In the last few years, businesses have committed themselves to addressing and preventing climate change. Some large American firms are using their market power to ensure consumers purchase only environmentally sound products, while companies in every sector of the economy are beginning to purchase more energy from non-carbon emitting sources.
Large companies are able to use their market power to influence the types of products consumers buy. Some companies have realized this, and are now offering only environmentally-friendly products to their customers, in effect forcing them to consume ecologically-sound items. Home Depot, one of the United States’ largest suppliers of lumber, has decided to sell only “certified wood” in its stores.10 “Certified” wood products are those that are harvested in a sustainable, environmentally sound manner; they exclude illegally logged lumber or wood from clear-cut rainforest. Home Depot was able to implement this policy because it controls a significant portion of the lumber market in the United States.10
The retail giant Wal-Mart is using its market power to educate its consumers about climate friendly approaches. For example, they are featuring more efficient electrical products in their stores, and are significantly increasing the number of organically grown cotton products they sell.12 Wal-Mart Vice President Andrew Ruben explains, “Our size and scale means that even one small pro-environment change in our policies or our customers’ habits has exponential impacts all over the world.”12 Had either Wal-Mart or Home Depot been a smaller company with fewer customers, they would not have been able to have such a large effect on the types of products that their customers purchase.
Another encouraging trend emerging in the corporate world is the acceptance of global warming by companies. Hundreds of businesses are recognizing that climate change is happening, and have made voluntary commitments to reduce emissions, use sustainable products and become more environmentally aware.
Perhaps most importantly, many corporations are now investing millions of dollars in alternative and renewable energy sources. Over $48 billion was invested in “green energy” in 2005, and that number is expected to reach $60 billion for 2006.1 Venture capitalists in the United States invested over $1.4 billion in clean technology markets in 2005, which have global annual revenues of $150 billion each year.3
Even more heartening, the investment comes from all sectors of the economy — transportation, electrical, industrial, financial, retail and entertainment businesses are all investing significant resources in the development of alternative energies. Even carbon-generating oil giants BP, Shell and Chevron are financially supporting “green” technologies.
The following examples give an indication of the many positive actions that are being initiated in the energy production, transportation, technology/industry, and financial sectors.
Energy: The first major oil company to publicly acknowledge that climate change is a serious threat,6 BP has worked to increase its efficiency and reduce its greenhouse gas emissions.14 In addition, it has created an Alternative Energy Division and has pledged to invest up to $8 billion in clean energy over the next decade.3 Although, some critics contend that BP’s previous investments in green technologies were more aimed at improving their reputation than accomplishing anything substantial10, the evidence proves otherwise and BP tops CERES’ list of multinational firms in their adoption of climate protecting steps.6
Other energy companies are taking substantial steps. Shell has become an investment leader in hydrogen and is spearheading such efforts in the US and Iceland.48 And Chevron, the fourth largest oil company in the world, currently invests more than $100 million each year in alternative energy. It has also officially integrated clean technologies into its energy portfolio.6
Transportation: Toyota, the largest foreign auto company, has committed itself to adhering to the Kyoto Protocol and reducing greenhouse gas emissions at its facilities.6 In addition, it plans to offer hybrid options for all of its major models by 2010.6
GM, the largest auto manufacturer in the United States, has started to turn its attention to alternative energy and fuels as well. It has already invested more than $1 billion on developing fuel cell technology and has increased its inventory of vehicles that run on bio-fuels.6
Technology and Industry: IBM participates in the Chicago Climate Exchange, the only voluntary but legally binding greenhouse gas trading system in North America. It also purchases 4% of its US electrical needs from renewable resources.15
DuPont, too, has been a leader in addressing climate issues. It has reduced its greenhouse gas emissions by 72% since 1990, and is developing energy-efficient building materials and low-emitting refrigerants.6 DuPont’s energy conservation strategies have actually saved the company over $3 billion.49 “What started as an effort to address our carbon footprint has turned out to be financially a very good thing” explains DuPont vice president Linda Fisher.49
GE recently introduced its “ecomagination” campaign, and plans to invest $1.5 billion in green technologies annually.7 The initiative generated revenues of $10 billion in 2005 alone3 and the company expects to double this to $20 billion by 2010.9 GE’s wind power program appears to be especially promising; it operates over 7,000 wind turbines worldwide already and the number is growing rapidly.16 This $2 billion program is expected to grow to $4 billion shortly.17
