Green companies do better

The wide variety and growing number of businesses contributing and the sheer amount of capital being invested in sustainable and 'green' technologies may seem surprising. These companies, however, are not acting solely out of concern for the environment. They are making sound business decisions and are finding that being green also means being profitable.

Many businesses readily express this mindset. As the Vice-President of Wal-Mart, Andrew Ruben, explained in testimony to Congress, 'we know that being an efficient and profitable business and being a good steward for the environment are goals that can work together' (Ruben, 2006). Companies will not generally 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' (Goldman Sachs, 2005). 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' (Mangu-Ward, 2006).

All of these corporations are taking action because, as former Vice-President Al Gore describes, there is indeed no 'conflict between the environment and the economy' (Kabel, 2006). 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 5 years the world's 100 most sustainable public corporations outperformed the Morgan Stanley Capital International index by 7.1 per cent (Holloway, 2006).

New market indexes for alternative energy are used to track the performance of alternative energy companies and can be compared to other market indices, such as the Dow Jones Industrial Average (Keehner, 2006). The numbers suggest that alternative energy indices (and companies) do better than many non-green indices. One index, Global Climate 100, increased 10 per cent over the first half of 2006, while the Morgan Stanley International World index was up 6 per cent. Another green index, Wilderhill Clean Energy, increased 24 per cent, compared to Standard & Poor's 500-stock index, which rose only 4 per cent (Keehner, 2006). As a whole, green companies are doing better than many other corporations, and many businesses are beginning to realize that being pro-environment can also be profitable.

This trend is likely to be reinforced by a shift in consumer attitudes as more of the public becomes conscious of the environmental consequences of their purchasing decisions. Many people are already willing to opt for more environmentally benign products, even if this requires paying a cost premium. Millions of Americans have purchased Energy Star appliances, computers and office machines; though these machines have slightly higher capital costs, the payback time of an Energy Star appliance in reduced energy costs is remarkably fast.

A sea of 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 campus' 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 (Climate Institute, 2006).

As the idea that we are each responsible for cleaning up our own mess gains sway among religious and secular institutions, a powerful dynamic will be at play in the marketplace. For example, Land Rover will be including the cost of offsetting carbon emissions for the first 45,000 miles driven in the price of most of its models sold in the UK beginning in 2007. The company has clearly calculated that most of its consumers are prepared to pay a little extra in order to reduce their impact on the environment.

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