Recent evidence suggests companies that score highly on sustainability metrics tend to be well run and have solid business models – 655 institutional investors representing $78 trillion in assets appear to agree.
The 655 investors are signatories to the Carbon Disclosure Project, which is a global greenhouse gas emission reporting initiative that incentives companies, governments and cities to voluntarily disclose data pertaining to key sustainability metrics.
“All companies purport to be market driven, and the market has spoken. People respect brands whose missions go beyond profit,” Shelly Lazarus, Chairman Emeritus of Ogilvy & Mather, recently told the audience on the floor of the New York Stock Exchange during an after-hours launch event for the CDP S&P 500 Climate Change Report 2012.
“Brands today are all about ethics…and consumers can smell disingenuousness a mile away,” she said.
And while ethics are certainly important and going beyond profit is a noble corporate attribute, profits cannot be ignored, least of all by investors with billions of dollars at stake.
Some of the world’s largest companies are recognizing this and have already seen how corporate social responsibility can positively affect the bottom line. “There is a trend toward tying this [CSR] to business performance,” Suzanne Fallender, Director of CSR Strategy and Communications for Intel recently told Breaking Energy.
Intel is proud of the fact that they scored highly in the CDP S&P 500 Climate Change Report, she said.
Tying Green Business to the Bottom Line
Of four main areas where Intel directly ties sustainability to increased financial performance: Risk management, operational excellence, the Intel brand and revenue opportunity; energy plays a significant role.
For example, procuring renewable energy can mitigate the risk of fuel price spikes associated with commodity price volatility. Consuming greater amounts of electricity from renewables like wind and solar can reduce the impact of an extreme natural gas price increase like the one experienced during the aftermath of hurricanes Katrina and Rita when gas prices rose to $14 per million Btu.
Energy efficiency also presents significant revenue opportunities, as there are cost savings associated with longer battery lives and data center efficiencies that reduce the amount of energy required to operate and cool large server banks, said Fallender.
While energy efficiency is one of the easier areas from which to draw direct correlations between CSR initiatives and financial performance, it can be more difficult to identify similar opportunities in different segments of the business, explained Fallender, and her group increasingly involves the corporate finance team in analyzing and drawing out these opportunities.
Water remains cheap in many places, so the key is to figure out how to monetize savings over time, she said. As water becomes increasingly scarce and greater value is placed on it, companies that have policies designed to use water more efficiently will have a competitive advantage.
“These initiatives are not about greenwashing, but the future of their brands,” said Lazarus. “Jeff Immelt [GE Chairman & CEO] says ‘green is green,’ it’s a business strategy.”