Corporate Sustainability Comes of Age?

I think we have reached an inflection point in the corporate sustainability movement. Today, Wall Street's most prestigious investment bank, Goldman Sachs, became the first invesment to adopt a comprehensive environmental policy. This milestone comes quick on the heels of the world's biggest company and retailer (Wal-Mart) and the world's biggest conglomerate of industrial technology innovation (General Electric) pronouncing ground-breaking environmental initiatives of their own. What is happening here?

Today's New York Times (Saving the Planet, an Earnings Report at a Time) observes that environmental factors are becoming primary drivers in the business decisions of America's biggest corporations. While corporate environmental activism by stakeholders is nothing new, what has recently spurred more corporate boardrooms to take action is the competitive advantage of using clean technologies, rather than simply stakeholder pressure, altruistic corporate citizenship, or the need for good publicity. With energy prices at a high, petroleum-based inputs to production are cutting into profit margins. As the article accounts, companies like Kimberly-Clark is substituting vegetable oil for petroleum derivatives in its shampoos while Dupont is replacing petrochemicals with corn.

This trend undermines the hackneyed excuse that the sole business of business is business and that addressing environmental concerns takes money out of shareholders' pockets. To be sure, the environmental benefits may merely be incidental to the economic considerations. Maybe these companies are solely concerned about the costs of inputs, rather than the associated emissions of greenhouse gases by additional fossil fuels. Yet, corporations have not shied away from trumpeting the ecological implications of such economic decisions. The proliferation of corporatsustainablety reporting is testament to this. Going green thus takes on dual shades, an environmental and monetary one.

The various initiatives that the article covers includes: Cargill's greener packaging; Eastman Chemical Company promoting cleaner coal use; Air Products & Chemical, Inc. selling refinery hydrogen that is used to remove sulfur from oil; GE's Ecomagination products that enhance energy efficiency; Chevron Energy Solutions promoting energy conservation; and Wal-Mart's new environmental policies.

Can Wal-Mart Green the Dragon?

The significance of Wal-Mart hopping onto the green bandwagon (apart from negative accusations that it is trying to create a distraction from its heavily critcized labor practices) is not only the sheer number of consumers it reaches, it is ability to control it thousands of suppliers whose operations are based in China. As Clyde Prestowitz accounts in his book, Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, if Wal-Mart were a country, it would rank ahead the likes of Germany and Britain for volume of imports from China, amounting to some $15 billion in 2003. Should Wal-Mart begin demanding that its suppliers not only meet its expectations of "Everyday Low Prices" but also a minimum standard of environmental quality, its impact on the sustainable development of the world's fastest growing economy could be enormous.

But perhaps the most profound development is Goldman Sach's new environmental initiative, which is so rich in detail and bold in promises that it deserves a post by itself.