Risk & Compliance

Feeling the Heat

More companies are cutting or offsetting their output of greenhouse gases.
Karen M. KrollDecember 28, 2006

Global warming is so hot that Corporate America is seeing green.

About 75 percent of respondents to an October 2006 survey by The Conference Board are measuring their carbon footprint, or the amount of direct and indirect carbon their operations emit. Half of the companies — 90 percent of which had revenues of $1 billion or more — have implemented programs to reduce or offset greenhouse gases, according to the final report, “Carbon Footprint: A Growing Management Concern.”

“We’ve seen a sea change in attitude over the last two years,” says Craig Ebert, executive vice president at consulting firm ICF International. And in action: the number of companies recognized by the U.S. Environmental Protection Agency as climate leaders (companies that are cutting their greenhouse gases) has grown from 11 in
2002 to more than 100 today.

One reason is regulation. “It will be a carbon-constrained future,” says Josh Margolis, managing director with Cantor Fitzgerald Environmental and Energy Brokerage in San Francisco. For example, California Assembly Bill 32, passed last summer, requires state greenhouse-gas emissions to drop to 1990 levels by the year 2020.

In addition, “investors and analysts are saying that companies’ bottom lines are affected by climate change,” says Mindy Lubber, president of Ceres, a Boston-based environmental organization. And businesses viewed as laggards are being targeted by environmental groups. In October, for instance, the Rainforest Action Network rebuked Wachovia Corp. for what it termed a “forest policy [that] is out of step with 21st-century business values.”

Companies are also finding that reducing their environmental impact can boost results. In 2003, Sonoma Wine Co. purchased a 60-year-old plant in Graton, Calif. While the existing facility and equipment could have sufficed, management made several energy-saving improvements, such as installing more efficient boilers and jacketing the stainless-steel cooling tanks to retain temperature. Consequently, even as production doubled, energy use increased just 13 percent. “We’ve seen an almost immediate payback,” says president and acting CFO Dennis Carroll.

Some companies are going even further to reduce emissions. Shaklee Corp., a Pleasanton, Calif.-based personal-care products producer, became the first company certified by the Climate Neutral Network as being “climate neutral”; that is, it reduces or offsets all of its greenhouse and global-warming gases. Among other steps, the company supported the installation of solar photovoltaics in Sri Lanka, which both offset its greenhouse-gas emissions elsewhere and provide energy to area villages. “Our intent is to help today’s developing countries become tomorrow’s markets,” says CFO Ed Dunlap.

Still, it’s difficult to determine just how much more companies are doing to reduce their emissions, says Charles J. Bennett, co-author of the “Carbon Footprint” report. What’s clear, however, is that “carbon constraints are going to change markets for the rest of our lives,” says consultant Ebert. “If you don’t understand that, you’re at a disadvantage and you’re going to miss opportunities.”