The Greening of the Bottom Line

Ten years ago, inspired by the Earth Summit in Rio de Janeiro, four dozen of the world’s major CEOs offered a vision of the future that today seems downright radical.

The group, founders of the Business Council for Sustainable Development, included several U.S. notables, such as Alcoa’s Paul H. O’Neill (now Treasury secretary), DuPont Co.’s Edgar Woolard and Johnson Wax’s Samuel Johnson. They endorsed some surprisingly controversial measures: an energy tax, an end to subsidies for coal and electricity and a new system of pricing goods and services to reflect their toll on nature. “Environmental thinking is bringing a new industrial revolution,” vowed the group’s leader, Swiss magnate Stephan Schmidheiny.

Granted, that summer of 1992 already had an aura of green hope. Voters were preparing to oust then-President Bush in favor of Bill Clinton. Al Gore’s crusading book, “Earth in the Balance,” was headed for the bestseller list. Public pressure was mounting for government and corporate leaders to take action on global warming, tropical deforestation and the dizzying rate of plant and animal extinctions. Both Bush--who had said he would be the “environmental president”--and Clinton were reportedly studying whether to back a revolutionary tax on consumption.

Now, as global leaders take up these issues once more at another world summit, in Johannesburg, South Africa, our planetary plight is more alarming than ever. The corporate effort endorsed 10 years ago has had some successes, but on a scale too small to be significant. At the same time, the scientific consensus has solidified that our climate is changing in perilous ways and that humans are largely responsible. Yet in contrast to 1992, our expectations of corporate behavior are so low that we’re pleased when firms promise to list their stock options as expenses--never mind trying to help save the world.

Who’s to blame? Or, as we may well be asking ourselves in 10 more years, who lost Earth? It’s all too obvious. Despite stirring rhetoric and even some admirable actions by a few innovative firms, it has always been up to governments to make sure there’s a “business case” for corporations to start treading more lightly on Earth.

To date, governments have failed to provide concrete incentives for businesses to, for example, switch from polluting fossil fuels to renewable energy sources. (The Bush administration opposes this strategy: At the summit, the U.S., joining Saudi Arabia and other industrialized and oil-producing states, rejected a plan calling for the use of renewable energy technologies to be increased to account for 15% of the world’s total energy production by 2010.) On the whole, it seems there’s a huge and growing disconnect between the scale of our environmental problems and official willingness to act.

If this weren’t so clear today it would be easy, as it has long been, to target multinational corporations, with their relentless search for profits, their budgets dwarfing those of many nations and their habitual resistance to new laws. Back in 1992, Greenpeace International branded the new business council’s call for reform “a veiled attempt to minimize international environmental controls.”

In fact, the group, now called the World Business Council for Sustainable Development, has never hidden its preference for free markets and volunteer measures. Even so, it marked its birth with the big, surprising step of recognizing that consumption is the crux of our environmental problem--and that, somehow, prices must start to reflect the worth of Earth. The message was: Until it’s no longer profitable to squander resources, the squandering will obviously continue. But the firms never claimed to have the power to change the rules; they were explicitly asking for new policies.

Even so, in the last 10 years, several big U.S. firms have achieved impressive progress in their voluntary quests to be “sustainable.” DuPont has made huge investments in reducing emissions of greenhouse gases, like carbon dioxide, that cause global warming, and it claims to have saved money in the process. Alcoa has invented technology that substantially reduces the energy required to make aluminum. Some energy utility officials have even been lobbying Congress and the Bush administration to limit carbon dioxide emissions. They’re guessing that such a limit is inevitable and don’t want to invest in technologies that will have to be abandoned if new laws are passed.

These kinds of bottom-line considerations underlie most of the accomplishments to date in what remains a minority pursuit. But some CEOs are also starting to feel heat from green-minded stockholders, employees and consumers. And some, looking further into the future, are convinced tomorrow’s most successful firms will be the most “eco-efficient,” using fewer resources and producing less waste.

Politicians have more trouble thinking past four-year cycles. Bill “Don’t Stop Thinking About Tomorrow” Clinton showed this by abandoning his promise to tax energy--and by offering to open the Strategic Petroleum Reserve to keep gas prices low during the 1996 election. Al “Earth in the Balance” Gore suggested similar lack of resolve when he played down environmental issues in his 2000 campaign.

Still, even the most farsighted firms feel shareholder pressure to produce good quarterly reports. It’s government’s responsibility, in the short term--and the time to act is shorter every day--to make sure those reports are judged by a new “triple bottom line” of financial, environmental and social performance.

“If you look at the best of the companies, the 25 that are doing the best things [environmentally], they’re providing new leadership--but even for them, in an absence of policy, they can be undercut by competitors,” World Resources Institute President Jonathan Lash says. “The most basic question is: When is our government going to limit greenhouse gas emissions? If companies knew they’d face such a limit in 10 years, they’d be making a lot more investments in technology now that would be helping the environment.”

Increasingly, corporations are clamoring to prove their green credentials by joining groups with other self-styled idealists (the sustainable development council now has more than 150 members) and signing on to any one or more of an array of new-age accounting schemes, such as the Global Reporting Initiative, designed to measure sustainability.

All these measures remain purely voluntary, however, leaving bewildered lay folk stuck with trying to decide which new standards and affiliations mean anything.

Meanwhile, as the Johannesburg meeting drones on, about 30 million acres of tropical forests--an area the size of Pennsylvania--are vanishing each year. We’re taking fish out of the sea faster than they can reproduce.

Two billion people now suffer from inadequate access to clean water--and the United Nations says that number will grow to 5 billion in the next two decades. And 2002 may be recorded as the hottest year since records have been kept. “We have hardly begun the task of creating a more sustainable society,” the most recent sustainable development council report acknowledged.

In 1992, business council leader Schmidheiny said businesses willing to act instead of resisting change might build support for self-regulation, “provided we do it in time, we do it convincingly and in a transparent way. If we fail to do it in time, we face government regulations under pressure from the public.”

The time has passed. What must change now is not just a few players but the whole playing field. Which means voters must insist that government step up to the plate.