Here’s How Corporate America’s Push to Go Green May Finally Be Working
It used to be, in America, that having recycling bins tucked away in businesses, even if they were just some sort of nebulous afterthought, represented a corporation’s sense of responsibility to the environment.
The contributions seemed particularly limited in the face of constant setbacks, from the oil tanker Exxon Valdez hitting a reef and spilling 11 million gallons of animal-and-plant-destroying crude oil into the Gulf of Alaska in 1989 to President George W. Bush withdrawing in 2001 from the Kyoto Protocol agreement to reduce greenhouse gas emissions.
With headlines like those and the public backlash they garnered, corporations tried to keep their worst practices silent and secret.
Today, 25 years after the Exxon Valdez spill, times are changing. Rising concerns from activist investors and the public over fossil fuel–produced carbon dioxide and other heat-trapping greenhouse gas emissions affecting global warming and climate change have brought seismic shifts in corporate responsibility. Increasingly, the accepted mode of operation means transparency, sustainability, and standardization. Corporate responsibility reports and energy-saving green buildings and cars are more in line with modern greenism.
Even Exxon Mobil, accountable for 3.2 percent of global greenhouse emissions from 1751 to 2010, has yielded to shareholder demands by announcing last month it would become the first oil company to release a carbon asset risk report, albeit without a commitment to reduce emissions.
“The planet is heating up, and biodiversity is diminishing. It’s a problem. I think folks recognize that, and businesses recognize that,” said Mark Tulay, program manager for the Global Initiative for Sustainability Ratings, which began in 2011. Intended to rate global businesses and organizations on sustainability, the initiative was launched in part by Ceres, a company founded in 1989 by a small group of investors in response to the Exxon Valdez spill and dedicated to formulating sustainable business strategies.
“People talk about fiscal cliffs. We’re approaching a sustainability cliff,” said Tulay. “People wait until the last minute to do things.”
Recent studies and surveys have found that corporations both in the U.S. and abroad are starting to recognize that doing good things—from revealing their business models and developing ways to cut their carbon footprint to improving health and safety conditions in offices and factories—doesn’t just serve the needs of their investors but improves the businesses’ futures.
Audit and advisory company KPMG found through its 2013 Survey of Corporate Responsibility Reporting, which looked at 4,100 companies across 41 countries, that 71 percent of those companies adhered to some form of corporate responsibility reporting, making the practice basically mainstream.
By comparison, when the KPMG survey was first published in 1993, the corporate responsibility reporting rate was only 12 percent.
Also, according to the 2013 survey, 75 percent of the world’s 250 largest companies researched by KPMG acknowledged risks tied to environmental and social forces, such as climate change and resource scarcity, in their corporate responsibility reports, though only 5 percent quantified how these risks might affect their financial performance.
A 2012 report by the Union of Concerned Scientists looking at statements and actions on climate science and policy by 28 top publicly traded U.S. companies found that despite selected energy and oil companies such as Peabody Energy Corporation funding anti-climate change lobbyists, other companies including Nike, Caterpillar, and General Electric were all actively engaged in climate change conversations.
“Sustainability reports are becoming more standardized, rigorous,” said Tulay. “Nike has a sustainability team that has gone from 20 or 30 people to 90. No longer is sustainability off to the side. It’s baked into their core.”
One huge, quantifiable core goal includes making buildings green, cost saving, water conserving, and energy efficient. In 2000, the nonprofit U.S. Green Building Council unveiled Leadership in Energy and Environmental Design, or LEED, a green-building rating and certification system, and it has become the industry standard since.
According to the council, there were only 42 LEED-certified commercial projects in 2000. That number jumped to 384 in 2005, then to 6,926 in 2010. The number of LEED-certified commercial and institutional buildings is now 21,525.
“Those numbers tell a really powerful story. When a company makes a top-down decision, it helps them change their entire practice, and it usually starts with a leader, then blossoms,” said Scot Horst, senior vice president of LEED. He noted that companies such as Starbucks, Nike, Procter & Gamble, and Intel are dedicated to building stores and factories according to LEED standards.
“LEED buildings are about human health and health in the environment,” Horst said. “We waste a tremendous amount of energy on buildings. When you use less energy, you’re burning less coal.”
Tulay acknowledged that the average age of a company’s board also affects hesitancy or openness to transparency and change. It’s a generational shift in thinking.
“The more enlightened ones think of recycling as a starting point, and the less enlightened ones think it’s the finish line. But it’s just the beginning,” he said. “If companies don’t get it, they won’t survive for the new millennium consumer. Sustainability is about becoming more competitive and profitable.”