"Going green" has become a very popular statement lately and now major corporations seem to be getting in on the act.
Yesterday afternoon, Professor Geoffrey Heal of Columbia University gave a lecture entitled "Corporate Environmentalism: Doing Well by Doing Good" in front of a packed Konover Auditorium in the Thomas J. Dodd Center. The lecture was part of the Edwin Way Teale Lecture Series on Nature and the Environment. Heal's lecture was the first lecture of six in the series, three in the fall and three in the spring.
Heal is currently the Garrett professor of public policy and corporate responsibility and professor of economics and finance at Columbia University's Graduate School of Business and professor of public and international affairs at the School of International and Public Affairs. He has written several books, including one in 1979 entitled "Economic Theory in Exhaustible Resources."
According to Heal, a seemingly strange phenomenon has been taking place in corporate America. Corporations, who were thought to only have economic interests at heart, are going out of their way to be overly environmentally-friendly. This idea of "over-compliance" as Heal called it, is becoming a growing trend among major corporations. Over-compliance is defined as going above and beyond what is required by U.S. environmental standards. Heal gave several examples of such corporations including British Petroleum, Amoco, Nike, Gap, Starbucks, Ikea, Home Depot and Wal-Mart, to name a few.
"Without meaning to sound so cynical," Heal said. "We can't help but think, what's in it for them?" The answer, explained Heal, is that lately there is plenty in it for them from both the consumer end and the investor end. Heal talks about how even financial analysts have been taking into consideration Toxic Release Inventory (TRI) reports when making investment decisions and valuing companies. These reports are released by the EPA every year, and they measure how much pollution the company releases that year.
Many investors and investment firms, especially UBS, fear that companies with high TRIs are at a greater risk for lawsuits and are thus risky investments. According to Heal, movements have even been made for publicly traded companies to report their pollution records as "contingent liability" on their balance sheets. Some investment firms have even created "Green Funds" and "Ethical Funds," investment funds that only include companies that are environmentally and socially responsible, which in a sense boycotts those companies which do not fall into those categories.
Consumer behavior also had an impact on corporations 'going green.' Studies have shown that some consumers are willing to pay up to 20 percent more for environmentally responsible goods.
"It's not even about if they'll pay a premium" Heal said. "It's if the consumer is given a choice between two comparable goods if they choose the environmentally friendly one, it's worth it for that corporation to over-comply."
In fact, consumer goods companies are the ones most focused on going green. Typically the types of companies who over-comply are ones who are very image conscious, who are focused on brand value and tend to spend a lot on advertising.
Over time, Heal believes, more and more companies will be socially and environmentally responsible because "in the end, its just bad business to be environmentally destructive."
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