there had been strong and pervasive resistance in the
corporate world to environmental responsibility, transparency and
sustainable business practices. Such corporate values were seen as the
province of the "tree-hugger" fringe and the notion that this could ever
change was widely dismissed as a pipe dream.
Fast-forward 15 years to a single week in May 2007.
Citigroup, one of the world's largest financial conglomerates, announces
that it will commit $50 billion over 10 years on investments and project
financing to reduce global carbon emissions, including development of
alternative energy and clean technologies.
NewsCorp, one of the word's largest media companies, and led by the
ultraconservative Rupert Murdoch, announces that it will become carbon
"neutral" by 2010.
And IBM, the venerable computer giant, announces it is spending $1 billion
to become more energy efficient across its global operations. All in a
single week! In each case, these decisions were driven by bottom-line
economics and a recognition that sustainability is a core business issue.
These three corporate giants are part of a stampede by major corporations
to go green. Dozens of Fortune 500 companies - Alcoa, SunMicrosystems, BP
America, Interface and Pacific Gas & Electric, among them - have urged
federal legislation to cap or reduce U.S. carbon emissions and have made
substantial investments to improve their environmental performance.
General Mills and Wal-Mart are reducing the size of their packaging, thus
saving large quantities of raw materials and the energy required to
process them. Dell is tripling its recycling of electronic products and
supporting federal legislation to mandate recycling of electronic
products.
Indeed, hundreds of companies have spent billions of dollars to understand
and reduce their impacts on biodiversity, water quality, energy use, and
climate risks.
In one especially remarkable instance, the board of American Electric
Power, AEP, a major producer of coal-fired energy, has made it clear that
Mike Morris, the company's CEO, will be held accountable for delivering on
AEP's commitments to integrate carbon capture and sequestration
technology, addressing environmental health and safety issues with its
coal suppliers, and preparing the company to thrive in a
carbon-constrained economy.
What happened at AEP is a model for a process that must become standard
operating procedure. Senior management, including the CEO, board members,
investors and company critics hammered out a comprehensive set of
sustainability goals for the company. It was then approved by shareholders
and adopted as part of the company's strategic plan.
Investors, too, are helping to shift the tide towards greater corporate
transparency and accountability on a variety of sustainability challenges.
It would have been inconceivable 15 years ago that in 2007, 55 of the
nation's largest institutional investors representing $4 trillion in
assets, would become part of Ceres' Investor Network on Climate Risk,
scrutinizing how the companies they invest in are managing the financial
risks and opportunities of climate change.
Climate change is the mother of all sustainability issues and will have an
impact on every economic sector, whether from new regulations, physical
impacts or growing demand for climate-friendly technologies. Thus, climate
risk is embedded in every business and investment portfolio, which is why
more Wall Street analysts are beginning to factor corporate response to
climate risk into their evaluations of the companies they cover.
Who would have imagined 15 years ago that more than 1,200 corporations
would sign on to the Global Reporting Initiative, GRI, the gold-standard
of corporate sustainability reporting, so that outside stakeholders could
evaluate, using a standard set of metrics, corporate performance on a
range of sustainability challenges, metrics that management can also use
to set specific sustainability goals and measure their progress.
As the evidence for climate change has mounted dramatically, more and more
corporate boards have started to take the issue seriously, ensuring that
management, often focused on quarterly results, take a long range view of
how climate change could affect the bottom line.
Ceres, in partnership with Yale University and insurance giant Marsh,
launched a Sustainable Governance Program in June to help more corporate
directors become more proactive in discussing climate change and other
sustainability issues within their corporations.
In short, corporate concern about sustainable business practices, once
taken seriously by a handful of prescient companies, is hitting both Wall
Street and Main Street.
Clearly, some corporations joining the movement to go green are doing so
because they see a market trend and don't want to miss the wave. Others
see a public relations opportunity, while still others have leadership who
genuinely see corporate responsibility and sustainability as integral to
the corporate strategy.
Whatever the motivation, the trend is a welcome one for regardless of how
they get there, in time most will see that enlightened self-interest means
that sustainability, primarily managing the risks and opportunities of
climate change, is a bottom-line economic and competitiveness issue they
ignore at their peril.
As organizations like Ceres gain a foothold in corporate America, however,
we have to hold corporate feet to the fire and ensure that organizations
such as Ceres and GRI continue to set the standards by which responsible
corporate behavior is measured or we may well have won only a Pyrrhic
victory.
I take heart that in 15 years sustainability issues have entered the
conversation in corporations across the country and the world, and that
many of the world's leading companies are, quite literally, putting their
money where their mouths are. There is today a critical mass of corporate
and investor power that has made sustainability, principally climate
change, a mainstream, high-priority political and corporate governance
issue.
We are trending in the right direction, but it is far too early to declare
victory. We have started to move the mountain, but just barely, and it
remains to be seen whether we are moving fast enough to avert
environmental and economic disaster. Of the 1,200 companies reporting
under the GRI, less than 20 percent are U.S. companies.
The major corporations calling for federal legislation to curb greenhouse
gas emissions are still in the minority, and many, such as ExxonMobil,
Southern and Dominion Resources have failed to set goals to reduce their
own greenhouse gas emissions or invested sufficiently in products and
technologies that will reduce carbon emissions. Most boards of directors
remain disengaged on sustainability issues.
And though it appears we have reached a public opinion tipping point on
the need for aggressive action to counter global warming, in the United
States, China and virtually every country carbon emissions are still
growing.
The growing corporate consensus on the need for action is a necessary,
though not sufficient, condition for success, and rhetorical commitment to
sustainability must be translated into measurable goals and results.
Neither the private sector nor government alone can bring about change on
the scale needed to ensure a prosperous future. In my view, governments,
companies and consumers all have essential roles in achieving a
sustainable planet.
And we must be clear that what we are seeking is lasting prosperity, a
goal that speaks to every citizen, stakeholder and corporate leader.
Too often sustainability issues are presented as either/or propositions.
We can have clean air, but only at a loss of jobs. We can cut greenhouse
gas emissions, but only at a huge hit to the corporate bottom line. These
are false choices.
It is becoming increasingly clear, even in the most conservative corporate
boardrooms, that the imperatives of the environmental and economic bottom
lines are one and the same. DuPont, for example, has saved billions of
dollars over the past decade by reducing energy use and greenhouse gas
emissions.
In short, what we are asking of the corporate world is this: engage with a
wide range of stakeholders to examine impacts and find solutions, disclose
your exposure to climate and other sustainability risks, and act. It is
not enough to do one of these; they are an inseparable package.
If we are to create lasting prosperity by 2022, sustainability reporting
must become as routine as corporate financial reporting. Indeed, it should
become an integral part of such reporting, and sustainability strategies
must become more than an adjunct or afterthought, or relegated to the PR
department. They must become an integral part of every major company's
core mission and strategic plan.
Fundamentally, environmental and social issues are business issues. They
cannot be compartmentalized either philosophically or in terms of
corporate management. They must be fully integrated throughout a company.
A company that does not know how to integrate issues of sustainability
into its long-term business strategy is a poorly run company and the
investment community will take notice.
By 2022, will corporate America have risen to the challenge? It has taken
many years to achieve the level of corporate engagement in environmental
and social issues we have today. But it will take enormous commitment by
corporate leaders, NGOs, local, state and federal governments, investors
and other stakeholders if sustainability is to be recognized as the core
economic issue that it is.
There is strong momentum in this direction and for more and more companies
to incorporate the values of sustainability into their corporate DNA. The
stakes are high. Our future prosperity, indeed the survivability of our
planet, may well depend on it.
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