“A terrific book from the sustainability pioneer Lester Brown.” —Bill Hewitt, FPA's Climate Change Blog
Chapter 12. Accelerating the Transition: The Corporate Interest
Like the rest of society, corporations have a stake in building an eco-economy. Profits do not fare well when an economy is declining or threatening to collapse. The stakes are particularly high in the energy sector, which is affected much more than, for example, the food sector. To become sustainable, the latter needs to be modified, but the former needs to be fundamentally restructured.
There are essentially two approaches that fossil fuel firms can take. They can try to defend the status quo or they can see climate stabilization as the greatest investment opportunity in history. In the United States, the Global Climate Coalition (GCC)—an industry group—was formed by those who wanted to resist the restructuring of the global energy economy. In opposition to the Kyoto agreement, the GCC engaged in a massive disinformation campaign, one designed to confuse the American public about the urgent problem of climate change.15
The first break in the united front presented by the fossil fuel industry came in a speech by John Browne, the head of BP, at Stanford University in May 1997. (See Chapter 5.) He acknowledged that climate change was a potentially serious threat and announced that BP was no longer an oil company, but an energy company. Browne's talk sent shock waves of distress through the oil community and ripples of excitement through the environmental community. A major oil company had broken ranks.16
Browne's speech set the stage for change. He announced that BP was withdrawing from the Global Climate Coalition. Dupont had already left. The following year, Royal Dutch Shell announced that it, too, was leaving. Its corporate goals, like those of BP and Dupont, no longer meshed with those of the GCC. Like BP, it no longer viewed itself as an oil company, but as an energy company.17
In 1999, the Ford Motor Company withdrew from the GCC. In rapid succession in the early months of 2000, DaimlerChrysler, Texaco, and General Motors (GM) announced that they too were leaving the coalition. With the departure of GM, the world's largest automobile company, the die was cast. A spokesman for the Sierra Club quipped, "Maybe it is time to ask the last one out to turn out the lights."18
Some major corporations are not only visualizing an eco-economy, but are starting to build it. As described in Chapter 5, Royal Dutch Shell and DaimlerChrysler are leading a consortium of corporations that is working with the Icelandic government to make that country the world's first hydrogen-powered economy. And in June 2000, ABB, the Swiss-based giant in the global power industry, with an annual turnover of $24 billion, announced a major restructuring. It indicated that henceforth it would be emphasizing alternative energy sources, such as wind. It announced that its engineers had designed a new wind turbine called the Wind Former, a machine that reduces generating costs by 20 percent below the most efficient turbines now in use.19
ABB is abandoning its traditionally dominant role in the construction of large-scale thermal power plants, including those powered by coal, oil, gas, and nuclear energy. In 1999, ABB sold off its large-scale power generating business, with the principal units going to Alston, of France, and to British Nuclear Fuels. It was thus repositioning itself for a major push in the development of small-scale, renewable energy generation. A company with a vision of the new energy economy, ABB is planning to concentrate on developing wind and small-scale combined-cycle heat and power, as well as fuel cells. It plans to use information technology to integrate these distributed sources into a single grid.20
Looking to the future, ABB sees 755 million households in the world without electricity. The overwhelming majority of these households do not even have access to an electricity grid. For them, ABB believes it will be cheaper to install small-scale power than to invest in large thermal power plants and building a grid, both of which are costly. In its vision of the new energy economy, ABB suggests, for example, that "a small town might be supplied by a mix of combined heat and power, generating facilities, wind power, fuel cells, and photovoltaic energy with output from individual sources being adjusted via a micro-grid to compensate for seasonal variations in wind speeds and sunshine."21
Many companies have set their own goals for reducing carbon emissions—and they substantially exceed the goals of the Kyoto Protocol. For example, Dupont, measuring its goals in terms of CO2 equivalent emissions, plans to reduce greenhouse gas emissions 65 percent from 1990 levels.22
Firms in some other industries are going even further in setting environmental goals. Among these are Interface, a manufacturer of industrial carpet based in Atlanta, Georgia, and STMicroelectronics, an Italian-based semiconductor manufacturer. Ray Anderson, the CEO of Interface, became an avid environmentalist in 1994 after reading The Ecology of Commerce by Paul Hawkins. Since his conversion, he has become an enthusiastic advocate of building an eco-economy. In Fortune magazine, he described plans for his firm: "Interface of Atlanta, my company, is changing course to become sustainable—to grow without damaging the earth and to manufacture without pollution, waste, or fossil fuels. If we get it right, our company and our supply chain will never have to take another drop of oil."23
