The first Earth Day and the ABCs of a greener bottom line
The first Earth Day and the ABCs of a greener bottom line
The other day I was talking to my 7-year-old son, Finn, about some of my favorite books when I was a child.
Foremost in my memory were the stories titled "We were there." This is a collection of 36 books in which the characters are children who go back in time to experience an event in history. Everything from "We were there on the Oregon Trail" to "We were there with Lincoln at the White House."
This conversation made me consider writing my own version of a "We were there" story. My story begins in San Francisco in 1970 at the first Earth Day rally. That day didn’t actually ingrain too many memories, but the following year brought an event that steered me towards my career in sustainable activism and, eventually, socially responsible investing. It started when two Standard Oil tankers crashed in the San Francisco Bay on Jan. 19, 1971. It wasn’t just the size of the spill that affected me -- it was almost literally in my back yard. I remember skipping high school cross-country practice to go help clean oil off birds. It was in that moment that I became an environmental activist.
Over the years my activism has taken different forms -- from making it a priority to take mass transit to starting a food co-op to now being the president of an investment firm that specializes in socially responsible investing. As I leap from my own version of "We Were There at Earth Day 1970" to "We Are Here at Earth Day 2013," I hope to share the lessons I have learned from both an activist’s and an investor’s point of view.
Keeping it simple, as Finn likely will be reading this, here are the ABCs of keeping green on the bottom line.
A is for avoidance
It costs a lot to clean up a mess. We are all better off if companies don’t do it in the first place. The evidence is pretty compelling, as study after study has shown a correlation between environmental consciousness and financial performance. My business partner and I always make it a point to examine a company’s policies and actions before making any investment.
In fact, this is fast becoming one of the most analyzed correlations in the financial markets. In a world where companies and investors will do almost anything to get a competitive advantage, the answer might be as simple as paying attention to environmental issues.
A significant body of research shows a moderate positive correlation between a firm's environmental performance and its financial performance -- regardless of the variables used to represent each kind of performance, the technique used to analyze the relationship or the date of the study.
The EPA has found that “capital markets have been slow to incorporate environmental information into mainstream investment decision-making." We think that gives anyone else who wants to do this work an important edge.
B is for brand
Consumers have long memories, so you must be mindful of your brand at all costs. It takes a long time to build a positive brand name, but it takes only one oil spill in Alaska to lose a generation of customers.
This lesson has been a difficult one for ExxonMobil's survival. Despite the company’s efforts to improve, it still has a mediocre environmental record, which is causing it to be viewed negatively through the eyes of the public. In Newsweek's 2012 Green Rankings, Exxon was ranked 13th out of 25 energy companies in the U.S., right in the middle. Yet, when Harris Interactive polled consumers for their views regarding companies and their roles in the environment, Exxon consistently ranked near the bottom, thus proving that the reality of a company’s environmental reputation can be vastly different from its public perception.
Consumers typically feel better about aligning with brands viewed as environmentally conscious. Similarly, companies that own strong brands can’t afford to ignore their environmental responsibilities. Shirking environmental responsibilities can lessen a brand’s value.
C is for culture
Interestingly enough, there is a proven correlation between employee satisfaction and their companies’ perceived environmental performance. Of all the studies I have seen, one is perhaps the most striking. I think we all assume that profitable companies have happy employees, relying on the notion that economic strength equates to happiness. However, according to a study by Adam Sulkowski at University of Massachusetts Dartmouth, there is absolutely no truth to this.
Sulkowski found that out of the 100 companies interviewed with thousands of employees, a correlation could not be made between a company’s financial performance and employee satisfaction. What he did find was that the strength of the relationship between environmental performance and employee job satisfaction is remarkable.
In an economy where companies are spending more money to increase employee productivity, there is a path leading to employee happiness and productivity that should not be left unexplored. The most effective route is focusing on the improvement of the company’s environmental performance, because companies that make a lot of money do not necessarily have happier or more productive employees.
In addition to the ABCs, there is a D coming down the line for industry: Disruption.
We are living in a time in which green innovation is disrupting several industries across the globe. Whether that means enzymes replacing chemicals, healthier ways to grow food or new ways to generate energy, if your company isn’t evolving with green business practices, you risk being left behind.
To me, Earth Day encompasses many more perspectives today than it did 40 years ago. Most important is a fundamental shift that must continue apace. Then, environmentalism was about individuals trying to make a difference.
Today, it is about individuals, corporations and governments making a difference. I’m certainly pleased that I started my own "We were there" in 1970, and I’m even more pleased to be here now.
Earth day illustration provided by alexmillos via Shutterstock.