Green Is Good For Business

Companies like General Electric and DuPont use sustainable practices to reshape their supply chain management, while Nike and Wal-Mart focus their environmental efforts on one of the most widely traded resources in the world.

By Dennis Walsh

Nature provides perhaps the best model for new forms of capitalism. Trees are able to take moisture out of the air and pump it back into the soil. Corporations need to be able to do the same. They must be profitable while at the same time delivering strong returns to shareholders and still promoting the health of people and the planet.

Today’s environmental initiatives are not just public relations campaigns intended to fool consumers. Neither is corporate attention to social issues altogether altruistic. A social initiative designed around a public relations campaign is fairly easy to recognize. BP’s five-year “Beyond Petroleum” advertising campaign was largely a public relations exercise. Five years ago it was revolutionary for an oil company to claim human activity had any effect at all on the climate, let alone to suggest that oil companies were not acting responsibly. The campaign made many of us adjust our view of “big oil.” Still, the campaign was not in itself revolutionary.

Most of the “corporate social responsibility” initiatives we see today are reactionary. Attitudes are changing, so companies are reacting to our changing world. The corporations that are going green recognize the gigantic profit opportunities in doing so, and the competitive danger of lagging behind. As consumer expectations grow, certain products—and processes—have become liabilities. Some of these companies are leading the charge on market transformation on the assumption that, if consumers do not yet care, they soon will. Forced to react to this market transformation, their less proactive competitors are demanding some order to the chaos around them. The International Organization for Standardization (ISO) has provided a forum for the debate.

The phasing out of polyvinyl chloride (PVC) is a good example of the collective power of market transformation. Specialty retailers were the first to phase out PVC because of environmentalist pressure. In recent years, Wal-Mart has begun to ask suppliers not to use PVC packaging. Even though PVC is a legal product that has never been shown by any regulatory authority to be a threat to human health, hundreds of companies across a multitude of industries have reduced their PVC use. These companies realized they could turn this potential vulnerability into an advantage. This was classic market transformation.

Dupont is another good example of a corporate innovator who uses technological advances to give them a huge leg up on the competition. Dupont championed the Montreal Protocol in the late 1980s—a treaty that outlawed chlorofluorocarbons (CFCs), the dominant refrigerant. In doing so, Dupont gave itself the lead in the research and development of the most easily substituted alternative. While they had an obvious financial stake in solving the ozone problem, a ban on CFCs was and still is good for the environment.

More recently, General Electric (GE) has emerged as another powerful agent of market transformation, particularly on energy-related issues. Annual sales of energy-efficient products are more than $11 billion, and sales are expected to double again in the next several years.

Wal-Mart is taking sustainability beyond reducing the company’s direct environmental footprint to engaging associates, suppliers, communities and customers. The company’s effort to make environmentally friendly products more affordable and available to customers aligns with their purpose to save people money so they can live better lives. Wal-Mart has taken steps to improve its environmental performance, including working to be supplied 100 percent by renewable energy, creating zero waste and selling products that sustain natural resources and the environment. Through its efforts, Wal-Mart is showing that being an efficient and profitable business and being a good steward of the environment go hand-in-hand. Wal-Mart has launched a sweeping drive to adopt business practices that are good for the environment.

Regardless of whether or not market transformation makes sense, there are challenges to pushing sustainability initiatives through the supply chain. Still, paying a little more up front to buy raw materials that align with socially responsible values has led to tremendous financial benefits in the long run: Take organics for instance. Five years ago, organic sugar purchased from Brazil was 100 percent more expensive than regular sugar. Today, that is no longer the case. Organic farms achieve much higher yields than conventional farms, and they are at parity in terms of pricing. Sustainable agriculture has evolved from a system of production to a concept of stewardship to a vehicle for sustaining rural communities.

In the 1970s, environmental and sustainable agriculture organizations were created in response to the global concern about the environment. The 1980s witnessed a dramatic increase in the number of organizations and promotional initiatives.
As sustainability becomes a bigger marketing tool, more large corporations are working with these organizations and publicizing these collaborations. Nike issued a new report addressing their environmental supply chain initiatives, saying they are going to reshape their supply chain management the same way the human rights abuse issues changed their policy 10 years ago.

