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What compels companies to get on board with sustainability?

December 8, 2016

Smart economics and executive leadership drive firms to go green. But company HQs near coastal flooding and extended droughts earn the highest sustainability scores.

 

If you want your company to go green, allow me to suggest that someone send your CEO on a trip to Gatlinburg, Tennessee. It just went through a devastating wildfire – which is just the point. What happened there is just one of the many effects of weird weather occurring all over the globe and right here in the U.S. Between three 1000-year floods in 2016, seawater creep into Atlantic coastal towns and drought conditions out West, there is plenty of tangible evidence that climate change is real, happening now and affecting American companies' operations and employees.

 

Which supports the axiom that seeing is believing. From my observation, the companies that directly experience climate change and its effects on their businesses are finding religion.

 

I gather this from spending three days with people engaged in what I consider the most alarming issue of our time, climate change. It was a round-robin examination of trends, science, best practices and ideas from some of the smartest people in the business.

 

And make no mistake: this was a business group. Which got me to thinking, what are the factors that lead some companies to embrace and integrate sustainability practices throughout their enterprise?

 

The conference was titled “Companies vs. Climate Change, the B2B Climate Solutions Event.” There were scientists, academics and engineers among attendees and presenters. But corporate sustainability officers, green service providers (many in the carbon offsets business), industry consultants, NGO professionals and communicators made up the majority. What bound everyone together was agreement with the 98% of climate scientists who say global warming is real, dangerous and it is caused by human activity.

 

 

The climate is changing now: Salt water licking at our feet

 

What was a little surprising to many of us was how immediate climate change is. It is not a theoretical construct, not something 100 years out. The location of the conference, Fort Lauderdale, Florida drove home that point quite clearly. It also helped this Chicagoan to realize the conversation on the coasts is very different from where I live and work.

 

Fort Lauderdale Mayor Jack Seiler showed us how the South Florida region is on the frontline of climate change. The uninitiated might think this has to do with hurricanes, but that’s not really the main story. The problem is “nuisance flooding,” which happens when water rises up from both the sea and the water table below. This is due to a combination of factors that largely relate to the slowing of the Gulf Stream along the entire U.S. East Coast due to cold, fresh water that increasingly flows into the north Atlantic from Greenland (for specifics on how this works, the excellent robertscribbler blog as well as National Geographic explain the science).

 

“Nuisance flooding” is an understatement. A component of it is “king tides,” which is when the moon colludes with offshore winds and weather to drive the rising ocean over the coastal highway A1A. It provides a stark visual: roads are cut off on otherwise pleasant, sunny days. That might sound benign, but try telling that to retailers who lose a day here and there of traffic because their stores are inaccessible. The city of Hallandale Beach, just north of Miami, closed most of its drinking water wells more than five years ago because the salt water overwhelmed the water table on land, while cities up and down the coast are spending tens of millions of dollars to get fresh water from further inland. The year 2015 had exceptional incidences of king tides in places that included nearby Miami Beach as well as further north in Savannah, Georgia, Charleston, South Carolina, and Norfolk, Virginia.

 

In 2012, this higher sea level combined with the churning seas from Hurricane Sandy offshore to rip apart sections A1A in Fort Lauderdale. “We lost a state road,” Seiler told conferees, noting that the actual hurricane never reached the city. “This issue for many years was strictly an environmental issue…the minute this issue became an economic issue, it became a mainstream issue.”

 

Underscoring this point, other conference presenters spoke of how evidence in polar cap melting suggest significant, life-altering effects from climate change once thought to be 100 years out might be more like 20 and 30 years out. Yes, that could well be in our lifetimes. And in our economy.

 

 

Company location determines its green ethos?

 

But I’m from the Midwest (Chicago). Only because I’ve vacationed in Florida and Charleston have I seen the nuisance. I was at a business event in Charleston in October 2015 that ended abruptly as we had to walk around rising water in the parking lot to get to our tour bus.

 

All this makes me ask questions. Do those of us removed from the coasts, or the droughts of the South and Southwest and California, have a lesser awareness of climate change? And if so, are the people running large companies less influenced by climate concerns if they are located where such conditions are unnoticeable?

 

It might help to consider which companies are onboard, in varying degrees, with addressing climate change. The bell curve graphic (above, provided by Avery Dennison and Schneider Electric) showed firms that can be characterized as green “innovators” and “early adopters,” which together comprise about 16% of the Fortune 500. Those companies are in the tech sector (Google, Microsoft, HP, Equinix), consumer products (IKEA, Amazon, Owens Corning) and healthcare (Kaiser Permanente). Many of the larger companies engaged in this conference – Alaska Airlines, United Airlines, TD Bank, SAP, EnerNOC, Sealed Air Corporation, Citi, GZA Environmental, Biogen, Ingersoll Rand, AmerisourceBergen, Nasdaq, Bacardi U.S.A., EY) might fall in this designation, although they weren’t specifically included in the graphic.

 

But where are the other 84% of companies? About two-thirds are deemed “early and late majorities,” in the center of the bell curve, while about 16% are kindly referred to as “laggards.” What can get them to move toward greater action to halt the emissions of greenhouse gases (as well as reduce overall resource consumption and waste disposal)?

 

As one presenter noted, the only industry sector not looking to reduce their use of fossil fuels is fossil fuel industry companies.

 

Energy use and cost are certainly at the heart of this equation. We learned the work of the two airline companies in attendance, Alaska and United, is exciting: with more-efficient jets and methodologies, coupled with remarkable progress in the use of biofuels, there is a lot to be optimistic about.

