Business market increases 'green' efforts for money

From Green to Gold

By: Ben Royce

Posted: 3/28/08

Concern about environmental issues among the general public has been growing, but only recently has there been a shift in governmental policy and business practices, an environmental expert said at a UA event Wednesday.

This shift is most clearly illustrated by the green campaigns of GE, Honda and Wal-Mart, said Daniel C. Esty, Yale professor and environmental consultant to many businesses.

Esty was hosted by the Walton College of Business Wednesday to discuss his new book, "Green to Gold."

The book covers strategies businesses are developing to profitably go green.

At the event, Esty discussed reasons for this sudden shift in focus occurring in the business world and reasons why these new policies succeed or fail.

In general, these changes are not brought on because the company is concerned about the environment, but rather by what Esty calls "regulatory" changes and "stakeholder" concerns.

Regulatory changes refer to a shift in policy from "command and control" regulations to economic incentive laws enacted by governments.

In a command and control regulation system, the government tells businesses what the minimum environmental standards are, and the business simply has to comply, Esty said.

An economic incentive law, on the other hand, charges businesses for excess waste and emissions while sometimes offering subsidies for exceptional energy or emissions savings, he said.

The European Union has passed laws that make it mandatory for businesses to buy carbon offsets to compensate for excess emissions, according to globalcarbonexchange.com.

This Web site also outlines goals set by the EU to harness 20 percent of its energy consumed from renewable energy sources and to have a 20 percent reduction in carbon emissions by 2020 as compared to 1990.

No such centralized plan has been adopted in the U.S., but 27 states have implemented environmental policy regulation, and more than 600 mayors have adopted city initiatives, Esty said.

Stakeholders range from individual consumers all the way to large corporations, such as Wal-Mart, he said.

Wal-Mart CEO Lee Scott recently announced the company's environmental sustainability agenda.

In a statement, Scott called the program "Sustainability 360," according to walmartstores.com.

Scott's plan calls for more energy-efficient light bulbs, a 5 percent reduction in packaging and the super centers to become carbon-neutral.

The Wal-Mart Web site described these "global innovation projects" as the process by which the company will try to offer only products produced with renewable energy.

Although Esty thinks it is essential for businesses to change their environmental stance, he said they must keep in mind that they are a business. As such, their environmental changes should focus on developing an attractive and revenue-earning product.

To illustrate this point, Esty compared the automakers Ford and Toyota.

Ford renovated one of its manufacturing plants to include many emission- and energy-saving elements, but did not change its products - the vehicles.

Toyota, on the other hand, developed lighter, more fuel-efficient cars, and quarterly profit reports indicate this was the smarter decision.

The current focus on greener products by consumers and businesses is likely going to be a lasting trend in the face of environmental concerns, Esty said.

Global warming, water quality, deforestation, waste management and energy conservation were included in the 10 concerns he outlined.