An elite group of companies are cutting their environmental impacts while continuing to grow as businesses, according to evidence gathered by natural capital analysts Trucost.
Just 34 companies were identified in the Natural Capital Leaders Index 2014 published by GreenBiz and Trucost in January. The new evidence provides further insights into how these companies achieved their position in the index.
Trucost compiled the index by analyzing the environmental and financial performance of the world’s largest 4,600 publically traded companies in 19 sectors. To compare the environmental performance of companies, which is traditionally measured by different environmental metrics – tonnes of carbon and other pollutants and cubic meters of water – with financial performance, Trucost calculated the environmental costs of these companies by putting a monetary value on their pollution and use of natural resources. The results reveal a small band of companies that increased revenue while decreasing natural capital impacts over the past five years – so-called "decoupling."
The index also identified a further group of companies that have made progress towards decoupling by using natural capital more efficiently to generate revenue over the past year.
Trucost’s analysis standardized information reported by companies in their annual sustainability or corporate responsibility reports. Trucost engages with companies each year to provide them with the opportunity to verify or improve these data. This engagement has thrown up numerous examples of how companies are achieving decoupling.
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Natural capital leaders tend to have a range of initiatives that each make a contribution, not just one big project. One decoupler, National Australia Bank, has a host of energy efficiency and carbon neutral programs, runs initiatives to reduce the impact of sourcing raw materials, as well as cutting waste through recycling. The bank is also looking at the impacts of its lending.
National Australia Bank recently invested in a tri-generation facility for its main data center. This is a gas-fired energy plant generating enough electricity, heat and cooling to satisfy 60 percent of the site’s needs. It saved some 20,000 tonnes of carbon and A$2 million in energy costs per year.
Setting targets to drive energy efficiency is another factor behind many companies’ success. Another successful decoupler, telecoms company Verizon, established standards that require new network equipment to be at least 20 percent more energy efficient than the equipment being replaced.
Business services company Manpowergroup has reduced gas and electricity consumption in its UK offices by 20 percent since 2010 through a number of energy saving initiatives including restricting heating and gas consumption to a single boiler for all but the coldest winter periods, delaying the start time of heating and air conditioning on workdays and turning it off during weekends.
Companies are also addressing the impacts in their supply chains, such as measuring their carbon and water footprints to identify ‘hotspots’ of natural capital consumption, or adopting green procurement activities. For instance, decoupler Kimberley-Clark has plans to source all of its wood fiber from suppliers that have third-party certification for their forests by 2015. National Australia Bank has switched to buying 100 percent of its paper from sources certified by the Forest Stewardship Council. US telecoms company Sprint has measured and valued the natural capital impacts of its purchased goods and services.
Cutting carbon emissions through switching to clean energy is a keystone of many firms’ improvement plans. A decoupler in the US utility sector, PG&E, is investing in solar, wind and hydroelectric energy generation to meet California’s target to generate a third of its energy needs from renewables by 2020.
Verizon is investing in US$100 million in solar and fuel cell technology at 19 facilities, reducing reliance on the fossil fuel grid by nearly 70 million kilowatt hours. Car hire firm Hertz generates over 2.5 million kWh of solar energy per year.
Closing the loop on waste through recycling and take-back schemes feature strongly among natural capital leaders. Sprint has kept 45 million tonnes of electronic waste out of landfills through a rigorous waste management program, while carmaker BMW has initiatives to integrate recycled materials into its vehicles.
These insights are very encouraging, and demonstrate that companies can be sustainable and profitable at the same time. But beyond revenue, these companies are also looking to the future by reducing the risks of exposure to volatile commodity prices, supply chain disruption and reputational damage. They are also best placed to benefit from the opportunities offered by green growth, such as demand for more sustainable products.
Despite the progress made by many companies to use natural capital more efficiently, only a handful are able to demonstrate decoupling of natural capital impacts and revenue growth. Clearly we need to see far more firms join the ranks of the decouplers in next year’s index if we are to achieve genuinely green growth.
Natural capital metrics that enable business managers to compare environmental performance with financial performance help companies to understand where they are on this journey – and consider the environmental business case alongside the financial business case in all types of decision making from product strategies to capital investments.