Companies Competing To Be Green

Companies are increasingly competing to be green. The news is full of corporate initiatives concerning sustainability and environmental impact. What metrics are companies using to measure greenness, and do they make sense?

Newsweek's Green Rankings

Newsweek just released its first Green Rankings of the Standard & Poor's 500. The following factors were used to rank the companies:

• an "environmental impact score" based on more than 700 metrics. The metrics were collected by Trucost, a company that analyzes emissions and natural resource use;
• a "green policies score" based on an analysis of corporate policies conducted by KLD Research & Analytics, a leader in socially responsible investing research; and
• a "reputation survey score" based on a survey of CEOs, corporate environmental officers, and academics conducted by CorporateRegister.com, an online directory of company-provides corporate social responsibility and environmental reports.

Based on this data, the top five green companies are: Hewlett-Packard, Dell, Johnson & Johnson, Intel, and IBM.

Here are the strategies of a few major corporations to become green, sustainable, and low carbon footprint.

Samsung: Energy Efficient Products, Greener Manufacturing

In July, Samsung announced a $4 billion plan to become greener called Eco-Management 2013. Under the plan, Samsung will spend $2.5 billion to improve the energy efficiency of its consumer electronics products, such as TVs and refrigerators. The company will spend $1.5 billion to reduce carbon emissions from its manufacturing plants. The goal is to produce the most energy efficient consumer electronics products.

Samsung's plans dovetail with South Korea's efforts to become a leader in cleantech.

Apple: Looking To Changing The Terms Of The Debate

Apple is ranked number 133 in the Newsweek Green Rankings. In response to criticism over its environmental practices, Apple is establishing a major initiative. Instead of just becoming more sustainable or green, Apple wants to broaden measure of greenness to include a company's carbon emissions from all sources and the impact of its products.

CEO Steve Jobs explains the reasoning behind Apple's new effort:

"A lot of companies publish how green their building is, but it doesn't matter if you're shipping millions of power-hungry products with toxic chemicals in them. It's like asking a cigarette company how green their office is."

Consistent with this position, Apple released detailed data on its carbon emissions for the first time. The company is also providing information about the materials used in its products.

Apple supports its position by pointing out that its products are responsible for more than half of its carbon footprint. Therefore, the company argues, it does not make sense to focus on the energy efficiency of its manufacturing operations. The company claims that its environmental impact can be attributed to the following sources:

• Product Use - 53%
• Manufacturing - 38%
• Transportation - 5%
• Facilities - 3%
• Recycling - 1%

UPS v. FedEx: Delivery Services Go Head To Head

UPS is ranked number 85 in the Newsweek Green Rankings, while FedEx is ranked number 93. Last year, both companies discussed their carbon emissions disclosures. While both bragged that they disclosed their direct emissions (Scope 1 emissions), FedEx one upped UPS by stating that it would disclose indirect emissions linked to power generation (Scope 2 emissions) in its 2009 disclosure.

This year, FedEx and UPS publicly continued their quest to be the most carbon friendly transport company. UPS released its Scope 3 emissions, which includes all other indirect emissions, for example, trucking services and planes. See here for UPS's Corporate Sustainability page and FedEx's Environment page.

Just last week, the companies provided data to ClimateBiz.com to show that they are doing more about their carbon footprint than their competitor. Clearly, these rivals care about their greenness relative to one another.

What Does It All Mean?

Like all rankings, Newsweek's rankings can be second guessed and picked apart. What do the metrics that were used in the analysis mean? At this point, it's difficult to say because the business of measuring sustainability and greenneess is still emerging. There is little consensus about what it means for a company to be green.

One problem is that using the same metrics to compare companies across industries does not make sense. Companies' inputs, outputs, and value chains vary in their energy usage intensity. What a technology company can do to be green might greatly differ from what an oil company or a mining company can do. Therefore, different metrics should apply for different industries.

Despite these differences, efforts by Samsung, Apple and the other companies to lay out green and sustainability measures are a step in the right direction. It will take a while for company observers to decide on most important indicators of greenness.

As that process evolves, companies should continue wrestling with how they are going to improve their bottom line through green efforts. The key is for companies to engage in meaningful activities, and not merely greenwash their products for marketing or public relations purposes.

Douglas Y. Park
Twitter: @DougYPark