The cover article of BusinessWeek for January 29 (“Beyond the Green Corporation“) argues that many leading companies now believe they will make more money by helping communities and protecting the environment.
Is this out of the goodness of their hearts? Heck no. But there is a growing awareness that people vote with their dollars, and some people (including many LGBT people, I believe) would rather shop at companies they feel good about. All else being equal (similar products, similar prices, etc.) the competition gets especially fierce, and having a brand that says “We help people and protect our world” can tip the balance between success and failure.
Take, for example, Toyota and Ford.
“As Toyota prepares to motor past Ford as the world’s second-largest carmaker, it has become a textbook case on how a green reputation delivers a competitive edge. In the five years since the Prius’ U.S. debut, Toyota’s brand value has surged by 47%, to $28 billion, according to Interbrand. In the same period, Ford has been beset with numerous troubles, including a failure to meet its goals for SUV mileage or to exploit its well-regarded Escape hybrid. It’s brand value fell by 70%, to $11 billion.”
There is a new consulting industry developing on Wall Street, called “sustainability analysis.” Investors fear their money could go down the tubes if companies generate poor reputations, or even lawsuits over environmental disasters or poor labor practices like discrimination. So they are demanding more information.
“Rising investor demand for information on sustainability has spurred a flood of new research. Goldman Sachs, Deutsche Bank Securities, UBS, Citigroup, Morgan Stanley, and other brokerages have formed dedicated teams assessing how companies are affected by everything from climate change and social pressures in emerging markets to governance records.”
For instance, according to BusinessWeek, New York’s Communications Consulting Worldwide (CCW) helps companies put dollar values on the public perception of its environmental and human rights practices. They calculate that if Wal-Mart had a reputation like that of Target, its stock would be worth 8.4% more. That’s $16 billion more in shareholders’ pockets. Guess what? When you speak shareholder language, companies take notice!
Wal-Mart’s CEO H. Lee Scott Jr. has now promised that the company will use 100% renewable energy, and drastically reduce waste through recycling. Already by switching to energy-efficient bulbs and adding skylights, Wal-Mart claims to have saved 17% on its electric bill.
Is that enough to turn Wal-Mart’s brand around? By no means. “A 2005 Innovest report on the company gave it the lowest rating. An update to that report will rank it higher, but far from the top. ‘Their failings on the social side are so strong,’ says Innovest analyst Elizabeth Lipton… And even on the environmental front, ‘they are certaintly not sustainable now,’ says Natural Resources Defense Council President Frances Beinecke. ‘Their goals are bold, but they have just begun’.”
That’s good news, though, right? Just last week Exxon cut ties with research outfits that deny global warming, and the company is reportedly in talks to learn how to cut greenhouse gas emissions. If Exxon keeps this up, I may even have to stop boycotting them!