Forget the election, Iraq, or the Paris Hilton video. This top-ten list of 2004 stories isn’t about them. It reflects the year’s significant events in the arena of business and the environment -- the forces that shaped how mainstream companies think, and act, on key environmental issues. That is, at least, in my opinion, having just perused the more than 500 news stories we ran on GreenBiz.com during the year.
The bottom line: amid steady declines in ecosystem indicators and devastating rollbacks by the Bush Administration in environmental laws and enforcement, there’s some good news to report. Companies seem to be stepping up to the plate -- or are being forced to do so by shareholders, activists, or competitors.
Herewith, in no particular order:
1. Investors Warm Up to Climate Change
Two thousand four was the year that climate change hit the boardroom. A succession of shareholder and activist initiatives made it so. During the annual meeting season, energy companies saw a record number of climate shareholder resolutions. The resolutions had impact, as electric power giants American Electric Power and Cinergy, then Southern Co. and TXU bowed to shareholder pressure by agreeing to report publicly on how they are planning for those scenarios.
Meanwhile, a survey of the world’s largest companies revealed that many were paying increasing attention to climate change. The report also unveiled a Climate Leadership Index, comprising the 50 companies “whose responses best addressed the breadth of climate change issues.” The Carbon Disclosure Project, representing 95 leading institutional investors that account for $10 trillion in assets under management, similarly found that more global companies are developing coherent climate change strategies.
Perhaps the biggest wake-up call to CEOs came from, of all places, the staid Conference Board, which issued a report based on the collective views of 11 noted climate scientists. It concluded that “businesses that ignore the debate over climate change do so at their peril."
2. Companies Told to Account for Risks
If the climate issue weren’t enough, company boards of directors were faced in 2004 with a spate of rulings and reports that pointed to inadequacies in how companies report their environmental liabilities to investors. In the wake of accounting scandals and increased disclosure requirements for U.S. companies, environmental issues, including climate, came under scrutiny.
One scathing report, by SustainAbility, the United Nations Environment Program and Standard & Poor’s, found that corporate boards are failing to disclose to financial investors how environmental and social issues pose strategic risks and opportunities for their businesses. Another report, titled "Fooling Investors and Fooling Themselves", identified aggressive accounting and asset management tactics that can lead to environmental accounting fraud. The General Accounting Office, the investigative arm of Congress, chimed in with a report concluding that environmental liabilities can pose significant financial burdens to corporations, yet there is currently no standard for reporting environmental risks.
In response, the United Nations Conference on Trade and Environment released guidelines on eco-efficiency indicators that link the environmental performance of corporations to their financial performance. And the U.S. Securities and Exchange Commission said it would create a searchable database to allow investors and analysts to track environmental liabilities, such as clean-up costs, fines, and potential risks from pollution and hazardous materials.
3. Water Becomes a Business Issue
While the world has focused for three decades on global energy issues, water has bubbled up as a critical resource challenge for many companies. A landmark report from the Pacific Institute concluded that businesses around the world, from beverage companies to chip manufacturers, are failing to prepare for the serious economic and political risks posed by growing competition for fresh water, the threat of water contamination, and rising water-related costs.
Meanwhile, a study by the World Wildlife Fund concluded that $70 billion worth of goods and services from freshwater resources could be at risk annually if governments do not manage wetlands in a more sustainable way. And a report from the United Nations Environment Programme and the Stockholm International Water Institute made the business case for financial institutions considering the problem of water scarcity when financing industrial projects.
4. The World Wakes Up to Sustainable Coffee
Issues related to the sustainability of coffee have been percolating for years, but seemed to reach a critical mass during the year, as a growing number of companies joined the sustainable-coffee movement.
The U.S. government, working through the United States Agency for International Development, joined forces with Conservation International and Starbucks Coffee Company to create the Conservation Coffee Alliance, with the aim of promoting private-sector approaches within the coffee industry that are environmentally sensitive, socially responsible, and economically viable. The Rainforest Alliance announced it had partnered with the U.S. Agency for International Development to establish the Certified Sustainable Products Alliance, a three-year effort to significantly promote and increase the sale of sustainably produced certified timber, banana, and coffee from Central America and Mexico.
At the retail end, the Giant Food supermarket chain said it would partner with TransFair USA to offer five varieties of Fair Trade Certified coffee in all 199 Giant and Super G stores. In Britain, Marks and Spencer announced that it now serves only Fairtrade coffee, thereby doubling the amount of Fairtrade coffee on sale in the U.K.'s coffee shops. And cafeterias and coffee shops throughout the United Nations offices in New York said they are now serving sustainable coffee to the delegates, diplomats, and visitors who walk its prestigious halls.
5. Green MBAs Make the Grade
Getting sustainability thinking into business schools has long been a challenge, with only a handful of schools offering anything more than a few elective courses on business and sustainability. Some progress was made in 2004, however. Bainbridge Graduate Institute granted MBAs in Sustainable Business to its first-ever graduating class in May. At another new green MBA program, Presidio World College in San Francisco, student enrollment more than doubled in its second year, from one cohort of 22 students to three cohorts of 55 students.