 

Still, might “nuisance flooding” – or worse, catastrophic flooding the likes of what Hurricane Sandy did to the New York City metropolitan area – be the driver for corporate eco-consciousness? Perhaps.

 

 

Texas is its own country – for better and worse

 

Fossil fuels are of course the foundation of many Texas businesses. And it bears mentioning that a major air carrier based in Dallas, American Airlines, ranks at the bottom among its peers in fuel efficiency, as measured by the International Council on Clean Transportation.

 

It’s a region that has been affected by extreme heat and drought juxtaposed with heavier downpours and flooding – including Houston's 1000-year-flood in April 2016 – conditions that very likely are related to climate change. But I know from my own work in speaking with developers and architects in that region that it's ok to say "energy efficient" but the words "climate change" need be absent from the conversation.

 

And yet Texas leads the nation in wind power generation, installing nearly 18 gigawatts (18,000 megawatts) as of 2015, energy that costs less (at $36-$51/MWh) to produce than by gas and coal. This is due to both the happenstance of consistently windy areas but also a hard-nosed business sense: it’s cheaper and renewable. And it has its own electric grid – ERCOT, the Electric Reliability Council of Texas – independent of the rest of the nation, where deregulation allows wind energy to flourish. It helps that Texas farmers have for more than 100 years used small windmills to pump water from below ground aquifers; they seem to have no NIMBY attitude toward rotating turbines. Also, Southwest Airlines (also Dallas based) does much better in fuel efficiency, ranking about 4th overall.

 

So while location is not destiny in this regard, is there a tendency for green companies to be located in certain regions? Or more to the point, does exposure to the early detrimental effects of climate change influence the policies and practices of those companies?

 

 

Where the greenest companies are

 

I pulled up a map of where Fortune 1000 companies are located as of 2015. Indeed there are certain states and regions where big businesses tend to cluster: the Eastern Seaboard, from Boston through New York, Philly and Washington, DC; the Upper Midwest (Cleveland, Detroit, Chicago, Milwaukee and Minneapolis); Texas (Houston and Dallas); and the West Coast, from San Diego and Los Angeles through San Francisco and up to Portland, Oregon and Seattle. These regions are loosely defined by shared transportation and energy systems, politics, culture – and climate.

 

Next, I reviewed Newsweek magazine’s “Top Green Companies in the U.S. 2016” to look for regional concentrations. The publisher used criteria that measure energy, greenhouse gas emissions (GHGs), water, waste and other factors against the company’s revenues, which arguably might skew against transportation companies such as airlines and trucking firms where energy constitutes an inordinate share of costs (two of the greenest airlines, Alaska and Southwest, rank 147th and 148th in the list, despite their aforementioned progress toward fuel efficiency and groundbreaking work in biofuels).

 

Note that in this list of 500 companies, 18 of the bottom 25 are in the energy sector.

 

From the top 50 companies in the list, the regional distribution was as follows:

 

  • East Coast: 18 companies

  • West Coast: 16 companies

  • Upper Midwest*: 9 companies

  • Outliers**: 7 companies

 

*Notably, this includes  four companies based in the Minneapolis-St. Paul area.

**Includes Atlanta (Coca-Cola), St. Louis (Monsanto), Louisville (Humana) and Broomfield, Colorado (Ball Corp.), among others. One could argue for counting companies such as Atlanta's Coca-Cola as climate-affected because it manufactures worldwide, is clearly water dependent and consequently impacted by drought conditions wherever that occurs.

 

So at least 34 (68%) of the top 50 fall into regions, the East and West Coasts, where the effects of climate change are already being felt.

 

To be clear, there are other things that influence a company to go green. Business-to-consumer companies are incentivized when a segment of buyers look for these characteristics (especially Millennials). Just as influential is how the increasingly favorable prices of renewable energy make it a sound cost-savings decision, regardless of location (which might leave out sustainability measures beyond energy and GHGs).

 

 

Take a climate change vacation

 

The decision to go green, regardless of location, has to be leadership driven. One of the best examples of that is Ray Anderson, the late founder and CEO of Interface carpeting who not only transformed his company into cradle-to-cradle environmental consciousness but provided an example of sustainability practices for companies in all industries. For firms that are in the Interface supply chain, it’s the customer that requires them change their products and practices.

 

For firms based away from the coasts, in places where tides or water shortages are less a factor, I suggest their leaders take a vacation. Go to Miami Beach, where some streets are being raised (and adjoining private property owners have to fend for themselves). Or visit the Napa Valley, where wineries have suffered from years of drought. Try Charleston, South Carolina or Savannah, Georgia, both historic cities where grand colonial and antebellum buildings get a lick of salty seawater from king tides at their front doors dozens of times each year.

 

It’s not even necessary to go to the coasts. Maybe it’s time for corporate executives to visit tourist-friendly Gatlinburg, Tennessee, where the Dollywood amusement park narrowly survived the November-December 2016 fire that took 14 lives, destroyed 1,400 buildings and displaced 14,000 people. This is in the Great Smoky Mountains, where the “smoke” used to be about water vapor rising from what was a temperate rainforest. But a funny thing happened this year: conditions of drought made it a tinderbox that fed the worst wildfire in the region’s recorded history.

 

There are 18,000 acres of devastation around Gatlinburg to give members of your C-suite a look at how climate change – mistakenly thought to be a far-off threat – can devastate habitats, homes and a business community in just a few days.

 

Russ Klettke is a business writer who covers a broad range of topics that include sustainable design, finance, law, real estate, and health and wellness, among others. Contact him for more information.

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Russ Klettke

Business Writer