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Even as economy lags, corporate 'green' push may advance
Companies used to shelve environmental initiatives when times got tough, but now, with oil so expensive, spending on green projects is expected to accelerate.
By Ron Scherer | Staff writer of The Christian Science Monitorfrom the October 15, 2007 edition
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New York - US companies from General Electric to Wal-Mart have spent the past several years announcing initiatives on everything from efficient buildings to alternative energy to leading-edge technologies to combat global warming. Now, with the economy slowing, some of those projects look iffy.
In the past, companies shelved environmental initiatives when profits shrank. This time, despite some slowing in momentum, corporate America's "green" campaign will survive, analysts predict. The reason: In a world of $80-a-barrel oil, there is a business case for saving energy.
"In a downturn, some would back away from their current commitments," says Dan Esty, a professor of environmental law and policy at Yale University in New Haven, Conn. "There could be stress in the next year or two, but I'm confident that investment in the environment will be higher." He estimates that 80 percent of corporations' green plans will go forward.
To date, the amount spent on such initiatives has been relatively modest. In 2005, US businesses spent some $3.5 billion in the US on renewable energy, says Allison Hannon of the Climate Group, a London-based nonprofit with offices in New York that is dedicated to reducing greenhouse gases. This compares with about $132 billion invested that year in conventional oil and gas, according to the American Petroleum Institute.
But spending on green projects is expected to accelerate. Mr. Esty estimates the total investment in the environmental area ranging from venture capital to actual investments will come to $100 billion in 2007. In March, for example, Bank of America announced it would commit $20 billion to green projects over 10 years. And last month at the Clinton Global Initiative, which is a project sponsored by the former president, Florida Power & Light announced it would spend $2.4 billion on energy-efficiency projects and install 300 megawatts of new solar-energy projects through 2012.
The challenge for business is that many economists think that by the middle of next year, the economy could be operating at a slower pace.
"Traditionally, in a slowdown people sharpen their pencils and cut things that are nice to have, feel good, or make you look good versus things that contribute to the bottom line," says Kenneth Simonson, chief economist at the Associated General Contractors of America in Arlington, Va. "Until now, the environmental changes have been an extra expense, but sometimes they pay off over a number of years."
Even executives who have announced green projects admit that some spending might be tempered at least over the short term depending on the economy.
"The investment can be rheostated," says Michael Chesser, chairman and CEO of Great Plains Energy, based in Kansas City, Mo. "In other words you can speed up or slow down, depending on how you see your demand going over the next couple of years."
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