Cotton Goes Organic

Because of cotton’s versatility, it is used for a vast variety of food and fiber products, making it one of the most widely traded commodities on earth. Cotton represents an essential component of foreign exchange earnings for more than fifty countries. Yet the simple act of growing and harvesting the one pound of cotton fiber needed to make a T-shirt takes an enormous toll on the earth’s air, water and soil, and has significant impacts on the health of people in cotton growing areas.

Wal-Mart, the world's largest buyer of organic cotton, began working with a nonprofit trade group called the Organic Exchange, which has been promoting the use of organic cotton around the world since 2002. Their market entry has changed the game. Five years ago, global production of organic cotton amounted to about 6,400 metric tons. Wal-Mart has made a commitment to buy organic cotton, which gives farmers the assurance they need to produce it. Beyond that, they will bring visibility to organic cotton. While retail sales of organic cotton have doubled, from $245 million in 2001 to $583 million in 2005, the $300-billion global cotton industry consumes more pesticides and synthetic fertilizers than any other crop. More than 50 million pounds of pesticides are used in the United States alone.

Located in the world’s most productive agricultural region—California's Central Valley—the Sustainable Cotton Project (SCP) focuses on the production and use of cotton, one of the most widely grown and chemical-intensive crops in the world. Since 1994, SCP has been building bridges between farmers, manufacturers and consumers to pioneer markets for certified, organically grown and sustainable cotton, including working on the ground with local farmers. SCP’s guiding philosophy of “cooperation for a change” has fostered a new level of shared information among farmers, manufacturers and others in support of creating a cleaner cotton industry.

In 2003, SCP joined with the Community Alliance with Family Farmers (CAFF) to strengthen its operation and reach into farm and consumer audiences. CAFF and SCP are collaborating to provide growers with information about biological farming techniques and to educate the public about the importance of reducing chemical use in food and fiber production.

According to 1995 data, for example, United States farmers applied nearly one-third of a pound of chemical fertilizers and pesticides for every pound of cotton harvested. When all 19 cotton-growing states are tallied, the crop accounts for 25 percent of all the pesticides used in the U.S. Some of these chemicals are among the most toxic classified by the U.S. Environmental Protection Agency. In developing countries, where regulations are less stringent, the negative impacts are even more severe. SCP has developed programs in three primary areas of the cotton value chain to stimulate the transition to supply and demand of the organic and sustainable cotton industry.

Since 1997, in the days when Nike purchased 250,000 pounds of certified organic cotton, they have steadily increased their reliance on organic cotton. More than 2.5 percent of the cotton they use globally is organic, representing approximately 3 million pounds of organic cotton fiber.

Nike’s corporate responsibility mission is to help the company achieve profitable and sustainable growth and to protect and enhance the brand and company. Sustainable growth requires finding ways to generate profit while minimizing the potentially negative impact on communities and nature. Their goal is to blend a minimum of 5 percent organic cotton into all of their cotton-containing materials by 2010, while steadily expanding their offering of 100 percent certified organic cotton products.

Nike works with the Organic Exchange and the Organic Trade Association to develop the organic cotton market. Not surprisingly, nearly 150 Nike employees work on CR issues as their primary function or have CR work as a significant portion of their workload. At the operational level, corporate responsibility is managed by specialist CR employees and regional CR directors, as well as by relevant departments in locations across Nike. These include labor and environmental health and safety compliance, community affairs, corporate communications, government affairs, legal, human resources and diversity, reporting, stakeholder engagement, environmental initiatives, strategy development and product sustainability.

Nike scores high with Wal-Mart on their Climate Counts Company Scorecard, a system designed to motivate companies to be more proactive in reducing their impact on climate change. Consumers can review all the company scores and download a pocket-sized shopping guide at www.climatecounts.org. Climate Counts developed the scorecard with input from a panel of business and climate experts.

Dennis Walsh is the Associate Publisher for Green At Work magazine.