"Sustainability as a key bottom-line issue for investors is poised to break through into the mainstream of consciousness in 2005. After years of business leaders grappling with the question of how to minimize the toll they take on the environment, we now see such well-known companies as IBM, Dell, AMD and Electrolux fully committed to sustainable business practices. These companies already know what investors will learn in 2005: Sustainability is good for the planet and it can be good for shareholder wealth," said Portfolio 21 co-founder Carsten Henningsen.
Investors who want to understand the growing emphasis on corporate sustainability should be aware of the following:
1. The Rise of Climate-Neutral Companies:
More and more companies are seeking to slash their greenhouse gas (GHG) emissions -- or even to come as close as possible to making no net contribution to global warming.
For example, STMicroelectronics is a recognized leader in GHG emissions reductions. The company has committed to an ambitious goal of becoming carbon dioxide (CO2) neutral by 2010. In October 2004, AMD published its fourth annual Global Climate Protection Plan. The company has documented achievements under its belt and new initiatives underway to reduce global warming emissions via energy efficiency, substance substitution, process optimization, renewable energy purchases, and product design (influencing the energy consumption of consumers). AMD also has an ambitious greenhouse gas emissions goal to reduce absolute perfluorinated compound (PFC) emissions by 50 percent by the year 2010. Facilities under AMD control prior to 2003 have already met this goal -- seven years early (2003), while newly acquired sites are working toward the 2010 goal. PFCs are used in the semiconductor manufacturing process and have a global warming impact that is significantly higher than CO2.
Other climate-neutral companies of note include: The North American carpet business of Interface -- a $500 million line of business -- is on track to be climate neutral by the end of 2004. Leading computer maker Dell has a "Climate Change Strategy" under which the company states that it has "committed to voluntarily reducing GHG emissions. We recognize and embrace the role that our product designs play in climate stewardship."
2. Enviro-Metrics for Accounting:
An increasing number of companies are seeking to quantify the impact of their sustainable business practices. For example, the medical products and services company Baxter now publishes an annual "Environmental Financial Statement" that documents the costs and benefits of the company's environmental initiatives. Baxter's "Environmental Expenses" include program costs, environmental and energy engineering expenses, remediation and pollution control costs, among others. "Environmental Savings" at the company include income, savings and cost avoidances from current year initiatives as well as cost savings realized in the current year from initiatives begun in the previous six years. In 2003, Baxter's net savings from environmental activities was $47 million, a figure that does not even include major intangible benefits such as improved employee attraction, and improved retention and morale.
Electrolux now provides detailed financial data on resource efficiency and environmental performance indicators that connect its business strategy with shareholder value. For example, the company reports the proportion of its products that meet its "green range" requirements (by units sold), and reports the proportion of gross profit attributable to these sales. From 1998 to 2003, Electrolux's "green range" products have increased 1.9 percent to account for 12.5 percent of all the units sold for the company. The share of gross profit from these enviro-friendly products has increased from 3.9 percent to 18.4 percent over the same period.
3. Emergence of Cradle-To-Landfill Stewardship:
More and more companies - including HP, IBM, Dell and Xerox -- are adopting a comprehensive life-cycle approach to thinking about their products and services. As part of its "Product End-of-Life Management" initiative, IBM offers product Takeback programs in 15 countries across North America, Europe and Asia. In the United States. IBM expanded its previous commercial offering and added the new IBM PC Recycling Service, allowing consumers and small businesses to recycle any manufacturer's PCs, including system units, monitors, printers and optional attachments. IBM operates nine major Asset Recovery Centers around the world. Additional locations support parts return and regional collection. In 2000, 51,304 metric tons of manufacturing scrap, IBM-owned end-of-life machines and customer-returned equipment were processed through these operations. A focus on equipment reuse and recycling resulted in only 3.22 percent of this amount being sent to landfills by IBM.
East Japan Railway has developed a groundbreaking "Product Life Cycle" model under which the development, manufacturing, maintenance, disposal and recycling of rolling stock are managed in an integrated system. Utilizing regenerative braking, lightweight body design and high efficiency motors, energy efficient railcars now account for 72 percent of the company's fleet, up from 51 percent in 1998. In terms of reducing the CO2 emissions of energy use on a per kilowatt-hour basis, the company has achieved a 31 percent reduction based on 1990 levels, indicating improved power generation efficiencies and the use of fuels with lower carbon intensities. The company's environmental accounting shows investments, expenses, and the economic benefits of environmental initiatives. East Japan Railway reports that its investment in environmental initiatives generated $25 billion yen in savings in 2003 - this equals over $243 million USD.
Portfolio 21 is a no-load global mutual fund for individuals and institutions committed to investing in a sustainable future. Portfolio 21 believes that companies using sustainability principles as a core part of their business strategies are positioned to prosper in the future and can be more efficient and profitable today. The portfolio includes companies that have made a commitment to environmental sustainability and have demonstrated this commitment through their business strategies, practices and investments. http://www.portfolio21.com