Is Apple Green or Rotten?

On June 29, Apple (Nasdaq: AAPL  ) made a strategic decision to withdraw all of its products from environmental rating system EPEAT. Two weeks later, Apple reversed its decision and renewed its partnership. So does Apple hug trees or not? To answer this question, let's take a deeper look at exactly what happened and who stands to benefit from Apple's tumultuous relationship with EPEAT.

Environmentalism and electronics
The Electronic Product Environmental Assessment Tool -- EPEAT for short -- measures a computer's overall eco-friendliness from the assembly line to the recycling bin. EPEAT's rating analyzes attributes such as material toxicity, energy use, product life, and recycling options. Since its creation in 2001, EPEAT's registry has grown to an impressive 2,074 products from 49 manufacturers worldwide. A lot of big names are EPEAT users, including Hewlett-Packard (NYSE: HPQ  ) ,Dell (Nasdaq: DELL  ) , Lenovo, Sony (NYSE: SNE  ) , and Oracle (Nasdaq: ORCL  ) . Here's a quick look at how these companies match up against each other using EPEAT's bronze, silver, and gold ratings.

Source: Author. Data from EPEAT.net.

Source: Author. Data from EPEAT.net.

As evidenced by its golden orb of product excellence, Apple has been a leader in the push for greener products. It has reduced toxic material use, continues to focus on energy efficiency, and performs lifecycle assessments on all its products. Its attention to environmentalism is important, as Apple relies heavily on its brand to build consumer loyalty. It's this loyalty that has enabled Apple to charge the price premiums that have led it to industry-defying gross margins and stellar profits over the past few years.

Apples to oranges
Rating systems can be a blessing and a curse for a company like Apple. As an innovator, Apple often heads where no computer company has gone before, making it difficult for a standardized rating system to compare Apple products with other products. While ratings usually mean good news for Apple, its new MacBook Pro's non-replaceable RAM and storage were destined to be a casualty of EPEAT's analysis, and Apple knew it. Rather than systematically addressing the metrics of EPEAT and adjusting or reacting accordingly, Apple decided to gracefully bow out.

Only Apple's smooth exit didn't go quite as planned. Instead of a quiet retreat, a media maelstrom set in, and customers vowed to punish Apple for its wrongdoing. E-protests ramped up as the City of San Francisco announced it would cease its purchasing of Apple computers. Companies such as Ford also found their hands tied because of purchasing policies that require EPEAT compliance. On July 16, Apple released a letter admitting its mistake and outlining a roadmap for its future relationship with EPEAT.

Despite all the negative media coverage, there's a brighter side to Apple's and EPEAT's break-up-to-make-up. EPEAT enjoyed international coverage and successfully highlighted the advantages of third-party rating systems. Apple proved that it's not above reproach by humbly and wisely reacting to its customers' disappointment. Moving forward, EPEAT will revise its standards to include many of Apple's historically non-quantified green initiatives, while Apple will be held to comparable standards that wipe away any "greenwashing" by Apple or its competitors.

Apple's core
As Kermit the Frog once said, "It's not easy being green." Apple's brand remains intact, but it learned a valuable lesson: Its consumers still want to know how Apple stacks up against its competitors. Moving forward, keep an eye on EPEAT's assessment of Apple's products, as well as Apple's own internal focus on efficiency and environmentalism. Apple is a sound investment, and the final chapter of this soap opera only makes me more confident in its business ethics and model.

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Fool contributor Justin Loiseau owns shares of Apple and two really old iPods. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo. The Motley Fool owns shares of Apple and Oracle and has sold shares of Sony short. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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