The flurry of interest in environmentally responsible companies has made it difficult to distinguish corporations that truly innovate through greener governance or by developing hyper-efficient products from those that simply employ pale green public relations. But according to the judges of Progressive Investor's recently announced Sustainable Business 20 awards, many companies, large and small, foreign and domestic, will make genuine strides towards sustainability in 2007—without compromising their bottom lines.
The annual list highlights companies that, according to the newsletter's panel, can serve as shining green examples for others. It includes organizations that have managed to minimize the impact of their own operations on the environment as well as those that make energy-saving products. The winners are notable for their diversity, including high-octane, global brands as well as lesser-known technology providers.
In the six years since the awards' inception, it's become harder for judges to choose winners. "When I first started in the industry, it was difficult to find anything at all," says Andrew Brengle, a judge of these awards for the past two years and senior analyst at Boston-based KLD Research & Analytics, which provides social and environmental research to money managers and large investment houses. "Now, there's a fire hose of information from all directions&it's gotten much more complicated." As "green" has caught on, it can be harder to distinguish real innovations from heartfelt but ultimately empty gestures.
To choose their 20 winners, judges drilled into company-provided documents, reports from nonprofits and nongovernmental organizations around the world, as well as the extremely active green quarters of the blogosphere to distinguish substantive programs and products from half-hearted programs without genuine environmental merit (often referred to as greenwash). "You learn to root out what's not real," adds Brengle.
Innovators, Large and Small
There were some shoo-ins, particularly larger companies that have set aggressive, public goals. Powerhouse consumer brands like Canon (CAJ), which is halving its global CO2 emissions while making consumer products such as its digital cameras with lighter plastics that contain less carbon, and Philips (PHG), a pioneer in energy-saving LED lighting, both won awards. Nike (NKE) was honored for its aggressive carbon neutrality goals—2011 for worldwide Nike-owned facilities—and its commitment to offset the business travel of executives. And Google (GOOG), while not a winner, claimed an honorable mention for its recently finished work on a 1.6-megawatt solar array to power its Mountain View (Calif.) headquarters. The internet giant also operates the largest employee commuter shuttle program in the country.
But there were also surprises, according to Brengle, including a number of smaller companies making efficient products that could eventually have outsize environmental impacts, cleaning up industries such as electric power and logging. The world's only publicly traded sustainable forestry company, Precious Woods (PRWN), won for its operations in the Brazilian and Congo rainforests, which forgo the slash-and-burn tactics of so many other logging outfits. Comverge (COMV), a behind-the-scenes technology company that sells management systems for power grids, was another winner. Its innovative tech allows power companies to track energy consumption and keep the dirtiest fossil fuel plants offline unless absolutely necessary.
As companies have geared up their internal programs, judges have moved away from chronicling companies' ability to offset their negative impact on the environment—the damage done by building and waste from plants—to consider proactive programs and, especially, energy-saving products. "How do you compare Philips or Nike with a company like Comverge?" asks Rafael Coven, another judge and the managing director of Baltimore research firm Cleantech Indices. "You can't, except to say all are trying to develop sustainable products by changing their operations."
Green Thinkers Are Good Leaders
Standards used by stock and environmental analysts to gauge performance on environmental issues can also indicate a generally safer investment as well. Not only have many of the award winners made environmental gains without adversely affecting their financial performance but, the theory goes, they could be less susceptible to the green-related scandals that have rocked some companies. Recent revelations that some of Mattel's (MAT) Chinese contractors used lead paint in products, and allegations that the greening of BP (BP) was largely a PR stunt, pummeled the companies' stock prices. "The greenest companies tend to have the sharpest management teams," argues Garvin Jabusch, a partner in Green Alpha Advisors, an investment advising firm based in Boulder, Colo., and the former manager of the Sierra Club Stock and Equity-Income funds. The management skills required to execute sophisticated sustainability plans align with the ability to guide a company towards long-term growth, he says.
The chief constant? Executive evangelists are still necessary in order to turn a company green. Jabusch cites the example of Interface, which this year won in the green building category. The company, which designs and produces modular carpets, received kudos for its decade-long attempt to remake itself from an old school industrial manufacturer into a more sustainable producer. Ray Anderson, Interface's founder, has spearheaded the turnaround, which aims to counter any of the company's negative effects on the environment by 2020 and includes programs such as ReEntry, which allows customers to recycle carpeting.
"They started off as just another carpet company, and the chairman has done a 180," says Jabusch. "Top-driven initiatives work a lot better."
For a closer look at the winners, see: slide show