Financial: J.P. Morgan, a leading provider of financial services, has established an “environmental policy” that outlines the conduct that the company will follow concerning the environment. In addition, it has pledged to invest $250 million in wind power initiatives.17
Goldman Sachs has also committed itself to working against global warming. In their “Environmental Policy Framework,” the company has committed to reducing greenhouse gas emissions from their offices by 7% by 2012.11 It will also promote market formation in emissions trading and renewable energy credits, and invest up to $1 billion in renewable energy and efficiency programs.11 According to a spokesperson for the company, it is “well on its way” to reaching the $1 billion investment goal.17
Retail corporations such as Wal-Mart, McDonald’s and Home Depot are also making environmental commitments, and even the National Football League (NFL) has made the past two Super Bowls carbon-neutral.18
Green Companies Do Better: Many may be surprised by the wide variety of businesses contributing and the sheer amount of capital being invested. But do not be fooled. Corporations are not solely acting out of some “vague sense of social responsibility” or even moral concerns; they are investing because they “see the chance to make money from providing things that help reduce global warming.”9
Some companies recognize that they face real, physical threats from the consequences of climate change, such as increased risk of storm damage and rising sea levels.6 Others are investing in alternative energies because they are multi-national corporations that operate in countries that must comply with the Kyoto Protocol.7 They may find it easier to install renewable power and reduce their emissions at all of their facilities, instead of just at the ones regulated by the Kyoto Protocol. But the main reason why companies are investing in green technology is because they can—and will— profit from it.
Many businesses readily express this mindset. In written testimony given to Congress, Andrew Ruben, Vice President of Wal-Mart, explains, “we know that being an efficient and profitable business and being a good steward for the environment are goals that can work together.”12 In general, companies will not undertake environmental initiatives at the expense of reducing their profits. Goldman Sachs, in its “Environmental Policy Framework” statement, maintains that in pursuing sound environmental policies, “we will not stray from our central business objective of creating long-term value for our shareholders.”11 Robert Langert, director for environmental affairs at McDonald’s, explains “we were willing to invest money into something, but if it is really going to be sustainable, it has to be economical as well.”10
But all of these corporations are investing because, as former Vice-President Al Gore describes, there is indeed no “conflict between the environment and the economy.”13 In fact, evidence suggests that “greener” and more sustainable companies do better than companies that disregard environmental concerns.
A recent study by Innovest Strategic Advisors, Inc. found that over the past five years the world’s 100 “most sustainable” public corporations outperformed the Morgan Stanley Capital International index by 7.1%.8
New market indexes for alternative-energy are used to track the performance of alternative-energy companies (through their securities) and can be compared to other market indices, such as the Dow Jones Industrial Average.4 The clean-energy indices also provide vehicles for investment in renewable energy technologies,4 and can, in a sense, measure the average success of “green” companies. In fact, the numbers suggest that alternative-energy indices (and companies) do better than many non-green indices. One index, Global Climate 100, is up 10% for the year, compared to the Morgan Stanley International World index which was up 6%.4 Another, Wilderhill Clean Energy, is currently up 24%, compared to Standard & Poor’s 500-stock index, which has risen 4%.4 As a whole, “green” companies are doing better than many other corporations, and many businesses are beginning to realize that being “green” can be profitable.
This trend is likely to be reinforced by a shift in consumer attitudes indicating that more of the public is both conscious of the environmental consequences of buying decisions and willing to opt for more environmentally benign products even if this requires paying a cost premium. Millions of Americans have opted for Energy Star appliances, computers and office machines; the payback on these in reduced energy costs is remarkably fast. A more limited number have been willing to opt for the green power choices pioneered by firms such as Green Mountain Energy.
Yet a sea change in public attitudes may be setting in. A Campus Climate Neutral Network is springing up on many US campuses and students have been willing to impose modest additional levies on themselves to lower their campuses’ greenhouse emissions. In June the General Assembly of the Presbyterian Church USA passed a resolution asking each of its 2.3 million members to bear “a bold witness” by leading a “carbon neutral lifestyle.”50 As this idea becomes implemented and the idea that we are each morally responsible for cleaning up our own mess gains sway among religious and secular institutions, a powerful dynamic will be at play in the marketplace. The decision of Land Rover to build in carbon offsets for the first 45,000 miles of use for most cars it sells in the UK beginning in model year 2007 is a calculated gamble that British consumers are willing to put their money where their mouth is.51 This will all be done through Climate Care, an Oxford-based group that has pioneered in voluntary carbon offsets.51
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