Can Business Be
Cool Why a growing number of firms are taking global warming seriously.
Companies supporting environment protection Rupert
Murdoch is no green activist. But in Pebble Beach later this summer, the annual
gathering of executives of Mr Murdoch’s News Corporation--which last year led to
a dramatic shift in the media conglomerate’s attitude to the Internet--will be
addressed by several leading environmentalists, including a vice-president
turned climate-change movie star. Last month BSkyB, a British
satellitetelevision company chaired by Mr. Murdoch and run by his son, James,
declared itself "carbon-neutral", having taken various steps to cut or offset
its discharges of carbon into the atmosphere. The army of
corporate greens is growing fast. Late last year HSBC became the first big bank
to announce that it was carbon-neutral, joining other financial institutions,
including Swiss Re, a reinsurer, and Goldman Sachs, an investment bank, in
waging war on climate-warming gases (of which carbon dioxide is the main
culprit). Last year General Electric (GE), an industrial powerhouse, launched
its "Ecomagination" strategy, aiming to cut its output of greenhouse gases and
to invest heavily in clean (i.e., carbon-free) technologies. In October Wal-Mart
announced a series of environmental schemes, including doubling the
fuel-efficiency of its fleet of vehicles within a decade. Tesco and Sainsbury,
two Of Britain’s biggest retailers, are competing fiercely to be the greenest.
And on June 7th some leading British bosses lobbied Tony Blair for a more
ambitious policy on climate change, even if that involves harsher
regulation. The other side The greening of business is
by no means universal, however. Money from Exxon Mobil, Ford and General Motors
helped pay for television advertisements aired recently in America by the
Competitive Enterprise Institute, with the daft slogan "Carbon dioxide: they
call it pollution; we call it life". Besides, environmentalist critics say, some
firms are engaged in superficial "greenwash to boost the image of essentially
climate-hurting businesses. Take BP, the most prominent corporate advocate of
action on climate change, with its "Beyond Petroleum" ad campaign, high-profile
investments in green energy, and even a "carbon calculator" on its websites
helps consumers measure their personal "carbon footprint", or overall emissions
of carbon. Yet, critics complain, BP’s recent record profits are largely thanks
to sales of huge amounts of carbon-packed oil and gas. On the
other hand, some free-market thinkers see the support of firms for regulation of
carbon as the latest attempt at "regulatory capture", by those who stand to
profit from new rules. Max Schulz of the Manhattan Institute, a conservative
think tank, notes darkly that "Enron was into pushing the idea of climate
change, because it was good for its business". Others argue that
climate change has no more place in corporate boardrooms than do discussions of
other partisan political issues, such as Darfur or gay marriage. That criticism,
at least, is surely wrong. Most of the corporate converts say they are acting
not out of some vague sense of social responsibility, or even personal angst,
but because climate change creates real business risks and opportunities—from
regulatory compliance to insuring clients on flood plains. And although these
concerns vary hugely from one company to the next, few firms can be sure of
remaining unaffected. The climate of opinion The most
obvious risk is of rising energy costs. Indeed, the recent high price of oil and
natural gas, allied to fears over the security of energy supplies from the
Middle East and Russia—neither of which have anything to de with climate
change—may be the main reason why many firms have recently become interested in
alternative energy sources. But at the same time, a growing number of
bosses—whatever their personal views about the scientific evidence of climate
change—now think that the public has become convinced that global warming is for
real. Hurricane Katrina was particularly important in changing opinion in
America. Many businessmen have concluded that this new public mood will result,
sooner or later, in government action to control carbon emissions—most likely,
using some sort of carbon tax or Kyoto-like system of tradable caps on firms’
carbon emissions. A carbon-trading system is already in place in
the European Union. But even in America, some influential businesses are
exerting pressure on the government to control carbon emissions. One motive is
to help firms facing decisions that will depend for their long-term
profitability on what carbon regime, if any, is in place. "Some asset-intensive
industries are making investments now that have a 30-to-50-year horizon," says
Travis Engen, who recently stepped down as boss of Alcan, a big aluminium firm.
"As CEO, I wanted to make damn sure my investments were good for the future, not
just today"—which, for him, meant evaluating investments assuming that his firm
would soon have to pay to emit carbon. Indeed, some expect
President Bush to start thinking more about climate change after November’s
mid-term elections, especially now that he has appointed a keen environmentalist
as treasury secretary— Hank Paulson, who as boss of Goldman Sachs was the force
behind the investment bank’s greener stance. "American businesses are starting
to realise that something is going to happen on carbon," says Jim Rogers, chief
executive of Duke Energy, one of the country’s biggest power producers, who
reckons legislation is quite likely to pass in Congress by
2009. Companies’ move As firms try to do something
about climate change, the typical first step is to improve their energy
efficiency, by both reducing consumption and also shifting the mix of sources
from hydrocarbons towards cleaner alternatives. Given high oil prices, those
that have already done so have found energy efficiency to be surprisingly good
for profits. "Carbon Down, Profits Up", a report by the Climate
Group, an organisation founded in 2004 by various firms and governments, listed
74 companies from 18 industries in 11 countries that are committed to cutting
greenhouse-gas emissions. So far, this has brought them combined savings of
$11.6 billion, claims the report. Four firms- Bayer, British Telecom, DuPont and
Norske Canada—account for $4 billion of this between them. Many
companies, including BP, also see the chance to make money from providing things
that help reduce global warming—from clean coal-fired power-stations, to wind
farms, to mortgages with better rates for homes that are carbon-neutral. GE
plans to double its revenues from 17 clean-technology businesses to $20 billion
by 2010. HSBC’s decision to become carbon-neutral is part of a plan to develop a
carbon-finance business, both for retail consumers and corporate clients. "We
believe it is a major business opportunity for us, not a hobby or corporate
social responsibility," says Francis Sullivan of HSBC. And even as car firms
lobby against regulating carbon, they are investing heavily in cleaner hybrid
cars, Going carbon-neutral—in which a firm cuts its carbon
output as much as possible and then offsets any left over by paying to reduce
emissions elsewhere—is particularly attractive to firms that sell directly to
the public and reckon that their customers want them to take climate change
seriously. Since these sorts of firms are often not great carbon-emitters in the
first place, "carbon neutrality" can be fairly painless. A
recent study by the Carbon Trust, a British quango, reckoned that, for
industries such as airlines, up to 50% of brand value may be at risk if firms
fail to take action on climate change. A recent study by the Carbon Trust indicated that industries such as airlines, if they______.half of its brand value may be at risk.