Creating a green image without addressing the main problems
Citation: This article was published as Sharon Beder, 'Creating a green image without addressing the main problems', Engineers Australia, June 2000, p. 44.
This is a final version submitted for publication.
Last month I attended a conference entitled "From sustainable development to Dow Jones". The conference was a travelling road-show of international and Australian speakers that toured the main cities of Australia.
Using the jargon of stakeholder engagement, triple bottom lines, road maps, business drivers and shareholder value the speakers described how improvements in environmental performance increase shareholder value because people prefer to invest in environmentally responsible companies.
The Dow Jones Sustainability Group Index, launched in September 1999, shows some evidence that companies chosen as "sustainability leaders" in 68 industry sectors in 22 countries do outperform other companies in shareholder value. Alois Flatz, Head of Sustainability Research at the SAM Sustainability Group in Zurich, which developed the index, explained at the conference how companies were chosen from amongst the largest companies in the world because they have adopted sustainability as a strategy. Sustainability, in this context, "is a future-oriented approach which is geared to economic success as well as adding environmental and social value".
John Elkington, chair of the London-based consultancy firm, SustainAbility told the conference that the number of companies that realise they can benefit from good environmental performance should reach a critical mass in the 21st century. After this, addressing environmental concerns will become a normal part of business and be seen as opportunities rather than obstacles.
However this sanguine view that the environment can be protected by the self-interest of corporate boards, without the need for further government intervention, is belied by the contradictions in the real world.
One example of this is the Ford Motor Company. Ford is very keen to promote itself as an environmentally responsible company and has engaged SustainAbility to help it. Ford has also spent massive amounts of money on promoting a green image for itself. Yet in the real world, Ford is having trouble reconciling its environmental image with its desire for profits. While Time Magazine’s Earth Day Edition (April-May 2000) was littered with double page Ford advertisements boasting of Ford’s environmental achievements—one ad even announcing "A car so environmentally friendly it helps clean up after the one in front"—Ford was in trouble with the governmental watchdog. In April Ford had to pay fines of over a million dollars after the US EPA claimed it had violated clean air laws at three of its plants in Detroit.
Then, a couple of weeks later, Ford admitted in its first "corporate citizenship report" that its sport utility vehicles (four-wheel-drives and pick-ups) emit more pollution and greenhouse gases than regular cars and were more likely to kill other motorists. They also consume more fuel. The real problem for Ford is that it gets the bulk of its profits from the sale of these vehicles and so is unwilling to stop producing and promoting them, despite its desire to be seen as environmentally responsible. It is apparent that the potential gain in shareholder value from a clean green image is often insignificant when compared to the loss of profit from stopping production of environmentally damaging goods. In such cases, corporations focus on relatively minor changes in the production process rather than the product.
There are many examples of this. BPAmoco is a company working particularly hard to green its image. But although it has placed solar power panels on top of some of its petrol stations to reduce its own greenhouse gases it is still selling a major source of greenhouse gases to others. Similarly Shell was cited at the conference by several speakers, including its Vice-President Sustainable Development, Tom Delfgaauw, as a pioneer of the new principle-oriented corporation. Although Shell claims to have significantly reduced its greenhouse gas emissions from production processing its primary product is still a fossil fuel. Neither company has been willing to invest even 1% of their budgets in solar energy.
No doubt environmentally concerned people will invest in such companies because they are making some environmental reforms and as a result their shareholder value will increase. But it is wishful thinking to believe that such investment alone will provide the impetus that is necessary to really protect the environment. The hard decisions needed to protect the environment, unfortunately, are too often ones that are likely to threaten profits and dividends.
Professor Sharon Beder is a visiting professorial fellow at the University of Wollongong.
Sharon Beder's Publications can be found at http://www.uow.edu.au/~sharonb