The American Spectator

The Nation's Pulse

Earth Day: Corporate Edition

By G. Tracy Mehan, III on 4.22.08 @ 12:07AM

Notwithstanding the present economic situation, environmental issues are a top concern of corporate executives. Every day seems to be Earth Day in the nation's boardrooms.

The motivation for this corporate behavior is, for understandable reasons, mixed. It involves anticipating or preempting future regulatory action, mitigating liabilities, reducing costs, maintaining customer goodwill and brand integrity, recruitment of the best and the brightest employees and enhancing profit margins through development of new services and products.

The late Peter Drucker Peter Drucker , the dean of management consulting, argued in his book Managing in a Time of Great Change (1995) that "a business that does not show a profit at least equal to its cost of capital is irresponsible; it wastes society's resources." He also believed that "every organization must assume full responsibility for its impact on employees, the environment, customers, and whomever or whatever it touches."

Nobel Laureate economist Milton Friedman argued that such social concerns were contrary to the primary function of business. The title of his famous 1970 article in the New York Times Magazine was "The Social Responsibility of Business Is to Increase Its Profits." He believed the duty to maximize profits was the essence of the fiduciary obligation owed to stockholders. He did, however, recognize the imperative to obey the law and "ethical custom."

Arguably, the "ethical custom" which Friedman noted has changed over the last four decades. Certainly, the laws have.

Social and political realities as well as the beliefs and behaviors of customers and even stockholders, both individual and institutional, are driving companies to be greener and cleaner whether they like it or not. The market and society appear to be demanding this behavior.

Forest L. Reinhardt, professor at the Harvard Business School, argues that one reason firms pursue "corporate social responsibility" or CSR is for risk-management considerations, i.e., "the social license to operate" under limited liability protections accorded to firms by society.

FOR SEVERAL YEARS NOW companies such as DuPont, GE, Dow, Anheuser-Busch, Wal-Mart, S.C. Johnson and many others have been developing and implementing environmental policies, products, and services. This Earth Day finds more and more companies traveling the same path.

Google, Inc., a voracious user of power, expects to spend tens of millions of dollars this year on research, development and related investments for renewable energy such as solar, wind and geothermal energy with a goal of producing 1 gigawatt, enough to power San Francisco (MarketWatch.com, November 27, 2007). It calls the program "Renewable Energy Cheaper Than Coal" and hopes to meet its goal "in years, not decades."

Marriott International is pledging $2 million to protect 1.4 million acres of the Brazilian rain forest while inviting guests to offset hotel stays with contributions to the cause. The inn keeper is also furnishing rooms with 47 million Bic pens made from preconsumer recycled plastic, committing to reducing fuel and water consumption by 25 percent "per available room" within the decade, installing solar power in 40 hotels, and extending recycling to in-room guest trash. Ninety percent of Marriott hotels already recycle.

Marriott will buy one million "room-ready" towels, which will eliminate an initial wash cycle, saving 6 million gallons of water a year. It also seeks to migrate to recyclable carpets, compostable key cards, and "green meetings" to increase recycling and minimize packaging.

Enterprise Rent-A-Car, the nation's largest car rental company, is putting its foot in environmental waters by opening four "green branches" in Atlanta with 60 percent hybrid or other fuel-efficient models. However, it will cost customers an extra $5 to $15 a day for a hybrid. Presently, it only has 4,000 such vehicles out of a fleet of 1.1 million.

Hertz Global Holdings Inc. has spent $68 million to add 3,500 Toyota Prius hybrids by this summer, and Avis now offers 2,500 hybrids.

Xerox has reduced its greenhouse gases (GHG) by 18 percent since 2002 by cutting emissions from cars and improving building equipment, thus exceeding its goal six years in advance. It is now stretching to reach a new target, a 25 percent decrease by 2012.

XEROX IS JUST ONE OF many companies that, for a variety of reasons, are anticipating customer and regulatory pressure, abroad and at home, and going on a carbon diet. This pressure will increase with a new president in the White House. All three candidates support various "cap-and-trade" bills to control GHG emissions.

Letter to the Editor

topics:
Trade, Business, Environment, Law, Energy