Being Green May Help Business in Bad Times

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Stan Honda / AFP / Getty

Toyota is weathering the recession far better than its American counterparts because it has been making the fuel-efficient automobile car owners want.

It hardly bears pointing out that during these days of 7.6% unemployment, when the business pages of the local newspaper look more like the obituaries, no industry is doing well — and that includes green business. Wind and solar manufacturers, starved for credit, are cutting back on projects and laying off workers. Whole Foods, the organic food superstore, has seen its stock price drop more than 70% over the past year, and has cut back on planned expansions. Companies — including Time Inc., which publishes TIME and — have eliminated their sustainability officers, and the business press seems more concerned with plotting financial panic than with covering the latest green enterprise. (Read TIME's survey of new green technologies.)

So if all that is true, why is Joel Makower feeling (relatively) optimistic? Because despite the current downturn, Makower, editor of the website and one of the best-known names in the field, has watched sustainability rise from a niche concern to something about which every executive must at least pretend to care. Green businesses may not be flourishing, but business is still going greener. Of course, the recession has restrained sustainability practices and as Makower writes in his just released State of Green Business report, whatever progress is currently being made may not be "addressing planetary problems at sufficient scale and speed." Regardless, he says, the green momentum is still growing, not so much because businesses such as solar power or recycling have become financial titans (they haven't), but because green values — efficiency, reducing waste, managing carbon — have increasingly become standard practice for any smart business. "It's really becoming business as usual," says Makower. "These are practices that don't go away during a recession." (Listen to Makower talk about the state of green business on this week's Greencast.)

Quite the opposite. Wasteful processes that might have mattered little in a booming economy could doom a company when the economic pie starts shrinking. Take the auto industry. Toyota is weathering the recession far better than its American counterparts not just because it has been making the fuel-efficient automobile customers wanted — though that helped a great deal — but because the Japanese giant makes a fetish out of efficiency. (The term for it in Japanese is kaizen, or continual improvement.) Even Wal-Mart, once environmental Enemy Number One, has made its Byzantine supply chain greener and more efficient — and spreading those values to its network of suppliers. The message is sinking in: a 2008 survey by Johnson Controls found that 72% of building managers are now paying attention to energy efficiency, up 10% from the year before. "We're finally coming to grips with the financial and environmental cost of waste," says Makower. "It's exciting the amount of innovation that's coming out of this." (Read TIME's top 10 green stories of 2008.)

Energy efficiency and waste reduction should be no-brainers — both factors contribute directly to the bottom line. But an even more encouraging trend from 2008 is the inclusion of a company's carbon footprint in the calculation of its financial targets. Businesses now increasingly measure and work to minimize their carbon footprint, even reporting their efforts in publications like the Carbon Disclosure Project. In part, that's because CEOs are simply greener today than they've ever been, but also because, with a new President in the White House promising carbon cap-and-trade legislation and the world working to negotiate a broader successor to the Kyoto Protocol, smart companies know that managing carbon will soon become a fiduciary responsibility. "[Executives] who don't will soon go way," says Makower. "This is now the price of doing business."

So if green isn't crashing, as many believe, why does Makower insist the "glass is half full?" Just as it is in the political sphere, the pace of change in business isn't anywhere near fast enough to meet the challenge posed by climate change, dwindling resources and myriad other environmental problems. Makower notes that carbon intensity — the amount of greenhouse gases emitted per unit of GDP — decreased by 0.6% in 2008, the smallest decrease since 2002. (The faster carbon intensity decreases, the more output businesses get for their carbon.) The failure of green business so far to produce a Google-like success story — a company that crushes in the stock market — hasn't helped either. "We're not moving the needle fast enough when it comes to climate, toxicity, energy use," says Makower.

In 2009, Makower says, the chief impediment to green business will be a lack of cash — just as it is for the rest of us. And like the rest of us, green businesses will be looking to Washington for a savior, hoping that President Barack Obama's promises to use stimulus spending to make the U.S. economy greener, leaner and cleaner was more than idle campaign talk. "If there's one thing I'd like to see from the Administration, it's a vision for what the green economy will look like," Makower says. "But right now, we're in uncharted territory."

See TIME's pictures of the week here.