Meanwhile, in more established schools, a $5 million gift from Samuel C. Johnson will give global environmental sustainability issues more prominence in MBA studies at Cornell University. And the University of Oregon said it would launch “one of the most comprehensive sustainability professional development programs of its kind in the U.S.”
Perhaps the biggest development came in the form of a survey of more than 800 MBAs from 11 leading North American and European schools, which found a substantial number were willing to forgo some financial benefits to work for an organization with a better reputation for corporate social responsibility and ethics.
6. Greener Buildings Break New Ground
The green-building movement has been making great strides for several years, but 2004 indicated that it may be hitting its stride. The movement was bolstered by a report offering compelling evidence that if there is any premium associated with building green, it is far less significant than a range of other factors that affect building cost. Another survey, by Turner Construction, of 719 building owners, developers, architects, engineers and consultants on green building issues, found that green buildings lead to increased efficiency and returns on investments.
Amid that good news, several landmark projects helped illuminate the green-building landscape:
At year’s end, a new book on marketing green buildings predicted that the number of LEED-registered buildings will grow more than five-fold over the next five years.
7. Electronics Makers and Retailers Take It Back
Another emerging trend, the take-back of used computers, cell phones, and other electronic equipment, also hit its stride. While Europe faces new legal mandates on takeback, U.S. companies have no such requirements -- at least from the government. But activist groups have relentlessly pushed the major PC companies to take “voluntary” action. One example: Large institutional purchasers, representing over $140 million of sales, pressed the computer industry to improve the environmental performance of computers.
It seems the companies are listening. HP accelerated its product recycling program by setting a goal to recycle one billion pounds of electronic products and printing supplies globally by 2007. Dell set the aggressive goal to increase recovery of used computer products by 50% over the amount collected in fiscal year 2004. And Cisco Systems, Microsoft and Intel endorsed the Electronics Industry Code of Conduct established by Hewlett-Packard, Dell, and IBM to promote industry standards for socially responsible business practices across their global supply chains.
Meanwhile, on the retail front, EPA and Staples Inc. teamed up on a project to utilize retailers to collect and recycle electronic waste instead of it being disposed of at landfills and other waste facilities. And Office Depot and HP launched a free in-store program that allows customers to drop off any brand of unwanted electronics at any of Office Depot's more than 850 U.S. retail stores.
8. Old Companies Learn New, Green Tricks
Slowly but surely, some big companies are discovering some big opportunities in services that help their customers address environmental challenges. Two examples:
9. Greener Fleets Get Traction
The Toyota Prius has been a big story for a couple years now, but 2004 saw the Prius and other hybrid, fuel cell, and cleaner diesel vehicles come to market -- and get adopted by fleet buyers, such as companies, government agencies, and other institutional buyers. That takes these vehicles beyond their image as the playthings of early adopters and greenies, and into the mainstream of buyers.
Hyperion Solutions, a Silicon Valley software company, became one of the first companies to help its employees purchase hybrids for their personal use. In Indiana, Roche Pharmaceutical purchased 10 Priuses and an equal number of Ford Escape hybrids for its sales force -- part of the company’s commitment to lower greenhouse gas emissions by 10% over the next five years.
Meanwhile, other companies joined in. FedEx expanded its low-emissions vehicle program by placing into service ten low-emission, hybrid electric delivery vehicles in New York City just in time for its holiday peak season. Canon New Zealand’s environmental policy shifted up a gear with the purchase of a number of hybrid vehicles for its corporate fleet. And UPS and DaimlerChrysler launched the first medium-duty fuel cell delivery vehicles in the U.S.
Amid all this, success seems to begetting success. The Alliance to Save Energy lauded Toyota for its Prius, with ASE president Kateri Callahan calling it “a hot, sexy, crowd-pleasing ride.” (It is noteworthy that, at the time, Callahan was one of tens of thousands of consumers on the waiting list for the 2004 Prius.) The Prius received a Gold Award at the 2004 Industrial Design Excellence Awards competition. And Toyota’s success led it to announce that the company “continued to make progress” managing environmental issues across the life cycle of automobile design, production, sales, distribution, and recycling.
10. Banks Get Credit for Sustainability
For years, activist groups have targeted financial institutions as a root cause of many environmental problems, for their financing of environmentally damaging dams, timber operations, and other non-sustainable ventures. The banks, for their part, largely passed the buck, saying they couldn’t control what their customers did with the money they borrowed.
That didn’t wash. And activist groups like Rainforest Action Network stepped up their campaigns. In 2004, they seemed to pay off.
Rainforest Action Network and Citigroup, one of the activist campaign’s big fish, announced that Citigroup had adopted a comprehensive environmental policy that would set a new standard for the financial services industry. The policy provides a long-term framework for Citigroup to promote higher environmental standards through its business practices. Bank of America joined in, reaffirming its commitment to responsible environmental practices in its corporate philosophy, everyday business operations, and products and services. B of A also pledged to take significant new steps in the reduction of greenhouse gas emissions, protection of intact forest ecosystems, and transparent public reporting to all stakeholders.
And HSBC announced its intention to be the first major bank to go “carbon neutral” in a program that may cost up to $7 million in the first year.