The ecosystems upon
which we all depend provide benefits of incalculable worth — including clean
air and water, minerals, timber, oil, and fertile land. These natural resources
are often available to companies at little or no cost. In addition, the extraction
of these resources threatens the viability of other environmental riches that
may not be of immediate benefit to the corporation, such as biodiversity.
Companies that fail
to treat these environmental riches with due respect, and that jeopardize the long-term
viability of the gifts that our ecosystems provide, can cause great harm. We
believe that companies that, among other things, acknowledge the long-term sustainability
challenges of their industry, maximize energy efficiency, use alternatives to fossil
fuels, use recycled materials, reduce use of toxic chemicals in manufacturing,
and produce less solid and hazardous wastes, will benefit not only the
environment but themselves by increasing their potential efficiencies and
reducing their potential liabilities.
Themes
The following are the
five major themes by which we assess the strength of corporations’
relationships with the ecosystems that support their activities:
While
other issues are also important in this regard, these five are those which we
believe we can most meaningfully and consistently assess.
Renewable and Alternative Energy Sources
Without
doubt, the greatest and most difficult environmental challenge of our time is
how to produce cheaply and efficiently the energy needed for economic
development without harming the environment. Burning fossil fuels is ultimately
unsustainable because it produces the greenhouse gases, including carbon
dioxide, chiefly responsible for global warming. Yet, as of 2006, the world was
consuming some 85 million barrels of oil daily, not to mention huge amounts of
coal and natural gas, and global energy consumption was sharply on the rise.
Equally convenient and inexpensive alternative sources of energy are simply not
available at this time. But the future of our planet as we know it depends upon
developing these renewable, sustainable alternatives. Corporations have played
a tremendous role in creating this problem and have the potential to play an
equally large role in its solution. They have the resources to develop and
market alternative clean-fuel technologies. We are particularly optimistic
about wind, solar, and tidal power. We have questions about such alternatives
as clean-coal and ethanol, and very serious concerns about nuclear power.
Corporations
have the capability to reduce their own carbon emissions. We applaud the work
of the Carbon Disclosure Project and those companies that report their carbon
emissions, thereby creating a framework for accountability that allows society —
including investors and corporate managers — to quantify and reduce these
harmful emissions. Companies can also play an important role in helping
consumers increase their energy efficiency. We therefore look for companies that are aggressive about the energy
efficiency of the products and services they provide.
In
addition to the significant opportunities corporations have to be part of the
solution to climate change, and to benefit financially from the transition to
an alternative fuel-based economy, companies that fail to address these risks
may face substantial financial risks of their own by failing to adequately
prepare for the onset of a carbon-constrained world, or to protect themselves
from the significant, and growing, physical risks posed by climate change, such
as increasing storm intensity and erratic weather patterns.
We therefore seek corporations
that are substantial users, producers, or developers of resources, products,
and technology that reduce the risks of climate change and increase the use of
sustainable alternatives to carbon-based fuels — and we avoid many of the oil,
coal, electric utility, and automobile companies whose products are
contributing most heavily to climate change.
We also recognize, however, that government must play the central role in
making a transition to sustainable energy sources and that corporations and the
marketplace alone cannot solve this problem.
Eco-Efficiency and Resource Conservation
Efficiency,
whether it is in energy or materials usage, is simply good business.
Investments made in eco-efficiency bring some of the clearest and most
immediate benefits to both the financial and environmental bottom lines. It is
essentially little more than sound financial management for companies to take
the relatively obvious and simple steps toward efficiency in their use of energy
and natural resources that will bring them into a more harmonious relationship
with the ecosystems within which they operate. We consequently view a company’s record in eco-efficiency and resource
conservation as a key indicator of the quality of management.
Recycling, Safer Technologies, and Lifecycle
Design
Environmental
organizations stress the necessity of incorporating recycling and reprocessing
into the lifecycle of product design. Starting with the selection of
environmentally benign materials, going through minimization of the
environmental effects of product packaging and use, and ending with product
takeback and recycling, lifecycle design can lighten the environmental
footprint we all leave as consumers. For example, those companies willing to
invest in the research and development necessary to eliminate toxics are
providing a long-term benefit to both workers and the environment. Companies
have been notably successful in finding nontoxic alternatives to volatile
organic compounds used as solvents. Finding equivalent substitutes for paints,
coatings, and adhesives is a greater challenge. Although balancing costs with
benefits is often a challenge in such investments, we believe that the
long-term benefits of such decisions generally outweigh short-term costs.
We therefore seek out companies that make major use of
recycled materials in their manufacturing processes, that are working to solve
the challenges of product takeback and recycling, that have found nontoxic
substitutes for toxic chemicals used in manufacturing processes, and that are
in other ways willing to invest in making their products and services
compatible with the ecosystems they affect.
We believe that these companies provide substantial long-term benefits to
ecosystems, as well as to their employees and customers.
Pollution Control and Abatement
A
company’s minimum obligation to its local communities and the natural
environment is to assure that no substantial harm is done by its current
operations. For industrial firms, for example, this means cleaning wastewater
before it is discharged and capturing volatile organic compounds before they
escape into the atmosphere. For electric utilities, this means installing
scrubbers to prevent particulates and sulfur dioxides being released. For
chemical companies and refineries, this means preventing spills and leaks, and
disposing of hazardous wastes appropriately. These basic steps help prevent
immediate harm and through today’s investments avoid tomorrow’s problems. We
recognize that pollution prevention often requires expensive capital
expenditures that force management to make short-term financial sacrifices. We
believe, however, that these investments can often pay long-term returns to
communities, neighbors, and companies themselves that more than compensate for
their short-run costs. We therefore
favor companies that have a record of handling today’s pollution challenges
effectively and without regulatory controversy, while developing more
sustainable practices for tomorrow.
Long-Term Environmental Sustainability
Despite
the tremendous progress toward increased awareness of the need for
compatibility and partnership between society and ecosystems, a surprising
number of corporations still deny or ignore the need to manage their long-term
environmental risks appropriately. Some oil companies still deny the reality of
climate change. Some forestry companies still destroy the rainforests of the
world. Some manufacturers still build toxic chemicals into their products. It
is of substantial concern to us when companies lag behind on such fundamental
matters of long-term environmental sustainability.
On the positive side, a handful
of companies have had the foresight to think systematically about their
environmental footprint and to pioneer long-term sustainability models for
their industries. A carpeting
firm rethinks the fundamental environmental implications of its operations. A
food retailer acts as a pioneer for the markets for organic or Fair Trade
foods. A furniture manufacturer rethinks the environmental implications of the
basic manufacturing materials it uses. We recognize these initiatives as having
the paradigm-shifting implications necessary to achieve true long-term
environmental stability.
