Doing Well by Doing Good: Being Green Adds Billions to Company Bottom Line
In the five years since the Prius' U.S. debut, Toyota's brand value has surged by 47%, to $28 billion, according to Interbrand. In the same period, Ford's brand value fell 70% to $11 billion on its failure to meet its goals for SUV mileage gains or to exploit its well-regarded Escape hybrid.
If Wal-Mart had a reputation like that of rival Target Corp. (TGT ), its stock would be worth 8.4% more, adding $16 billion in market capitalization, according to Communications Consulting Worldwide (CCW).
At Wall-Mart, switching stores to more efficient bulbs and adding skylights for natural light has trimmed the company's electricity bill by 17% since 2002.
Some 40% of Unilever's sales and most of its growth now take place in developing nations. In addition to a range of socially responsible projects from Brazil to India, Unilever funds a floating hospital that offers free medical care in Bangladesh, a nation with just 20 doctors for every 10,000 people.
Assets of mutual funds that are designed to invest in companies meeting social responsibility criteria have swelled from $12 billion in 1995 to $178 billion in 2005, according to Social Investment Forum.
Institutional investors with $4 trillion in assets, including charitable trusts and government pension funds in Europe and US, pledge to weigh sustainability factors in investment decisions.
The Cleantech Venture Monitor has tracked more than $8.8 billion in cleantech venture capital deals since 1999. The global market for clean energy sources such as biofuels, hydrogen fuel cells and solar and wind energy rose to $40 billion last year, and is expected to increase to $167 billion by 2015, according to a report by Clean Edge Inc.
Innovest, an investment research firm specializing in analyzing companies' performance on environmental, social, and strategic governance issues, studies 120 different factors, such as energy use, health and safety records to assign grades ranging from AAA to CCC, much like a bond rating, to 2,200 listed companies.The best positioned company in the Innovest GHG (Greenhoue Gas) regulatory model could have windfall revenues yielding $298 million or 10.6% of 2005 earnings (EBITDA). The worst could lose 25% of its EBITDA due to regulatory compliance costs.
Climate change has become a major concern among leading US financial institutions and companies, according to the Carbon Disclosure Project (CDP), a coalition of global investors with more than $31.5 trillion in assets.
In a recent McKinsey & Co. study of 1,144 top global executives, 79% predicted at least some responsibility for dealing with future social and political issues would fall on corporations.
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