The Interface plan is to generate no waste and no carbon emissions—to be totally sustainable. Instead of selling carpet to companies, Anderson wants to sell carpeting services, an arrangement whereby Interface agrees to maintain a certain style and level of carpeting in a company's offices for, say, 10 years. Worn carpet will be returned to the factory, melted down, and respun into new fiber. This new carpet then goes on the floor. "Our goal," Anderson says, "is not to lose a single molecule of carpeting material." This system, which requires no raw materials and sends nothing to the landfill, closes the loop.24
Interface's zero carbon emissions goal is being achieved by turning to solar cells and wind energy to power its plants. For energy uses that cannot be covered by these renewable sources, the company plans to offset carbon emissions by planting trees.25
STMicroelectronics, one of the world's largest manufacturer of semiconductors, is also committed to an environmentally sustainable operation. Pasquale Pistorio, president and CEO, matches the fervor of Ray Anderson. After being ranked first in eco-efficiency among 14 semiconductor companies worldwide, Pistorio said that "none of ST's environmental initiatives have taken more than three years to pay back, while our reputation as the semiconductor industry's 'green leader' helps us to attract the young, talented engineers that are essential to sustain our growth and keep us at the leading edge of the industry that is transforming the world."26
Like Anderson, Pistorio also wants to build an environmentally neutral corporation, and to do it by 2010. The company plans to reduce carbon emissions by shifting to an energy mix for 2010 that relies on cogeneration for 65 percent of its energy, conventional sources for 30 percent, and renewables for 5 percent. This will still leave it with a net contribution of CO2 into the atmosphere, which it plans to offset by planting enough trees to sequester roughly 1 million tons of carbon emissions per year. The company's net revenues in 1999 exceeded $5 billion, with net earnings of $547 million; in 2000, net revenues were estimated at $6.7 billion, with earnings of $1.3 billion.27
Pistorio dates his environmental conversion to reading State of the World 1994 from the Worldwatch Institute. Since then, he not only has begun to reshape his company, but each year he distributes English, Italian, and French editions of State of the World to his senior staff and to European political and business leaders.28
These two firms are models of future corporations, the companies that will make up the eco-economy. Both CEOs support a restructuring of the tax system, one that reduces income taxes and increases taxes on environmentally destructive activities, including the carbon emissions that are disrupting the earth's climate. These two firms, in different industries and from different cultures, have identical goals. Each wants to build a corporation that meets human needs, provides generous profits to stockholders, and does it in a way that is environmentally neutral. Their CEOs have reached this point for the same reasons. They understand that the economy depends entirely on the earth's natural support systems. If these deteriorate, the deterioration of the economy cannot be far behind. In the end, their interest is not altruism, it is self-interest.
Both emphasize that being "green" pays. This is perhaps not surprising, since more-enlightened managers are more aware of environmental issues. Those clinging to the past, always trying to defend the status quo, are by definition not likely to be the more talented managers. As Ray Anderson has "greened" his firm since 1994, sales have surged 77 percent, profits are up 81 percent, and the stock price is up 70 percent. Amory Lovins, a longtime energy efficiency advocate who has served as a consultant to Anderson, notes that the sales representatives adopt the CEO's vision and become eco-crusaders as they pitch their carpeting with renewed fervor. Lovins observes, "This happens a lot in green companies. Freeing up the contradictions between making a living and doing it in a way that your kids can be proud of you causes an implosion of energy."29
15. William Drozdiak, "U.S. Firms Become 'Green' Advocates," Washington Post, 24 November 2000.
16. John Browne, Chief Executive, BP, speech delivered at Stanford University, Stanford, CA, 19 May 1997; Michael Bowlin, speech to Cambridge Energy Research Associates, 18th annual meeting, 9 February 1999.
17. Browne, op. cit. note 16; Martha M. Hamilton, "Shell Leaves Coalition That Opposes Global Warming Treaty," Washington Post, 22 April 1998.
18. Keith Bradsher, "Ford Announces Its Withdrawal From Global Climate Coalition," New York Times, 7 December 1999; David Goodman, "GM Joins DaimlerChrysler, Ford, Quits Global Warming Lobby Group," Associated Press, 14 March 2000; "Texaco Leaving Anti-Global Warming Treaty Group," Reuters, 29 February 2000; Sierra Club quoted in Lester R. Brown, "The Rise and Fall of the Global Climate Coalition," Earth Policy Alert (Washington, DC: Earth Policy Institute, 25 July 2000).
19. Hydrogen consortium in Dunn, op. cit. note 8; "ABB Puts Alternative Energy in the Mainstream," Environmental Data Services (ENDS) Report 305, June 2000, pp. 3-4.
20. "ABB Puts Alternative Energy in the Mainstream," op. cit. note 19.
22. Dupont will cut emissions by 65 percent by 2010, according to their position statement, "Global Climate Change" (Wilmington, DE: 5 June 2001).
23. Eileen P. Gunn, "The Green CEO," Fortune, 24 May 1999, pp. 190-200.
26. "STMicroelectronics Ranked First By Innovest Strategic Value Advisors as World's Only 'AAA' Eco-Efficient Semiconductor Company," press release (Geneva: STMicroelectronics (STM), 31 October 2000).
27. Ibid.; carbon emissions and energy mix in STM, STMicroelectronics Corporate Environmental Report 1999 (Agrate Brianza, Italy: 1999), p. 17; Pasquale Pistorio, discussion with author, Tokyo, 9 November 2000.
28. Pistorio, op. cit. note 27.
29. Interface and Amory Lovins quoted in Gunn, op. cit. note 23.
Copyright © 2001 Earth Policy Institute