Activist shareholders scored a victory last month when Ford Motor Co. announced that it would reduce the greenhouse-gas emissions of its new vehicle fleet by at least 30 percent by 2020 in response to pressure from a number of groups focused on climate change.
Such resolutions reached a record during this year's proxy season, both in number (nearly 60 at press time) and in voter support (averaging more than 22 percent). About one-third of the 2,200 global executives who responded to a recent McKinsey survey say they place more importance on climate change than on most other global trends, motivated most often by reputation/brand-management concerns.
CFOs are also taking a closer look at all things green, but not, they say, because of pressure from investors or a mere desire to avoid bad press. Investors are, in fact, "silent" on the subject, according to Caterpillar Inc. CFO David Burritt. Nonetheless, he says that sustainable development represents a "'show me the money' opportunity" for companies and that rather than make "apologies for the time and resources spent" on green initiatives, companies should focus instead on how such efforts can boost the bottom line.
Burritt offered those comments at the recent "CFO2: The CFO Green Conference" (sponsored by CFO Enterprises, a sister company). At the same event, Lauralee Martin, CFO of real estate company Jones Lang LaSalle, said the greening of her industry had created a growth area; last year the company saved clients $40 million in energy costs through consulting services, and she says that "green buildings are more attractive to buyers" and easier to sell.
CFOs have plenty of incentive to pay close attention to sustainability issues. All three Presidential candidates support U.S. participation in the Kyoto Accord, which may hasten the arrival of a cap-and-trade system for carbon emissions. There are already several carbon markets operating in the United States, where a ton of CO2 trades for about $5. In Europe, where regulations are already in effect, the going rate is six times higher, suggesting that U.S. companies would be wise to amass carbon credits sooner rather than later. A bill dubbed America's Climate Security Act of 2007 (S. 2191) calls for a cap-and-trade system and is moving through the Senate now.
Companies may have an easier time, however, selling green products and services to customers than becoming green themselves. Martin says that managing Jones Lang LaSalle's carbon footprint has been "a nightmare...worse than the horrors of Sarbanes-Oxley." That's largely because the company's activities depend heavily on travel and on managing buildings that other people own. With so many facets of its operations outside of its direct control, obtaining basic measurements of its environmental impact has been a challenge.
Additional reporting by Marie Leone and Avital Louria Hahn