How do you tell when a firm is really green?

A panel discussion with two experts who research companies that claim to be Earth-friendly.

from the May 7, 2007 edition

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The greening of big business could be one of the most meaningful economic shifts of the century, but it can be hard to tell how big a change a corporation is making when it claims to be Earth-friendly. To help investors sort out the issue, the Monitor's Laurent Belsie sat down with two experts who follow green companies: Joel Makower, executive editor of GreenBiz.com in Oakland, Calif., and Andrew Shalit, director of shareholder advocacy at Green Century Capital Management, an environmentally responsible investment firm in Boston. Here's an edited transcript of their conversation:

Is the greening of US business real – or just a fad?

Mr. Shalit: I think it's a real trend. There's still a lot of work to do. Every company is a mixed bag. But the stakes are getting high enough, and companies are beginning to realize that there'll be huge business costs if they don't improve their environmental performance.

Mr. Makower: This is really the 20-year overnight success story. All of a sudden we're seeing this on every magazine cover, we're hearing about it. But what's really exciting about this ... is that we're moving from a place where it was improving the bottom line – improving efficiency and reducing waste and being more energy efficient – to now, where we can actually see companies growing the top line. That is to say, [they're] increasing their revenue [and] creating new business opportunities through environmentally responsible products and services. And when companies start making money doing this, frankly that's the point at which sustainability becomes sustainable.

Why is it happening now?

Makower: It's really a confluence of a lot of things, certainly concerns about energy. But climate change is driving a lot of this.

Shalit: I think companies are also learning the lessons of other companies that didn't take environmental steps. Toyota has passed GM as the largest car producer in the world – cars and trucks. A lot of that can be traced to GM and Ford and other US automakers refusing to take the environmental steps that some people have been pushing them to take for years. And the fact that they stuck with the old model has cost them tremendously.

Makower: I disagree with you. That's a common story. A lot of speakers [say]: "Toyota intro­­duced the Prius and other hy­­brids. They're profitable. GM didn't. They're not. And therefore it's cause and effect." And I think that the problems that these companies have had transcend simply that one thing. There's labor costs, there's inefficiency, healthcare costs, there's old models. I'm not saying that Toyota hasn't dramatically improved and doesn't have a better vision. But it's not simply that cause and effect.

Shalit: Not that it's simply that. But Ford and GM are companies that wouldn't listen to outsiders, wouldn't bring in outside perspectives, and got stuck in an old way of doing things that doesn't work today.

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