Elgin, Ben. "Little Green Lies." BusinessWeek 29 Oct 2007: 45-52.
http://www.businessweek.com/magazine/content/07_44/b4056001.htm?chan=search
The Article that I found identifies that making a company environmentally friendly cost effective and profitable is becoming questionable. The featured individual of this article is person named Auden Schendler. Schendler worked as a junior researcher at the Rocky Mountain Institute, which is a think tank in Aspen Colorado. He worked for a well-known author named Amory Lovins who co-wrote “natural capitalism”. Lovins’ ideas embrace the notion that “going green” can help companies increase profits while saving the planet.
This notion of “going green” has become a centerpiece for corporate image crafting. Companies such as General Electric identify that they spend nearly their entire multimillion-dollar advertising budget on green driven projects and products. Other companies such as Google and Yahoo pledge to have all of their offices carbon free by 2008.
The idea of pledging to improve the environment has become a standard for forward thinking corporations. However, the biggest issue for organizations is being able to stay profitable along with implementing new environmental friendly projects. The most common solution to this issue is the use of Renewable Energy Credits (REC’s). REC’s are a type of financial arrangement that companies use to justify assertions that they have reduced their net contribution to global warming. These REC’s should be used to promote the use of third party pollution free energy. However, companies such as Staples, Fed Ex and Johnson and Johnson merely use REC’s as justifications for their overall energy consumption. The issue with these statements is that organizations are continually consuming more energy, but are using REC’s as their excuse for their overall energy usage.
This article also identifies specific firms who have actually moved towards legitimate environmental gains. Walmart has given top billing for energy saving fluorescent light bulbs even though incandescent bulbs are more profitable for the company. Office depot have replaced all of their lighting in more than 600 stores, which has caused a 10% decline in the release of heat – trapping gases.
In 2006, Johnson and Johnson spent one million dollars on credits, which are equivalent to 400,000 tons of emissions. Based on this purchase alone, J&J received praise from the Environmental Protection Agency and the World Wildlife Foundation. J&J have claimed to have reduced their contribution to global warming by 17% since 1990. Dennis Canavan who is the company’s senior director of global energy stated that REC’s don’t really reduce J&J’s pollution, but somewhere along the line they do encourage new projects.
The economics behind REC’s is vague do to lack of market makers for the credits. REC’s are purchased roughly at $2 a megawatt hour, however normally wind developers usually receive roughly $91 per megawatt hour from selling their electricity to utilities and from government tax breaks and incentives. This leaves little room for expansion for green energy companies because another $2 does not offer the amount of capital needed to develop their technologies. To sum up this situation, REC’s are currently the system available to offset Carbon Dioxide for green companies. Even though REC’s may help to invest in new projects, in the long run they do not encourage further development or growth of green technologies.
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5 comments:
How timely! Everyone should consider the implications of "green" decisions. What is green for one, may be brown for another! Be prepared to tee off our class conversation next week and discuss your perspective on RECs.
Nice article Rey. You have provided useful information about how companies manage to be green and at the same time be profitable, and how this is a complex initiative for them. It enabled us to correlate RECs to the green perspective of the stock game portfolio companies.
Fatou
This article is interesting as most large public companies are displaying how they are going 'green.' Though I was initially skeptical by reading through statements issued by various companies about being green, I'm glad I found this article to confirm my skepticism. I agree that RECs are only a temporary solution, and also not ideal.
This article is very interstig. Nowadays, every companies are asserting how there are going Green. Most of the time, going green won't equal profitable but I think that RECs is urging companies to be green.
As we all know by now, environmental improvement and "going green" is a huge movement in the business world. As the article says, RECs probably aren't the final solution, but they bring more attention to the issue and give some quantifiable measures to something that is often difficult to get a good idea of.
Sure some companies will find a way to skirt the rules and some will make real progress. We can only hope more take the latter approach.
Since elementary school we have all grown up with the importance of the environment being drilled into our heads (the 3Rs, Captain Planet!, etc.) so I think we will make a more conscious generation of consumers compared to our predecessors who didn't grow up with recycling bins at home and energy efficient appliances.
Companies will definitely take notice of the value we put on protecting the world's natural resources.
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