How Business Saw the Light

Smart companies are using the environment not just to seem virtuous but to crush their rivals

By Bryan Walsh/Tokyo Monday, Jan. 15, 2007
    • ILLUSTRATION FOR TIME BY ELLEN WEINSTEIN

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    When an industry leader like Toyota succeeds by going green, its rivals take notice--as Ford's and General Motors' frenzied game of catch-up demonstrates. But the impact reaches beyond the fight for market share. The mega-retailer Wal-Mart has pushed a slew of high-profile environmental initiatives over the past year, including the construction of experimental green stores in Texas and Colorado and the launch of a campaign to sell ultraefficient compact fluorescent bulbs to 100 million homes. The real power of Wal-Mart to drive environmental change, however, rests in its sheer size, by which it can influence the behavior of the more than 60,000 companies, large and small, that stock its stores. The "Wal-Mart price"--the corporation's drive for the lowest possible cost, at all costs--ensured that only the leanest companies would survive to do business with it. By demanding energy efficiency and environmentally friendly practices from its partners--such as reducing packaging waste or selling only sustainable seafood--Wal-Mart could help start a green wave across the U.S. economy, especially among smaller companies that might be less eager or able to change on their own. "When Wal-Mart talks, everyone listens," says Andrew Savitz, an environmental business consultant and the author of The Triple Bottom Line.

    What makes the transformation of companies like Wal-Mart so remarkable is that it has occurred despite the general passivity of the White House toward green issues. "I'd say 90% of the business community wants more action on the environment than the Bush Administration does," says Esty. So while the Federal Government dragged its feet on alternative energy, business moved into the vacuum, lured primarily by potential profits. In 2005 Goldman Sachs pledged to invest $1 billion in renewable energy, while Cleantech Venture Network estimates that $10 billion in venture capital will be directed to green technology from 2005 to 2009. Under CEO Jeff Immelt's Ecomagination initiative, GE has committed to spending $1.5 billion a year on renewable energy and other green research by 2010. That's already translating to sales today; the company reported revenues of $10.1 billion from environmental products in 2005, up from $6.2 billion in 2004. "What GE is doing is a bellwether," says Joseph Romm, founder of the Center for Energy and Climate Solutions. "There is some style here, but it also has a lot of substance."

    Still, given the severity of climate change--and with rising consumerism in China and India set to complicate the crisis--it's hard not to wonder whether these initiatives are more than greenwashing. GE will sell wind turbines, but it will probably sell even more jet engines, contributing to the rising carbon emissions caused by air travel. Wal-Mart pledges to double the efficiency of its vehicle fleet over the next 10 years, but it's also eager to introduce hundreds of millions of Chinese to middle-class consumption, American-style. "I find it hard to look at a Wal-Mart and see anything like a truly sustainable company," says John Elkington, a co-founder of the green-business consultancy SustainAbility.

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